HONG KONG, Nov 9 (Reuters Breakingviews) – As automakers hesitate to invest in legacy motors, China’s Geely and France’s Renault (RENA.PA) are teaming up to supply gas guzzlers and more to rivals. It’s a promising idea.
The plan creates room to accelerate the industry’s electrification. Founder Li Shufu wants new-energy vehicles to account for 50% of Hong Kong-listed Geely Automobile’s (0175.HK) sales next year. Renault boss Luca de Meo says European car sales at the company he leads will be 100% electric by 2030. Automakers expect to splurge more than $1 trillion through 2030 to develop and produce electric cars, batteries and related raw materials, per Reuters research.
Carmakers are collaborating to speed the development and commercialization of new technologies. Toyota Motor (7203.T), the world’s largest automaker by sales, has shared its hybrid patents; the $18 billion Chinese electric-car upstart Nio (9866.HK) outsources manufacturing to a state-backed auto group; a collaboration between General Motors (GM.N) and China’s SAIC has produced the world’s best-selling mini EVs.
Joining up on fossil fuel powered vehicles makes sense too. These will contribute less to most automakers’ top line as policymakers demand cleaner cars. But the numbers could remain significant for years or decades. Roughly 50 million internal combustion engine models were sold last year, according to the International Organization of Motor Vehicle Manufacturers and the International Energy Agency. Meanwhile stringent environmental regulations make it increasingly irksome and costly to design and manufacture such models. Off-the-shelf solutions would be an affordable alternative.
By hitching itself to Renault, Geely can shift gears faster to make the most of the window of opportunity. Together, they sold nearly 5 million cars last year, most of which were internal combustion engines. Renault, for its part, will benefit from connections to Geely’s export markets, which include developing countries where electrification could be slower.
Renault’s long-time Japanese partner Nissan (7201.T) has expressed concerns over the protection of its own technology, complicating discussions with Geely. Nissan executives are convinced that fossil-fueled vehicles have a place in the market for many years to come, yet Renault’s broader strategy roadmap, delivered on Tuesday, failed to explain how Nissan fits in. The pair own sizeable equity stakes in each other. That potentially creates problems to tackle later with the gas guzzler venture. A first-mover advantage could smooth some of the road ahead.
Follow @KatrinaHamlin on Twitter
CONTEXT NEWS
Renault and China’s Geely will supply gasoline engines and hybrid technology to their own brands and other automakers through a 50-50 partnership, the companies said in a statement on Nov. 8.
The joint venture will employ 19,000 people, boast 17 powertrain factories and five research and development centers, and it will have the capacity to supply 5 million powertrains per year, they said.
Editing by Una Galani and Thomas Shum
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
.