Teaming up to supply rivals with standard combustion cars is a promising idea
As automakers hesitate to invest in legacy engines, China’s Geely and France’s Renault are teaming up to supply their rivals with gas-guzzling cars, among others. It’s a promising idea.
The plan creates a space to accelerate the electrification of the industry. Geely Automobile founder Li Shufu wants new energy vehicles to account for 50% of his Hong Kong-listed company’s sales next year. Renault boss Luca de Meo says European car sales for the company he heads will be 100% electric by 2030.
Automakers expect to spend more than $1 trillion through 2030 to develop and produce electric cars, batteries and related raw materials, according to a Reuters investigation.
Automakers are collaborating to accelerate the development and commercialization of new technologies. Toyota Motor, the world’s largest automaker by sales, has shared its hybrid patents; Nio, China’s $18 billion electric car startup, outsources manufacturing to a state-backed car group; A collaboration between General Motors and China’s SAIC has produced the world’s best-selling mini electric vehicles.
Joining together to develop vehicles powered by fossil fuels also makes sense. These will contribute less to the revenues of most carmakers, as policymakers demand cleaner cars. But the numbers could remain significant for years or decades. About 50 million internal combustion engine models were sold last year, according to the International Organization of Automobile Manufacturers and the International Energy Agency.
Meanwhile, strict environmental regulations make the design and manufacture of these models increasingly cumbersome and expensive. Standard solutions would be an affordable alternative.
By joining Renault, Geely can shift gears more quickly to better seize the opportunity. Between them, they sold almost 5 million cars last year, most of them with 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.
Nissan, Renault’s longtime Japanese partner, has raised concerns about protecting its own technology, complicating talks with Geely. Nissan executives are convinced that fossil fuel vehicles have a place in the market for many years to come, but Renault’s broader strategy roadmap, released on Tuesday, does not explain how Nissan fits in. Both companies have significant holdings in each other’s capital. This can create problems that will have to be addressed later with the gas-guzzling company. First-mover advantage could pave part of the way.
