The Renault-Geely thermal tandem will be finalized at the end of February

(Updated §5 with reaction from Geely)

by Gilles Guillaume

PARIS, February 9 (Reuters) – Renault and Geely could announce towards the end of February the finalization of their joint venture in thermal and hybrid engines, two sources close to the matter told Reuters, putting the issue back in the spotlight. historical activity of the diamond group from which it still draws the majority of its income.

According to one of the sources, Saudi Aramco could also announce at the time of closing the signing of a memorandum of understanding (MOU) to join the joint venture (JV), confirming its letter of intent from last March and its desire to become a strategic investor reaffirmed in July 2023.

According to the source, the final round of the joint venture could give 40% to Horse (Renault), 40% to Geely and 20% to Aramco, but discussions on the precise investment of the Saudi group are still ongoing.

Last July, Renault and Geely announced for the JV an initial arrangement of 50% for Renault and 50% for Geely – divided into 33% for Aurobay and 17% for GHPT, two subsidiaries of the Chinese group.

“The projects are progressing as planned, we will communicate in due course,” a Renault spokeswoman said, without elaborating, while Geely in China declined to comment.

Aramco responded in an email that it was unable to comment on this information immediately.

The creation of a thermal and hybrid champion, which should achieve 15 billion euros in annual turnover with 19,000 employees on 22 sites around the world – in Spain, Romania, Turkey, South America and China in particular – constitutes one of the two main pillars of Renault’s strategy to stay in the race against larger competitors.

Luca de Meo multiplies partnerships to reduce costs and access new markets. The transformation of the group’s historic activity has recently been eclipsed by its other major project dedicated to electricity and software, Ampère, whose IPO was abruptly canceled in January due to market conditions.

Renault achieved around 93% of its 2.23 million sales last year with vehicles with thermal and hybrid engines, compared to around 7% with purely electric models, for which its range has not yet been completely renewed.

THE RETURN OF HISTORICAL BUSINESS

“The abandonment of the Ampère IPO should ultimately bring the spectacular recovery of Renault’s historic business back to the top of the agenda, while giving the group more time to strengthen its balance sheet in the electric sector,” BNP wrote in a note last week.

The Renault-Geely JV will function as an equipment supplier for the brands of the two groups, but also for other third-party manufacturers. According to the two sources, interest is keen, both outside Europe where many markets are far from switching to all-electric, but also on the European continent where certain customers do not rule out a delay in the ban on 2035 for heat engines.

Renault, which will publish its 2023 results next Thursday, said it was aiming for an operating margin for the past year at the top of its forecast range of 7% to 8%, compared to less than 6% in 2022. Its objective for 2025 is set at 8% and for 2030 at 10%.

The group also expects operational free cash flow from the automobile sector to be greater than or equal to 2.5 billion euros in 2023.

Despite the improvement in its performance, Renault still suffers from comparison with Stellantis, born from the merger between its French competitor PSA and FCA.

The group of 14 brands, which this week denied information from the Italian press according to which France would push for a merger between the two manufacturers, is one of the most profitable in the sector. Its results, which will be published on the same day as those of Renault, should once again be marked by a double-digit adjusted operating margin. (Report by Gilles Guillaume, edited by Sophie Louet)