Electric cars have been cited as a key solution to the decarbonization of the transport sector, but a joint venture between French car maker Renault and Chinese firm Geely could see millions of hybrid combustion engines support the transition to net zero.

On Tuesday, Renault and Geely announced the formation of a new company that will see both companies invest a combined $7.7 billion into the new firm, which will employ 19,000 workers. The two automakers said the new group would operate 17 engine plants and five R&D hubs across three continents, with the firms’ headquarters located in Britain. 

The aim is to produce five million internal combustion engines and hybrid engines yearly – supplying companies including Nissan, Mitsubishi and Volvo – with the goal of becoming a "global leader" in developing and manufacturing the technology.

The news comes despite a global shift towards electric vehicles – the UK has announced that it will ban the sale of new petrol and diesel cars by 2030 – but David Bailey, professor of Business Economics at Birmingham Business School, says hybrid engines will play a key role in the race to decarbonize the sector.

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"The internal combustion engine is going to be around for quite a long time," he told CGTN. "Last year of 70 million cars sold, there were 10 million electric cars and 60 million internal combustion engine cars. Even if electric cars really take off, which they will, there's still going to be a demand for hundreds of millions of internal combustion engine vehicles over the next decade or so. The key technology, I think, is going to be hybrid engines."

The reason for that demand is because of the varying speeds at which countries are likely to pivot to electric cars. While the UK, U.S. and China have all set ambitious targets to shift to electric vehicles, in other parts of the world the transition is likely to be much slower.

He added: "Remember, Europe isn't banning hybrids until 2035. It will be much later in other parts of the world. So, the two companies are coming together, trying to get their costs down, share costs and share risks, and also try and develop those hybrid engines that will be used throughout much of the world over the next decade and beyond." 

'No one has all the solutions'

Renault CEO Luca de Meo says diversification is key to meeting sustainability targets. "With the challenges facing the automotive sector today, no one can claim to have all the solutions, alone. "When it comes to the global race for decarbonizing road transports, there is no time to lose, and it will not be business as usual.” 

For Renault, the deal will enable them to assemble engines cheaply in China and sell them to lots of other car makers, who can't afford to continue developing the internal combustion engine because of their investment in electric cars.

Geely also stands to win big. Western carmakers have been dependent on China as the biggest market for a long time now, their most lucrative market. But the deal could see the Chinese firm win new ground in Europe.

"What this is showing is that Geely is very dynamic company," adds Bailey. "It owns not only Volvo, but Proton, Proton Lotus, the London Electric Vehicle Company, [and is] looking to expand even further internationally. I think what you are seeing is the internationalization of the Chinese automotive industry. We're going to see more strategic investments in Europe from these firms and much greater integration between Western auto firms and Chinese firms going forward."

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