Renault and Geely reach agreement for internal combustion joint venture By Reuters

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© Reuters. FILE PHOTO: The Renault logo is displayed at the 2022 Paris Auto Show, France October 17, 2022. REUTERS/Stephane Mahe

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By Norihiko Shirouzu

BEIJING (Reuters) – Renault SA (OTC:) 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 the brands they own as well as other automakers .

The deal represents an important step in a months-long effort by the French automaker to carve out its gasoline-powered car business into a separate company.

The joint venture will employ 19,000 people at 17 powertrain plants and three research and development centers, the companies said, adding that they expect to reach a final agreement and launch the new company in 2023.

The preliminary agreement with Geely, with whom Renault (EPA:) 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 SA (ETR:).

Renault has also entered into negotiations with its existing alliance partner, Nissan (OTC:) Motor Co, over a new investment in an electric vehicle business which it also plans to establish. The Japanese automaker has said it is considering investing in the company, which is codenamed Ampere.

Nissan raised concerns about the treatment of intellectual property, including battery and powertrain technology, in its discussions with Renault and said these concerns extend to any partnership the French automaker enters into. 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 (OTC:).

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.

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