Renault to Pair Up With China’s Geely in Combustion-Engine Venture
French auto maker details major overhaul, says talks with Nissan about investing in electric-vehicle unit continue
PARIS—France’s Renault SA RNO -2.04% and China’s Geely Automobile Holdings Ltd. GELYY 2.66% are forming a joint venture focused on gasoline-powered engines and hybrid technology, the latest example of auto makers sharing the burden of development costs as the industry grapples with the transition toward electric vehicles.
Renault announced the deal Tuesday as it detailed plans to split itself into several divisions, including the combustion-engine-focused venture with Geely and another on electric vehicles and software, which it plans to spin off as soon as next year. It said it was in talks with longtime alliance partner Nissan NSANY 0.30% Motor Co. about the Japanese company investing in the EV business, though didn’t provide a time frame for reaching an agreement.
Renault said the joint venture with Geely would have 17 so-called powertrain plants, and five research and development centers, and would employ about 19,000 workers. Financial terms of the deal weren’t disclosed, though each car maker will hold a 50% stake in the new company. The JV could welcome new shareholders in the future, the company said.
The new JV will supply both car makers, and may later serve outside customers. Renault said it expects to finalize the agreement with Geely next year.
Across the auto industry, executives are restructuring operations that have long been built around the internal combustion engine, putting more emphasis on the development of technologies for electric vehicles—a transition that requires hefty investment.
“A series of revolutions is reshaping the auto industry in depth,” Renault Chief Executive Luca de Meo told investors on Tuesday while presenting the company’s new strategy.
For Geely, the move continues a pattern of investing outside China. The Chinese auto maker is owned by Zhejiang Geely Holding Group, which also holds Swedish car maker Volvo Car AB.
For Renault, the JV is a central plank of a major overhaul of the company’s operations, which executives have been working on for months. Renault’s management hopes the plan to split itself into different units, particularly the separation of the EV and software business, will help it attract outside investment and give it the wherewithal to invest in future technologies.
The EV business, named Ampere, will be based in France and employ about 10,000 people. Renault aims to take the new company public during the second half of next year if market conditions allow, and intends to keep a majority stake in the business as well as seek the support of outside investors. On Tuesday, Renault and Qualcomm Inc. said the San Diego-based chip maker intended to invest in Ampere.
Renault has also been locked in negotiations with partner Nissan about investing in Ampere, and said those talks were continuing. A number of people involved in the negotiations with the Japanese auto maker had said they had hoped to have a preliminary agreement in place by the end of October, The Wall Street Journal has previously reported.
The framework being discussed, the people said, would also see Renault reduce its current 43% stake in Nissan to 15%—a stake sale that its Japanese partner has long requested.
Renault said the overhaul would boost its financial performance, including doubling its operating margin in the coming years. It is targeting a margin above 8% in 2025 and above 10% by 2030. It also backed this year’s guidance, which includes an operating margin of above 5%.
The French car maker said it planned to reinstate dividends next year, which it paused in 2020 as the pandemic shuttered plants around the world. It said it aims to reach a payout of 35% of its net income in the coming year.