Renaud and Geely Join Forces to Create a New Auto Giant: “Horse Powertrain”
The French automaker Renault and the Chinese conglomerate Geely have formed an alliance to create a new auto giant in the automotive industry with “Horse Powertrain” for the development and construction of combustion engines, hybrid drives, and the necessary transmissions.
When politics announces a turning point, the automotive industry, as one of the most important sectors globally, naturally cannot lag behind. Currently, it is making a significant effort. Almost daily, there are reports of new alliances or failed cooperations, record profits, bankruptcies, misfortunes, and mishaps.
On May 31st, amidst discussions about possible EU tariffs on subsidized Chinese electric cars, the surprising news of the formation of a new combustion engine conglomerate as a joint venture between the French automaker Renault and the Chinese multi-brand conglomerate Geely broke: “Horse Powertrain – Renault and Geely establish a combustion engine conglomerate.”
Renault, a well-known European traditional brand, and its Italian CEO Luca De Meo have been in the spotlight. Although not through spectacular product innovations, De Meo gained attention with the “Letter to Europe” published at the end of March, calling for a European industrial policy for the automotive industry following the model of the Airbus consortium, an “Airbus of the automotive industry.”
The Chinese automaker Geely, founded by Li Shufu in 1986, initially manufactured refrigerators before venturing into automobile production. After rapid growth, the Chinese automaker is now the parent company of Volvo, Lotus, Proton, Polestar, Lynk & Co, Zeekr, London Taxi, Maple, Smart, Radar, Geoem, and Geometry. Additionally, Li Shufu and the state-owned Beijing Automotive Group (BAIC) each hold around ten percent of the Daimler Group. In cooperation with Geely, Daimler will produce the Smart as an electric vehicle at its major shareholder Geely in China from mid-2024, with a 49 kWh battery, a range of up to 160 kilometers, and a starting price of 37,490 euros.
Initially, De Meo attempted to realize his cooperative efforts at the European level with the VW Group (Note: there are no other partners for mass producers in Europe besides direct competitor Stellantis). However, the negotiations failed. And now, the announcement in the Automotive Week that Renault and Geely will establish the combustion engine conglomerate “Horse Powertrain Limited” by May 31, 2024.
The name Horse Powertrain speaks for itself. The French-Chinese joint venture seems completely out of the “electric era” and aims to become the world leader in the production of combustion engines and hybrid drives. The company already produces around five million powertrains for combustion and hybrid vehicles worldwide. The former Volvo-owned Aurobay engine plant in Skövde, Sweden, now belongs to the joint venture. Aurobay has been producing engines and transmissions for Geely’s subsidiary brands Volvo, Polestar, Lynk & Co, and Proton since Volvo’s acquisition in 2021. From March 2023, Aurobay’s drives were also used in models from Renault, Dacia, and others after Renault acquired a 50% stake from Geely.
The French-Chinese 50:50 joint venture, Horse Powertrain, is not entirely new but consists of merging Renault’s combustion engine division, separated from the electro business Ampere of the French group, under the name “Horse,” and Geely’s combustion engine division, which was last known as “Aurobay.”
In the world of the automotive industry, a new auto giant emerges with “Horse Powertrain,” or simply Horse, for the development and construction of combustion engines, hybrid drives, and the necessary transmissions. The company has 19,000 employees, 17 plants, and five development centers worldwide. These plants are located in China, Portugal, Romania, Spain, Sweden, Turkey, the United Kingdom, Argentina, and Brazil.
According to the founders’ intentions, Horse aims to achieve an annual turnover of 15 billion euros in its first full calendar year of operation and build around five million powertrains for combustion and hybrid vehicles, representing over 6% of the current global car production. The company has a complete portfolio of combustion engines, electric hybrid technology, and the required batteries from day one. It aims to supply not only all brands of Renault and Geely but also other manufacturers. Nissan and Mitsubishi are among the first customers.
Renault CEO De Meo aims for a global leadership position with “Horse.” With Horse Powertrain, the Renault Group can take a “worldwide leadership position and expand” in a sector that accounts for more than 80% of its business.
Even more crucial for the industry’s future is De Meo’s commitment to the combustion engine. For De Meo, a partnership with a leading company like Geely is essential to develop extremely low-emission combustion engines and highly efficient hybrid technologies. This is “the key to the future.” A combination of various drive technologies is necessary to advance decarbonization in a world where by 2040, half of the vehicles sold are still expected to be combustion engine cars.
Geely Chairman Eric Li stated, “Horse Powertrain Limited will have the portfolio, size, and capabilities to offer the low-emission solutions that the automotive industry of tomorrow needs. Today’s launch marks a new chapter in sustainable mobility, and we at Geely are proud to contribute to it.”
However, the cooperation between Renault and Geely does not end there. Renault also plans to build an electric Twingo with Geely’s assistance.
After the failed cooperation with Volkswagen, Renault now intends to introduce the electric version of its successful small car Twingo with Geely’s help as an entry-level model. Renault’s electric vehicle division Ampere announced that it would lead the project and have a larger share in development and design. The Renault electric Twingo is expected to hit the market in 2026, with Geely assisting in accelerating the process and reducing costs. The development of the E-Twingo is progressing rapidly, and it is expected to be available for around 20,000 euros.
This endeavor has a backstory. Initially, following his Airbus doctrine, De Meo had negotiated with Volkswagen to develop an entry-level electric car in a joint venture. However, VW withdrew and opted to build a cheap electric car independently. The Volkswagen electric car, known as ID.1, is set to be launched in 2027 and is expected to cost around 20,000 euros, similar to the E-Twingo.
This ambitious goal for both companies comes with challenges as Alliance Trade has calculated an average price advantage of over 20,000 euros for Chinese electric cars compared to European ones for 2022. The cost difference is due to locally available inexpensive raw materials and intermediate products, especially batteries, as well as economies of scale. While costs can be significantly reduced, especially for electric cars where battery storage alone accounts for about a third of production costs, they still remain partially around 50% higher than comparable combustion engine vehicles.