ALBAWABA — Oil giant Saudi Aramco agreed to take a minority stake in a joint venture between China's Geely and France’s Renault that would develop and supply internal combustion engines and hybrid technologies, the three companies said on Thursday.
"Our planned collaboration with Geely and Renault would support the development of powertrains across the automotive industry and aligns with our broader efforts across our global operations," Mohammed Y. Al Qahtani, executive vice president of Downstream at Aramco, told Gulf Business.
In a joint statement, Geely and Renault said they would most likely retain equal equity stakes but did not disclose how much each would own and how much Aramco would invest.
Going against industry trends, the new joint venture is aimed at developing more-efficient gasoline engines and hybrid systems, whereas much of the industry is focused on the capital-intensive transition to purely electric vehicles.
"This partnership with Aramco will... give it a head start in the race towards ultra-low-emissions ICE powertrain technology," Luca de Meo, chief executive officer of Renault, said in a statement.
"Aramco’s entry brings to the table unique know-how that will help develop breakthrough innovations in the fields of synthetic fuels and hydrogen," De Meo added.
In November, Renault said it was teaming up with Geely to develop and produce engines, gearboxes and other components for hybrid, petrol and diesel vehicles.
The 50-50 partnership was announced as part of a sweeping overhaul at Renault as it tries to expand its electric vehicle business.
In January, media reports said that Aramco was involved in advanced discussions to take up to 20 percent stake in the Geely-Renault company.
Now Aramco signed a letter of intent "to become a potential minority stakeholder" in the subsidiary, said the statement.
Aramco's investment will "contribute to key research and development across synthetic fuels solutions and next-gen hydrogen technologies", according to the statement.
The deal would make Aramco the first major oil producer to invest in the automobile business, as the rise of electric cars threatens to cut into the demand for conventional fuels.
In March last year, Aramco announced a partnership with Hyundai to study advanced fuels that could be used in hybrid engines to reduce CO2 emissions, in collaboration with the King Abdullah University of Science and Technology.
Building up its international partnerships, in early 2020, Geely announced a hybrid gasoline engine development deal with Mercedes-Benz, while also owning shares in the German automaker.
The new subsidiary will have 19,000 employees in Europe, China and South America, with 17 factories and five shared research and development centers.
The new independent entity would have an annual production capacity of more than 5 million internal combustion, hybrid and plug-in hybrid engines and transmissions per year, supplying more than 130 countries and regions, the companies said in their statement.