Renault gears up to go electric, Geely steps on the gas

The preliminary agreement is part of a radical reshaping of the auto industry as it shifts towards cleaner driving technologies, but also underscores the different strategies carmakers are adopting

November 09, 2022 11:39 am | Updated 12:49 pm IST - BEIJING/PARIS

File photo of the Renault logo

File photo of the Renault logo | Photo Credit: Reuters

As automakers prepare for an electric future, China's Geely on Tuesday placed a bet on gasoline engines being around for years to come by agreeing a joint venture with Renault that will also include the legacy engine business of Geely's Volvo Cars.

(For insights on emerging themes at the intersection of technology, business and policy, subscribe to our tech newsletter Today’s Cache.)

The 50-50 venture, covering gasoline engines and hybrid technology, will aim to maximise sales by also supplying other automakers.

While that will cut costs and help Renault free up resources to invest in its electric business, some analysts said the logic appeared somewhat different for Geely.

"We wonder if there is a broader (Geely) plan to consolidate assets for internal combustion engines?" Bernstein analysts wrote in a client note. "There may be an opportunity to bring together leading assets ... and corner this 'unloved' part of the market, which will need to function for decades to come."

The preliminary agreement is part of a radical reshaping of the auto industry as it shifts towards cleaner driving technologies, but also underscores the different strategies carmakers are adopting.

For Renault, the venture is part of a major overhaul being announced on Tuesday that will see it separate its activities into five businesses, including an electric vehicles unit that it plans to list next year while retaining a majority stake.

The French carmaker is also trying to revamp its alliance with Nissan Motor Co., aiming to convince its Japanese partner to invest in its new electric unit. Nissan reiterated on Tuesday it was considering such a move.

Ford Motor Co. has also begun separating its operations into electric, combustion engine and commercial vehicles, though Stellantis has rejected such a move as traditional automakers grapple how best to compete with Tesla.

"We are creating independent businesses, focused on structurally more profitable activities, open to external investments, each built around an indigenous set of technologies," Renault CEO Luca de Meo told investors.

For Geely, the deal extends its pattern of building partnerships to expand beyond China. It has a stake in Mercedes-Benz and also owns Sweden's Volvo Cars

As part of Tuesday's deal, Volvo Cars will divest its 33% stake in its Aurobay joint venture with Geely. That unit will become part of the Geely-Renault venture.

Nissan’s Concerns

The joint venture will employ 19,000 people at 17 powertrain factories and three research and development hubs, Geely and Renault said, adding they expected to reach a final agreement and launch the new company in 2023.

The deal follows at least three months of negotiations, a person with knowledge of the terms told Reuters.

The new company will be based in London, said the person, who was not authorised to speak to media and declined to be identified. Renault and Geely will each hold 50%, the companies said in a statement that did not detail other financial terms.

The outcome of Renault's talks with Nissan remain an open question, however. Nissan has said it is considering an investment in Renault's electric venture.

However, Nissan has raised concerns about the treatment of intellectual property, including battery and powertrain technology, in its talks with Renault and has indicated those concerns extend to any partnership the French automaker strikes with Geely, people with knowledge of the discussions have said.

Renault and Geely said they expected their new joint venture would supply internal combustion engines and hybrid powertrains to both Nissan and the junior partner in Renault's existing alliance, Mitsubishi Motors.

The venture would have the capacity to supply about five million engines and hybrid systems per year once operational, they said.

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.