RENAULT is spreading its wings through a tie-up with China’s biggest privately-owned automotive group Geely Auto. The link involves an investment in a huge internal-combustion engine business with a future based on synthetic fuel and hydrogen capabilities.

Renault and Geely will form a joint venture with Geely buying 34 per cent of Renault Korea Motors (RKM) that operates the former Samsung Motors factory in Busan.

Geely will pay $US200 million for the one-third share which is seen as potentially helping the Chinese company increase exports into the US. For Renault, the funds will help boost investment in its growing EV business.

“With the South Korea-US free trade agreement, Renault or Geely would not face tax burdens if they export vehicles manufactured in South Korea to the United States,” said Song Sung-jae, an analyst at Hana Financial Investment, told Automotive News.

The Busan factory will, in 2024, start production of a new line-up of hybrid and ICE models, initially for the Korean market and later for export.

Vehicles will sit on Geely’s Compact Modular Architecture (CMA), developed by Geely Holding Group’s R&D centre in Sweden and used for Geely assets including the Volvo XC40, Polestar 2 and Zeekr.

The Renault-Geely vehicles will also use Geely-developed hybrid powertrains. Renault-RKM will contribute technologies, design and customer experience.

The new product range will be sold through the existing RKM sales and aftersales network.

In addition, Renault and Geely have joined with Aramco, the Saudi energy company and one of the world’s biggest companies by revenue, to develop new ICE powertrains and hydrogen and synthetic-fuel production for automotive use. The business is known as the Powertrain Technology Company (PWT).

Aramco – which has revenue of about $A500 billion a year and owns businesses including Valvoline and partners with Aston Martin in Formula One – will assist Renault and Geely on a path to have an annual production capability of more than five million internal combustion, hybrid and plug-in hybrid engines and transmissions.

The three businesses would have a global network of 17 powertrain plants and five R&D centres across three continents and together aim to be a standalone global ICE and transmission supplier for global automotive companies.

Geely Holding Group CEO Daniel Li said in a statement: “We welcome Aramco in joining us in the creation of a globally leading sustainable powertrain company. The proposed investment by Aramco represents recognition from global industry leaders in the PWT’s future business prospects and vision for pioneering low and carbon-free fuels such as methanol and hydrogen.”

Renault Group CEO Luca de Meo said: “This partnership with Aramco will raise our joint powertrain company together with Geely Group to the next level and give it a head start in the race towards ultra-low-emissions ICE powertrain technology.

“Aramco’s entry brings to the table unique know-how that will help develop breakthrough innovations in the fields of synthetic fuels and hydrogen.”

Aramco executive vice president of downstream, Mohammed Y. Al Qahtani, said: “This letter of intent represents a new milestone in our ongoing commitment to transportation technologies and presents a platform to support Aramco’s research and development in engine innovation.

“Our planned collaboration with Geely and Renault would support the development of powertrains across the automotive industry, and align with our broader efforts across our global operations.”

Renault has been making and selling cars in South Korea, largely based on European models, for over two decades via Renault-Samsung Motors and can build 300,000 vehicles a year in its factory in Busan.

Renault-Samsung Motors’ sales have declined in recent years. Last year the brand sold 57,480 cars, a drop of 36 per cent from 2020.

Renault is in the middle of a turnaround aimed at increasing margins and separating its electric vehicle business to catch up with rivals such as Tesla.

The acquisition will create synergies with Geely in South Korea, a market with potential for strong growth, Renault Korea said.

Renault will remain Renault Korea’s (RKM’s) biggest shareholder with a majority holding. Geely will hold 34 per cent and Samsung Card holds 20 per cent.

Although Renault is in a long-running global car making alliance with Nissan and Mitsubishi Motors, the French company has been deepening ties with Geely.

Renault is revamping its strategy in China to work more closely with Geely. It previously worked in the Chinese market with Nissan.

By Neil Dowling