Renault, Geely ink pact with Aramco for engine venture

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Oil giant Saudi Aramco (2222.SE) has agreed to take a minority stake in a new powertrain engine company that French car maker Renault SA (RENA.PA) and China's Geely Automobile Holdings Ltd (0175.HK) plan to set up jointly, they said on Thursday.

Reuters reported in January that Aramco has been involved in advanced discussions to take a stake of up to 20 percent in a previously announced but still-unnamed Geely-Renault powertrain company that would develop and supply internal combustion engines (ICE) and hybrid technologies.

They said on Thursday Geely and Renault are expected to retain equal equity stakes in the new independent entity, but did not disclose how much each would own and how much Aramco would invest.

The new joint venture is aimed at developing more-efficient gasoline engines and hybrid systems at a time when the focus of much of the automobile industry has been 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," Renault CEO Luca de Meo said in the statement.

By carving out its internal combustion engine business, Renault plans to focus on electric cars, part of the French automaker's broad restructuring that also involves overhauling its decades-old alliance with Nissan Motor Co (7201.T).

"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 said.

The deal would make Aramco the first major oil producer to invest in the car business, as the rise of electric cars threatens to cut demand for conventional fuels.

Last year, Aramco announced a partnership with Hyundai Motor Co (005380.KS) to study advanced fuels that could be used in hybrid engines to reduce CO2 emissions.

For Geely, the deal with Renault extends its pattern of building partnerships to expand beyond China. Geely previously announced a hybrid gasoline engine development deal with Mercedes-Benz (MBGn.DE) and holds a stake in the German automaker.

The new company would have an annual production capacity of more than 5 million internal combustion, hybrid and plug-in hybrid engines and transmissions per year, the companies said.