Business Essentials for Professionals


Renault And Geely Are Looking To Bring Aramco Into Their Engine Venture: Reuters

Renault And Geely Are Looking To Bring Aramco Into Their Engine Venture: Reuters
A deal is close to be completed between Renault SA and China's Geely Automobile Holdings  aimed at bringing Saudi Arabian state oil producer Aramco to invest and be a partner in the development of  and and supplying gasoline engines and hybrid technologies, according to a report by Reuters quoting information from people with knowledge of the matter. 
According to people familiar with the matter, Saudi Arabia is in advanced talks to take a stake of up to 20% in a previously announced but unnamed Geely-Renault powertrain technology company that the automakers are attempting to establish.
According to a document prepared by the companies and obtained by Reuters, the goal is to launch a powertrain company this year with a capacity of more than 5 million "low-emission and hybrid engines and transmissions" per year.
According to Reuters, Aramco's investment would leave Renault and Geely with 40% each of 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.
There were no comments on the issue from Renault and Geely as well as Aramco.
The aim of the possible new joint venture, which has been christened "Horse" by Renault and "Rubik" by Geely, is to develop gasoline engines and hybrid systems that are more efficient . This development is happening at a time when the major focus of the global the automobile industry is on the capital-intensive transition to making completely electric vehicles, according to sources. 
The financial terms of Aramco's potential investment in the joint venture were not immediately available.
The investment would be used to support the development of decarbonization technologies for gasoline engines, according to the document.
According to the document, Aramco would also contribute to the research and development of powertrain technologies, particularly synthetic fuel solutions and next-generation hydrogen technologies.
The people who described the outline of the deal being negotiated requested anonymity because it had not yet been finalized.
Last year, Aramco announced a collaboration with Hyundai Motor Co (005380.KS) to research advanced fuels that could be used in hybrid engines to reduce CO2 emissions.
According to one of the people, the oil company's deal with Geely and Renault still needs to be approved by the boards of the automakers. According to one of the sources, the three companies have been working to complete a letter of intent in the coming weeks.
When Geely and Renault announced the new venture last year, they stated that it would employ 19,000 people across 17 powertrain factories and three research and development hubs.
Renault intends to focus on electric vehicles by separating its internal-combustion-engine business, as part of the French automaker's effort to restructure its alliance with Nissan Motor Co. As part of this, Renault is attempting to persuade Nissan to invest in its new electric vehicle division.
The agreement with Renault continues Geely's pattern of forming alliances to expand beyond China.
According to two of the sources, the joint venture's strategic focus will most likely be on an advanced four-cylinder engine.
One of them suggested using those engines as a dedicated power generator to charge a hybrid car's battery system rather than directly powering the vehicle when the battery charge was low.
In that kind of arrangement, gasoline engines could be designed to operate in an "exceptionally efficient mode," one of the sources said.
Geely has a 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 that is investing on the view that fuel-efficient hybrids will remain part of the mix even as more automakers roll out electric vehicles.
Toyota Motor Corp chief executive Akio Toyoda has defended his company's continued investment in hybrids, such as the Prius, saying that electric vehicles remain expensive and the charging infrastructure is incomplete.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc