Exclusive-Renault, Geely look to bring Aramco into engine venture
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[January 17, 2023] By
Norihiko Shirouzu and Gilles Guillaume
BEIJING/PARIS (Reuters) -Renault SA and China's Geely Automobile
Holdings are working to finalise a deal to bring Saudi Aramco in as an
investor and partner to develop and supply gasoline engines and hybrid
technologies, three people with knowledge of the talks said.
The Saudi oil producer has been involved in advanced discussions to take
a stake of up to 20% in a previously announced but still-unnamed Geely-Renault
powertrain technology company that the automakers are working to
establish, the three people told Reuters.
Big oil firms have worked with automakers to develop sustainable fuels
and hydrogen engines in recent years.
But if a deal is agreed, Aramco would be the first major oil producer to
invest in the car business, as the rise of electric cars threatens to
cut demand for conventional fuels.
According to a document prepared by the companies and viewed by Reuters,
the aim is to establish a powertrain company this year with a production
capacity of more than 5 million "low-emission and hybrid engines and
transmissions" annually.
A 20% stake for Aramco would leave Renault and Geely with 40% each in
the joint venture, which would combine a carve-out of the French
automaker's existing combustion-engine production with Geely's gasoline
and hybrid technology and related assets, the people told Reuters.
Renault and Geely both declined to comment. Aramco did not immediately
respond to a request for comment from Reuters.
The new joint-venture – codenamed "Horse" by Renault and "Rubik" by
Geely – is aimed at developing more-efficient gasoline engines and
hybrid systems at a time when the focus of much of the automobile
industry has been on the capital-intensive transition to purely electric
vehicles, two of the people said.
The financial terms of the potential investment by Aramco in the joint
venture were not immediately known.
According to the document, Aramco's investment would be used to support
development of decarbonisation technologies for gasoline engines.
Aramco would also contribute to research and development of powertrain
technologies, especially synthetic fuel solutions and next-generation
hydrogen technologies, the document said.
The people who described the outline of the deal being negotiated asked
not to be named because it has not been announced.
Last year, Aramco announced a partnership with Hyundai Motor Co to study
advanced fuels that could be used in hybrid engines to reduce CO2
emissions.
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Saudi Aramco logo is pictured at the oil
facility in Abqaiq, Saudi Arabia October 12, 2019. REUTERS/Maxim
Shemetov
SUBJECT TO BOARD APPROVALS
Aramco's deal with Geely and Renault still needs approval by the
boards of the automakers, one of the people said. The three
companies are working to complete a letter of intent in the coming
weeks, one of the sources said.
Geely and Renault when they announced the new venture last year said
it would employ 19,000 people at 17 powertrain factories and three
research and development hubs.
By carving out its internal-combustion-engine business, Renault
plans to focus on electric cars, part of the French automaker's
effort to revamp its alliance with Nissan Motor Co.
As part of that, Renault is trying to convince Nissan to invest in
its new electric vehicle unit.
For Geely, the deal with Renault extends its pattern of building
partnerships to expand beyond China.
A strategic focus for the joint venture will likely be on an
advanced four-cylinder engine, two of the sources said.
One way to use those engines would be as a dedicated power generator
to supply a charge to a hybrid car's battery system, rather than
powering the vehicle directly when the battery charge was low, one
of them said.
In that kind of arrangement, gasoline engines could be designed to
operate in an "exceptionally efficient mode", one of the sources
said.
Geely previously announced a hybrid gasoline engine development deal
with Mercedes-Benz and holds a stake in the German automaker.
The new Geely-Renault joint venture is not the only company betting
on the view that fuel-efficient hybrids will remain part of the mix
even as more automakers roll out electric vehicles.
Toyota Motor Corp CEO Akio Toyoda has defended his company's
continued investment in hybrids, such as the Prius, saying that
electric vehicles remain expensive and that charging infrastructure
is incomplete.
(Reporting by Norihiko Shirouzu in Beijing, Gilles Guillaume in
Paris, and Maha El Dahan in Dubai; editing by Bradley Perrett and
Jason Neely)
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