French carmaker Renault and Chinese rival Geely are expected to finalize a joint venture for their combustion and hybrid engines by the end of February. Meanwhile, Saudi Aramco is set to announce the signing of a memorandum of understanding to invest in the venture, which would confirm Aramco's letter of intent from March last year. The deal is crucial for Renault, which is overshadowed by bigger rivals including Stellantis, as it could bolster its legacy business that still accounts for most of Renault's income while the company also tries to make headway with electric vehicles (EVs).
Renault's unit Horse and Geely could end up with 40% of the joint venture each, with the remaining 20% going to Aramco. Discussions on the precise investment of the Saudi group are ongoing. The venture will aim for 15 billion euros ($16 billion) in annual turnover and employ 19,000 people on 22 sites around the world, mainly in Spain, Romania, Turkey, South America, and China.
The Renault-Geely venture will supply both the groups' brands as well as third-party manufacturers. Carmakers and other industry sectors have expressed interest in the new supplier, especially outside Europe, where many markets are far from switching to EVs, and in Europe, where some potential clients do not rule out a delay to the EU's 2035 ban on combustion engines.
According to a Reuters calculation, the combustion and hybrid engine vehicles business accounted for around 93% of Renault's 2023 sales, against around 7% for pure EVs. Renault is aiming for an operating margin at the top of its 7%-8% forecast range, up from less than 6% in 2022. Last year's operational free cash flow from the automobile sector is expected to be at least 2.5 billion euros.
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