Following the framework agreement announced in November 2022 (earlier post), Geely Holding Group, Geely Automobile Holdings Limited and Renault Group have signed a binding 50/50 joint venture agreement to launch a new powertrain technology company that aims to become the global leader in developing, manufacturing, and supplying best-in-class hybrid powertrains and highly efficient ICE powertrains.

The new company will include 17 engine plants and 5 R&D centers in 3 continents with 19,000 employees in a full-fledge effective organization strategically structured to provide powertrain solutions for multiple OEMs. The joint venture company aims to have an annual production capacity up to five million internal combustion, hybrid and plug-in hybrid engines and transmissions per year.

The completion of the transaction is expected to take place in H2 2023 and remains subject to the conditions normally applicable to this type of transaction, in particular the prior approval of the relevant antitrust and foreign direct investment authorities.

Aramco, which signed letter of intent with Renault and Geely on 2 March 2023 (earlier post), is evaluating a strategic investment in this new powertrain technology company. Aramco’s investment would support the growth of the company and contribute to key research and development across synthetic fuels solutions and next-gen hydrogen technologies. Synthetic fuels including e-fuels, and hydrogen are part of the solution for decarbonation in the automotive industry, including for the ICE vehicles on the road today.

The joint venture will be jointly led by Renault Group and Geely, with equal board members to formulate and execute strategies and set the direction for the joint venture. The initial organization will secure the continuity of the business with two operational centers in charge of the respective operations: Madrid for Renault Group and Hangzhou Bay for Geely. An executive team will be based in the headquarters of the new company, which is intended to be established in the UK, to consolidate operations, build on synergies, and define future plans.

Renault Group and Geely will transfer Intellectual Property to the operational centers enabling them to be fully autonomous in developing future powertrain technologies capable of addressing all market expectations. The new joint venture’s complementary product portfolio and regional footprint could offer solutions for 80% of the global ICE and hybrid market.

At launch, the new company is expected to supply multiple industrial customers including Renault Group, Geely Auto, Volvo Cars, Proton, Nissan, Mitsubishi Motors Company, and PUNCH Torino. In the future, the joint venture will be capable of providing end to end solutions in powertrain technologies to third-party car brands and will welcome partners to further strengthen the value chain.

Subject to applicable laws and regulations, Geely Auto and Renault will enter into a long term procurement agreement from the joint venture for ICE, hybrid and plug-in hybrids powertrains (engine and transmissions) for passenger vehicles. In addition, Renault will procure powertrains from the joint venture for light commercial vehicles as well as the development of hybrid batteries.