Geely eyes share in Renault engine company

CHINA’S Geely Automobile Holdings and a Saudi-based oil group are in talks to take a significant stake in Renault’s internal combustion engine unit, according to sources close to the French car-maker.

Renault plans to separate its fossil-fuel engine and electric vehicle businesses, but the two separate sources have told Reuters that Renault’s alliance partner Nissan had declined to obtain a stake in the engine unit.

The French carmaker intends to remain the majority shareholder in its Ampère electrical division, which will employ around 10,000 people and could become publicly listed in the second half of 2023.

But it will only retain a minority stake in its Horse combustion engine business, which would allow it to remain a reference shareholder with significant clout in the unit.

According to the sources, the proposed deal would see Renault and Geely each hold a 40 per cent stake in the fossil-fuel engine unit, with Saudi-based Aramco securing the remaining 20 per cent.

This wouldn’t be the first time Renault and Geely have shaken hands.

In May this year, the Renault sold 34 per cent of its South Korean subsidiary to Geely and the pair agreed to develop hybrid vehicles, which will be produced at the Renault plant in Busan.

They are also collaborating in mainland China after Renault recently dissolved its main joint venture there with Dongfeng Motor, which is partly owned by Nissan.

So, what’s in the new engine manufacturing deal for each party?

By sharing costs for outgoing diesel and petrol engine technology, Renault could free up funds to reinvest in EV technology to make it a major player once again in the field.

It could do with the cash, having taken significant action towards cost-cutting, which included cutting 14,600 jobs globally and reducing production capacity by almost 20 per cent.

It has also had to contend with the Russian invasion of Ukraine, which forced significant changes to its Russian-based operations.

Renault transferred its 68 per cent stake in AvtoVAZ to the Russian Science Institute in April for the token sum of one rouble ($A0.019), essentially walking away from its €1.01 billion ($A1.41b) investment.

Meanwhile, such a deal would give the Volvo, Polestar and Lotus parent company Geely a way to expand its business without stumping up the full cost of investing in outgoing technology.

And, as one of the sources pointed out, the oil company would help the development of green hydrogen and the infrastructure required to make hydrogen fuel cell cars viable alongside battery EVs.

The alleged decision by Nissan not to seek a stake in Renault’s combustion engine business comes in the wake of its decision to cease production of engine cylinder heads for Renault at Sunderland, England plant from 2024.

Each move raises further questions about the future of the Renault-Nissan-Mitsubishi alliance, which has struggled to maintain pace since the departure of former CEO Carlos Ghosn.

Each alliance partner said they wanted more than 80 per cent of their models to be based on common platform architecture by 2026, despite lingering questions about the strategic convergence at the three companies in the coming decade.