Renault and Geely Plan to A Joint Venture Producing Combustion Engines

Renault and China's Geely Holding Group have agreed to form a joint venture to produce combustion engines, which will create a company with EUR 15 billion in revenue.

The agreement is non-binding at this point, and talks on technology sharing with Renault's partner Nissan are still ongoing. If successful, the new company will span 19,000 employees across 17 plants.

The tie-up will see the two carmakers pool their assets to cut costs and free up funds to invest in electric vehicles. The deal is seen as a way for Renault to keep pace with the deep changes brought on by the electric era.

However, there are still hurdles to be overcome before the deal can be finalized. Renault and Nissan are negotiating the licensing of potentially hundreds of jointly developed patented technologies to other players. Nissan is seeking assurances that key technologies will be protected under any deal with Geely.

The new company, provisionally named Horse, will now look into details such as governance, plant utilization and the location of its headquarters. While the joint venture is currently evenly split between Renault and Geely, it is open to other carmakers and investors to join.

 Geely was a minnow in the Chinese market in 2010 and was unknown outside the country. But it pulled off a masterstroke by buying world-renowned Swedish brand Volvo for USD 1.5 billion. Geely took advantage of Volvo's reputation for safety and robustness, both concerns frequently levied at Chinese manufacturers, to boost its sales in China. Geely made a flurry of investments after buying a British taxi manufacturer in 2013. It became the main shareholder in British sports car maker Lotus in 2017, then in the American flying car start-up Terrafugia.