Renault and Geely reach an agreement for a joint venture in the field of internal combustion

BEIJING, Nov 8 (Reuters) – Renault SA and China’s Geely said on Tuesday they had agreed to launch a new 50-50 joint venture that will supply gasoline engines and hybrid technology to brands they own as well as to other car manufacturers.

While it wasn’t immediately clear whether the venture represents a step towards an even closer collaboration on petrol cars between the two companies, it marks a critical step in the complex restructuring of the French automaker.

As well as seeking to carve out a place in its internal combustion business, Renault is in talks to revamp its alliance with Nissan Motor Co and convince its Japanese partner to invest in its new electric unit.

The scale of the overhaul – encompassing the gasoline engine business codenamed “Horse” and the electric business codenamed “Ampere” – speaks to the pressure automakers are now feeling from the from investors and regulators to accelerate their adoption of electric vehicles, with Europe having effectively banned combustion engines from 2035.

Renault’s joint venture with Geely will employ 19,000 people at 17 powertrain plants and three research and development centers, the companies said, adding they expect to reach a final agreement and launch the new business in 2023. .

The preliminary agreement with Geely, with whom Renault has been negotiating seriously for at least three months, is not binding, a person familiar with the terms told Reuters.

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

For Geely, the deal expands its model of building partnerships to expand beyond China. Geely also owns Volvo Cars and has a 9.7% stake in Daimler AG.

Still, the outcome of Renault’s talks with alliance partner Nissan remains an open question. Nissan said it was considering investing in the Ampere business.

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

Renault and Geely said they expect their new joint venture to supply internal combustion engines and hybrid powertrains to Nissan and Renault’s existing junior alliance partner Mitsubishi Motors.

They said it would have the capacity to supply around 5 million engines and hybrid systems per year once operational.

Nissan had no immediate comment.

The announcement came ahead of Renault’s capital markets day on Tuesday in Paris, where chief executive Luca de Meo is due to brief investors on the company’s strategy and financial projections.

Renault’s De Meo said the automaker was looking for a partner who would bring scale and lower costs to its internal combustion business, including hybrids.

Renault and Geely Automobile also have an existing joint venture in South Korea.

Separately, Volvo Cars said it would sell its 33% stake in its Aurobay unit to Geely, without disclosing terms. (Additional reporting by Maki Shiraki; Writing by Kevin Krolicki and David Dolan; Editing by Sam Holmes and Edwina Gibbs)

Kevin A. Perras