Renault and Geely aim to conquer the world with the new joint venture
For the French giant Renault, sales were down in 2022, and operations slowed down in China, the world’s largest auto market. With the approval of a joint venture with the Chinese Zhejiang Geely Holding Group by the European Commission (EC), Renault plans to conquer China and the rest of the world with a greenish and flexible global strategy.
Renault opened its first manufacturing facility in Wuhan, China, through a joint venture with Dongfeng Motor Group in 2016. With an annual capacity of up to 150,000 cars, the passenger car sales didn’t go as planned, and Renault withdrew from the joint venture in 2020, selling its 50% stake in the operation.
The downward shift in operations continued in China for Renault as another joint venture with Brilliance China Automotive Holdings went bankrupt in 2021 following a Chinese court’s commencement of bankruptcy at the beginning of 2022. After this loss, Renault was left with only two electric vehicle (EV) joint ventures, eGT New Energy Automotive and Jiangxi Jiangling Group Electric Vehicle. In 2022, Renault’s global sales shrunk by 9%, while China didn’t appear in the first 15 geographies for the brand’s annual sales list.
Luca de Meo, CEO of Renault Group, said, “They will have to bring something that doesn’t exist in China.”
Something is about to hit -not only- China: A grand joint venture supported by oil giant Aramco.
Insights of Renault-Geely joint venture
The EC approved the joint venture between Renault and Geely on 17 November 2023 under the EU Merger Regulation. Despite launching an anti-subsidy inquiry into Chinese EV brands on 13 September 2023, Europe is keen to continue long-term partnerships with Chinese automakers. According to experts, China will have a significant role in electrifying European fleets and continue its influence in the electric passenger car segment.
From the European perspective, the Renault-Geely partnership is a “balanced” and highly strategic move for both companies, aiming to be sustainable with global expansion and strong partnerships:
- The amount invested by Reanult and Geely is €7 billion, each holding a 50% stake in operations.
- The agreement followed a framework agreement announced by Renault and Geely in November 2022.
- The partnership aims to become a global leader in next-generation hybrid and high-performance powertrain solutions.
- To this end, a new powertrain technology company will emerge, aiming to become the global leader in developing, manufacturing, and supplying hybrid powertrains and high-performance internal combustion engine (ICE) powertrains.
- Aramco, one of the largest oil and natural gas producers, signed a letter of intent with Renault and Geely in March 2023.
- Aramco is expected to support the research and development of synthetic fuels and next-generation hydrogen technologies.
- According to Reuters, Saudi Aramco had discussions with Renault and Geely in January 2023 to have a 20% stake in the joint venture, splitting the rest evenly between the French and Chinese auto companies.
According to de Meo, “Aramco partnership will take the joint venture to the next level and give it a head start in the race towards ultra-low-emissions ICE powertrain technology while bringing unique know-how to help develop breakthrough innovations in synthetic fuel and hydrogen energies.”
The joint venture will have two operational centres, Madrid for Renault Group and Hangzhou Bay for Geely. An executive team will be headquartered in London to look over operations.
Factories all over the globe
The new ‘mega-company’ will have 17 engine manufacturing facilities and five R&D centres. The new company will span three continents and 130 countries and is estimated to employ around 19,000 people. The company will provide powertrain solutions to multiple auto manufacturers worldwide, with an annual production capacity of up to 5 million ICE, hybrid, and plug-in hybrid engines.
According to several resources in the auto media, eight of the 17 plants are owned by Renault and are located in Latin America, Europe, and Turkey. The remaining nine factories of Geely are all based in China except one in Skovde, Sweden. This facility is operated by the powertrain developer and manufacturer of Volvo Cars, Aurobay, both owned by Geely.
Aurobay and Geely plan to establish two R&D centres under the new joint venture, one in Gothenburg, Sweden, and the other in Hangzhou Bay, China. According to Reuters, Renault will support the R&D process with three facilities in Europe and Latin America.
Reaching 80% of the global market
The forming of the joint venture is expected to be finalised in the second half of 2023. Renault says that “the new joint venture’s complementary product portfolio and regional footprint could offer solutions for 80% of the global ICE and hybrid market.”
The new company will begin supplying many industrial customers, including Renault Group, Geely Auto, Volvo Cars, Nissan and Mitsubishi Motors Company. While providing end-to-end solutions in powertrains, the new company will be open to future partnerships to strengthen the value chain.
Combining technical know-how and expanding the global frontiers, the Renault-Geely strategy is robust, aiming to provide affordable low-emission ICEs while developing e-fuel and hydrogen energy technologies and boosting electrification in major markets. From 2024 onwards, Renault is determined to keep global sales high and penetrate China without a doubt.
The main image shows Renault Zoe E-Tech, courtesy of Renault.