Oil Giant Invests in Combustion Engine Future with Renault-Geely Partnership

Saudi Aramco, the world's largest oil producer, is making a strategic move into the future of traditional gasoline and hybrid engines by acquiring a 10% stake in a joint venture between French automaker Renault and China's Geely. The deal, announced on June 28th, values the newly formed venture, named Horse Powertrain, at a staggering €7. 4 billion ($7. 93 billion).

This partnership signifies a surprising alliance between an oil giant and automakers traditionally focused on internal combustion engines (ICE) technology. With the auto industry on a fast track towards electrification, the move raises questions about Aramco's long-term strategy. Analysts believe the investment could serve a dual purpose. Firstly, it secures a foothold in the ongoing production of gasoline and hybrid engines, which are expected to remain dominant for several years, particularly in emerging markets. Secondly, Aramco's expertise in lubricants and biofuels could prove valuable to Horse Powertrain as they develop more efficient and sustainable ICE technologies.

Renault and Geely established Horse Powertrain in May 2024. The venture will focus on developing and supplying gasoline engines, hybrid systems, and gearboxes specifically for thermal vehicles. Both Renault and Geely will hold roughly 45% ownership each, with Aramco's 10% stake solidifying their position as a minority partner.

This collaboration comes amidst a backdrop of increasing pressure on automakers to transition towards electric vehicles (EVs). The European Union recently imposed significant tariffs on imported Chinese EVs, highlighting the complexities of the global automotive landscape. While the future undoubtedly belongs to EVs, the internal combustion engine still holds a significant market share, particularly in regions with limited charging infrastructure or lower consumer purchasing power.

For Renault and Geely, Aramco's investment provides a much-needed financial boost for continued research and development in the thermal engine space. The deal also positions Horse Powertrain as a major player in the global market for next-generation ICE technology. Aramco, on the other hand, gains valuable insights into the evolving automotive industry and a potential hedge against the full-scale adoption of EVs.

The agreement between Aramco, Renault, and Geely underscores the multifaceted nature of the automotive industry's transition towards a more sustainable future. While the rise of EVs is undeniable, the internal combustion engine is not on the verge of immediate extinction. This strategic partnership suggests that both traditional and new forms of automotive technology will continue to coexist for the foreseeable future.

Previous Article Next Article