(Reuters) – Saudi Aramco has signed a letter of intent with Renault and China’s Geely to become a minority shareholder in their gasoline engine and hybrid technology joint venture, the companies said in a joint statement on Thursday.
Reuters reported last month that the Saudi oil producer was in advanced talks to take up to 20% of the entity, which Renault and Geely want to set up this year.
The companies said Renault and Geely were expected to retain equal shares in the new independent company, but did not disclose what that level of ownership would be, or how much Aramco would invest.
“Aramco’s planned investment would be aimed at supporting the development of synthetic fuel solutions and next-generation hydrogen technologies,” the statement said.
“This partnership with Aramco will allow us to step up the powertrain business that we are developing with Geely Group,” said Renault chief executive Luca de Meo.
“It will give it a head start in the race for ultra-low emission thermal technology,” he added.
By splitting its thermal engine activities, Renault intends to focus on its electric car entity, “Ampère”, where it would like to see its historical partner Nissan invest as part of efforts to restructure their alliance.
“The entry of Aramco brings unique know-how to develop breakthrough innovations in synthetic fuels and hydrogen,” explained Luca de Meo.
The agreement would make Aramco the first major oil producer to invest in the automotive sector, as the growing market for electric vehicles threatens to lower demand for fuel.
Last year, Aramco announced a partnership with Hyundai Motor to study advanced fuels, which could be used in hybrid engines to reduce CO2 emissions.
For Geely, the agreement with Renault is part of its partnership strategy to expand beyond China.
Geely has already announced a development agreement in gasoline engines for hybrid vehicles with the German Mercedes, of which it is also a shareholder.
The new venture would have an annual production capacity of more than five million combustion, hybrid and plug-in hybrid transmissions and engines, the companies said.
(Report Anirudh Saligrama; French version Camille Raynaud)
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