By Ambar Warrick
Investing.com -- Chinese automaker Geely Automobile Holdings Ltd (HK:0175) said on Thursday that it had entered into a preliminary agreement with Saudi Aramco (TADAWUL:2222) regarding a potential investment from the oil and gas giant into a planned joint venture with Renault SA (EPA:RENA).
Geely said it, Aramco and Renault had signed a non-binding letter of intent over the potential investment, which could see Aramco take a minority stake in a proposed joint venture between Renault and the Chinese automaker.
Geely and Renault will maintain equal equity stakes in the venture, with Aramco expected to take a minority stake. The letter of intent entails a three-month exclusivity period, and will expire in September.
Geely had announced the potential joint venture with Renault in late-2022, which is intended to build and supply combustion and hybrid engines. The venture also intends to develop more efficient gasoline engines, amid growing global consciousness of emissions and a shift towards electric vehicles.
The planned company is intended to be a standalone supplier with a combined capacity of over five million combustion, hybrid, and plug-in engines per year, the companies said in a statement.
Reuters had reported in January that the two were also courting Aramco as a potential investor. Renault CEO Luca de Meo said on Thursday that the new venture plans to leverage Aramco's knowledge to help develop "breakthrough" technology in synthetic fuels and hydrogen.
The venture comes amid an ongoing restructuring in Renault, as the European automaker looks to pivot largely into electric vehicles, following similar forays by its peers.
For Geely, the deal represents its second major alliance with a European automaker. The firm had previously announced a deal with Mercedes Benz (ETR:MBGn) to develop hybrid gasoline engines, and is also a stakeholder in the German carmaker.
Geely’s shares fell 1.5%, tracking a 0.8% drop in Hong Kong’s Hang Seng index.