On June 28, Geely Automobile Holdings (Geely) and Renault Group announced that Saudi Aramco has signed a definitive agreement to acquire a 10% stake in HORSE Powertrain Limited, a joint venture between the two companies.
Under the agreement, Aramco will purchase a 10% stake in Renault and Geely based on the overall value of the joint venture of €7.4 billion, subject to customary closing conditions, including obtaining regulatory approvals. Geely said in the announcement that after the completion of the acquisition, Saudi Aramco will become the new shareholder of the joint venture, and Saudi Aramco, the company's indirect wholly-owned subsidiary Aurobay Holding (BVI), Geely Holding's indirect wholly-owned subsidiary GHPT Limited and Renault will hold 10%, 29.7%, 15.3% and 45% of the joint venture, respectively.
In other words, after the completion of the transaction, Aramco will acquire a 5% stake in HORSE Powertrain Limited from Geely and Renault, bringing the stake of both Geely and Renault to 45%. According to reports, the transaction is expected to bring about 7.6 billion yuan of unaudited proceeds to Geely.
Back in November 2022, Geely and Renault signed a non-binding framework agreement to establish a new company to develop, manufacture and supply advanced hybrid powertrains and efficient fuel powertrains worldwide, with an annual production capacity of 5 million units, which will be supplied to more than 130 countries and regions. In March 2023, Saudi Aramco intends to acquire a minority stake in the Geely-Renault joint venture through a cash investment. In July of the same year, Geely and Renault signed a joint venture agreement in which each company holds a 50% stake in the joint venture, which aims to become a leader in the next generation of high-efficiency and energy-efficient hybrid system solutions, developing, manufacturing and supplying advanced hybrid powertrains and high-efficiency fuel powertrains worldwide.
In May this year, Geely and Renault officially announced the establishment of HORSE Powertrain, headquartered in London, England, employing 19,000 people in 22 locations around the world, mainly in Spain, Romania, Turkey, South America and China, with Matias Giannini as CEO, Renault and Geely each holding 50% of the shares. At that time, Renault Group said in a statement that the joint venture is expected to have annual revenues of nearly 15 billion euros (about 116.55 billion yuan), an annual output of about 5 million powertrain units, and a complete powertrain technology portfolio including hybrid systems, internal combustion engines, transmissions and battery solutions for global partners.
As for why Renault and Geely set up a joint venture to develop internal combustion engines? In today's global electrification transformation environment, Renault and Geely's action has a trend of "reverse electrification", but it seems to be going against the trend, but it is actually a win-win cooperation. For both Geely and Renault, fuel vehicles and hybrid vehicles are still the main sales force, and the establishment of the new joint venture can pool the existing resources in the hands of both parties to a certain extent, so as to obtain better resource development and updated technology. It is worth noting that the deeper intention of the joint venture is that the joint venture not only has internal combustion engine business, but also hybrid and plug-in hybrid powertrains, which is where Renault's technical advantage lies.
In other words, Renault and Geely have partnered to establish a joint venture for internal combustion engines, which is a win-win situation for both parties. Industry insiders believe that for Renault, this is another rebirth in the Chinese market, and at the same time, Geely's technology accumulation in the field of plug-in hybrid can promote its acceleration of the development of electric vehicles. For Geely, this cooperation is also conducive to the export of its Raytheon electric hybrid technology to the world, and to leverage Renault's advantages in the European market and Latin American markets to achieve the layout of overseas market business.
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