Renault SA (RENA.PA) and China’s Geely (0175.HK) announced a 50-50 joint venture on Tuesday to supply gasoline engines and hybrid technology to their brands and other automakers, in the latest step in the French carmaker’s complex restructuring.
As well as carving out its internal combustion engine business to focus on electric cars, Renault is trying to revamp its alliance with Nissan Motor Co (7201.T), aiming to convince its Japanese partner to invest in its new electric unit.
The scale of Renault’s planned overhaul – encompassing the gasoline engine business it has code-named “Horse” and the electric one code-named “Ampere” – speaks to the pressure automakers now feel from investors and regulators to quicken their move to 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 factories and three research and development hubs, the companies said, adding they expect to reach a final agreement and launch the new company in 2023.
It was not immediately clear whether the venture represents a step towards even closer collaboration on gasoline cars.
The preliminary agreement follows at least three months of negotiations and is non-binding, 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.
For Geely, the deal extends its pattern of building partnerships to expand beyond China. It also owns Volvo Cars (VOLCARb.ST) and has a stake in Mercedes-Benz (MBGn.DE).
Still, the outcome of Renault’s talks with Nissan remain an open question. Nissan has said it is considering an investment in the Ampere 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 expect 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 (7211.T).
The venture would have the capacity to supply about five million engines and hybrid systems per year once operational, they said.
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 scheduled to update investors on strategy.
Ahead of the presentation, Renault said it aimed for an 8% operating margin by 2025, compared with the 5% expected this year, thanks to the plan to carve out the electric unit. The margin is seen rising to more than 10% in 2030.
De Meo has said Renault was seeking a partner that would bring scale and drive down cost in its internal combustion business, including hybrids.
Renault and Geely have an existing joint venture in South Korea.
Separately, Volvo Cars said it would divest its 33% stake in its Aurobay unit to Geely, without disclosing terms.
