Saudi Aramco Revs Up for 10% Stake in Renault-Geely Engine Venture

Saudi Arabian oil giant Saudi Aramco is nearing a deal to acquire a 10% stake in Horse Powertrain, a joint venture between French automaker Renault and China's Geely. The venture focuses on the development and production of traditional gasoline and hybrid engines and gearboxes, catering to the ongoing demand for internal combustion engines despite the electric vehicle (EV) revolution.

This move by Aramco signifies a strategic shift, aiming to secure a foothold in the established internal combustion engine (ICE) market while the electric vehicle segment continues to develop. The agreement, initially targeting a 20% stake for Aramco during early discussions, has been scaled back to 10%. Sources familiar with the negotiations, who requested anonymity due to confidentiality agreements, valued Horse Powertrain at approximately €7. 4 billion ($7. 92 billion).

The alliance between Renault, a European car manufacturing leader, and Geely, a prominent Chinese automaker, established Horse Powertrain in May 2023. The venture combines the expertise of both companies in the traditional engine domain, offering a wider range of powertrain solutions to automakers still heavily reliant on internal combustion technology.

This strategic partnership with Aramco aligns with Renault and Geely's goals of securing a steady stream of revenue from the prevalent ICE market while simultaneously investing in and developing next-generation electric vehicle technologies. The cash infusion from Aramco's stake purchase could be instrumental in funding these crucial research and development initiatives.

For Aramco, the deal presents an opportunity to diversify its revenue streams beyond just oil production. As the world transitions towards cleaner energy sources, the company is actively seeking ventures that complement its core business and ensure its long-term financial stability. The investment in Horse Powertrain allows Aramco to maintain a presence in the broader automotive sector, even as the industry undergoes a significant transformation.

Industry analysts suggest that the demand for internal combustion engines, particularly hybrid powertrains, is likely to persist for several years to come. While electric vehicles are gaining traction, concerns regarding charging infrastructure limitations and range anxiety continue to deter some consumers. Additionally, the high upfront costs of EVs make them less accessible to budget-conscious buyers.

The collaboration between Aramco, Renault, and Geely brings together a unique blend of expertise and resources. Aramco's financial muscle, coupled with Renault and Geely's established presence in the automotive industry, positions Horse Powertrain to be a strong competitor in the traditional engine market. The venture is well-positioned to cater to the ongoing demand for internal combustion engines while strategically investing in the future of electric mobility.

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