Joint venture to build powertrain giant

French truck and car manufacturer Renault and Chinese giant Geely are looking to join forces and build more than five million engines and transmissions a year

The countdown is on for the completion of a joint venture agreement between Renault and Geely that will see a new company formed that will control 17 engine plants, five research and development centres and 19,000 employees across three continents.

The aim is to create a standalone organisation that will be structured to provide powertrain solutions for multiple Original Equipment Manufacturers.

The joint venture company aims to have an annual production capacity up to five million internal combustion, hybrid and plug-in hybrid engines and transmissions per year.

It will supply multiple brands worldwide with a complete range of best-in-class powertrains.

The deal proposal and framework was first announced in November 2022, and on July 11 in France Renault and Geely formally signed a 50/50 joint venture agreement.

The Saudi Arabia Oil Group, known as Aramco, signed a letter of intent on March 2, 2023, and is currently investigating the potential of an investment to support the growth of the new company and research and development into synthetic fuel solutions and next generation hydrogen technologies in particular.

The new joint venture’s complementary product portfolio and regional footprint could offer solutions for 80 per cent of the global ICE and hybrid market.

At launch, the new company is expected to supply multiple industrial customers including Renault Group, Geely Auto, Volvo Cars, Proton, Nissan, Mitsubishi Motors Company, and PUNCH Torino.

Subject to applicable laws and regulations, Geely Auto and Renault will enter into a long term procurement agreement from the joint venture for ICE, hybrid and plug-in hybrids powertrains (engine and transmissions) for passenger vehicles.

In addition, Renault will procure powertrains from the joint venture for light commercial vehicles as well as the development of hybrid batteries.

Renault Group CEO Luca de Meo says the joint venture will offer new solutions for the future.

“Facing today’s automotive challenges, no one can claim to have all the solutions, alone,” de Meo says.

“Coming up with breakthrough innovations requires to combine expertise and assets.

“When it comes about the global race for decarbonising road transports, there is no time to lose, and it will not be business as usual.

Speaking at the signing of the agreement he said: “Today, we are proud to join forces with a great company like Geely to set up a new player, up to the challenge, able to disrupt the game and open the way for ultra-low emissions ICE technologies. I want to thank Eric Li Shufu for his trust: we are now ready to move forward!”

Geely Holding Group Chairman Eric Li says Geely is pleased to be embarking on the journey with Renault.

“We are looking forward to working with Luca de Meo and his Renault team. With this agreement, we reiterate our commitment to leveraging our group-wide technological expertise and brand portfolio to pioneer the journey to greater sustainability and value creation which will lead to better consumer experiences.”

GlobalData Automotive Analyst Rupayan Chakraborty says the joint venture agreement could challenge the world’s biggest powertrain manufacturers in the coming years.

“As the automobile industry is making rapid strides towards low-emission vehicles and traditional engines are experiencing a reduction in demand, synthetic fuel technologies are now in high demand,” Chakraborty says.

“Although the new company will be focusing on primarily manufacturing internal combustion engine (ICE) engines, it is expected to drive new innovations in hybrid and electric vehicle (EV) powertrains and will be ready to provide end-to-end powertrain solutions to major automakers in three continents.

“As per GlobalData estimates, the global vehicle market, including battery electric vehicles (BEVs) and hybrid vehicles (HEVs), will reach 103.5 million units by 2030, recording a compound annual growth rate (CAGR) of 3.1% during 2022-30.

“Considering the market potential of the decarbonized automobile and the growing global electric vehicle market, the new Renault Group and Geely company will pose a head-to-head challenge to global automobile companies like BYD and Tesla in the long run.”

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