Carmakers Renault and Geely have announced a joint venture to build engines for hybrid and gasoline-powered vehicles, with the partners investing a maximum of €7 billion ($7.7 billion) in total.
Renault said Tuesday that, together with its Chinese counterpart, it planned to create a new company that aimed to produce up to five million internal combustion, hybrid and plug-in hybrid engines and transmissions a year.
The new firm “aims to become the leader in next-generation hybrid and highly efficient powertrain solutions to meet worldwide demand for the years to come,” Renault said in a statement.
“Powertrain” refers to the entire mechanism, including the engine, that enables a vehicle to move.
Renault and Geely expect the new company to supply engines and other components to several global auto brands, including Volvo, Nissan and Mitsubishi, as well as for their own cars.
The firm, expected to employ 19,000 people, will have 17 factories and five research and development centers spanning three continents, Renault said.
The French and Chinese automakers will together invest up to €7 billion in the new company, according to a filing by Geely with the Hong Kong stock exchange.
The investment is expected to be completed before the end of the year, Renault said, adding that Saudi Aramco, the world’s biggest oil producer, was also considering investing in the joint venture.
Saudi Aramco’s investment, Renault said, would help the new company grow and fund research into synthetic and hydrogen fuels, both of which are key to decarbonizing the automotive sector, including cars with internal combustion engines.
In January, Reuters reported that Saudi Aramco was in advanced discussions with Renault and Geely to take up to a 20% stake in the joint venture, citing three unnamed sources close to the matter.
Jim Saker, director of the Centre for Automotive Management at Loughborough University in the United Kingdom, said Tuesday that the Renault-Geely partnership was a recognition by both companies that selling into the global market meant having “alternative options than simply [electric vehicles].”
“The aim is to produce more environmentally friendly internal combustion engines that will be appropriate for markets other than those committed to EV,” he added.
Renault’s partnership with Geely, which is the largest privately owned carmaker in China, will deepen its access to the world’s biggest EV market.
Sales of EVs in China soared in the second quarter of this year — hitting a record high in June — buoyed by generous price cuts by carmakers and local government subsidies, according to the China Passenger Car Association. Vehicles sold included those powered by batteries, plug-in hybrid engines and fuel cell engines.
Tesla’s deliveries from its Shanghai factory more than doubled in the second quarter, accounting for over half of its record global sales, data from the CPCA showed. Deliveries include both domestic sales and exports.