French automaker Renault and Chinese Geely have agreed to establish a joint venture company that will produce internal-combustion and hybrid powertrains.
The two companies announced they have signed a non-binding framework agreement to establish the company, and will hold 50/50 equity stakes.
The framework agreement is expected to be made formal in 2023, at which stage a new standalone company will offer powertrains to Renault and Geely and brands under their umbrellas, such as Dacia, Lynk & Co, Proton and Volvo.
The company will also supply powertrains to Renault’s Alliance partners Nissan and Mitsubishi.
The two automakers estimate that, with their combined product portfolio and regional footprint, their joint venture could offer solutions for 80 per cent of the global internal combustion engine market.
Renault and Geely have plans for 17 powertrain plants spread across three continents staffed by a total of 19,000 people.
The new company will have a total production capacity of over five million internal-combustion, hybrid and plug-in hybrid powertrains and transmissions each year.
Renault and Geely will also establish five global research and development centres to innovate carbon-free and low-emission technologies: three in Europe (Romania, Spain and Sweden), plus one in China and one in South America.
It’ll employ a total of 3000 engineers.
“ICE and hybrid engine technologies will remain a critical part of the automotive supply chain for decades to come. We’ll be able to offer best-in-class powertrain and electrified solutions to multiple OEM brands worldwide, unleashing the market potential for this low-emission technology,” said Renault CEO Luca de Meo.
Renault says internal-combustion and hybrid vehicles will still represent up to 50 per cent of passenger car sales worldwide by 2040.
This deal was one of the elements of Renault’s financial restructuring announced at the Renault Group Capital Market Day on Tuesday, including the reintroduction of dividends in 2023 after a three-year break.
Renault also announced that it will split its business activities into five separate entities to encourage faster financial transformation and recovery from the hardship worsened by the pandemic.
These will consist of the new powertrain operation; a new electric vehicle and software business, Ampere; mobility division Mobilize; performance brand Alpine; and The Future is Neutral, a “circular economy” company.
This isn’t the first collaboration between Renault and Geely – last year it was announced that Geely would produce vehicles for the Chinese market that would be badged and marketed by Renault.
The new company will ‘welcome partners and shareholders attracted by the opportunity,’ suggesting that it could supply to third-party automakers in the future.
“Today’s agreement with Renault Group will enable the creation of a global leader in hybrid technologies to provide highly efficient advanced solutions for automakers around the world,” said Geely Chairman Eric Li.
This deal is just one of many ventures for Geely Holding Group, which has acquired a controlling interest in Volvo, made a recent investment in Aston Martin Lagonda, has its EV spinoff in Polestar, and stakes in Lotus and Proton.