A new joint venture between Renault and Geely will see the pair commit to internal combustion engine cars despite a growing movement to battery-powered vehicles.
Hybrid, hydrogen and synthetic-fuelled car engines and transmission systems will be produced by the new company, which will be headquartered in the UK and have production sites “in three continents”.
Though the move marks a boost for Britain’s struggling auto sector, it also comes despite a planned ban on the sale of new petrol and diesel cars in 2030, followed by hybrids in 2035.
European Union nations will ban fossil-fuelled cars from 2035 meanwhile, though this will not stretch to alternative and potentially less-polluting fuels such as hydrogen and synthetics.
These have long been proposed as a replacement to conventional fossil fuel-powered cars, though their green status largely relies on how they are made.
Alternative fuels
Hydrogen can be produced through electrolysis, with electricity required to power the process which sees water molecules split to create the fuel.
Synthetic fuels actually use hydrogen meanwhile, which is mixed with carbon to replace traditional hydrocarbon-based fuels such as petrol and diesel.
Most of today’s hydrogen is ‘grey,’ meaning it is produced by splitting natural gas or methane in a carbon-emitting process.
Regardless, the transition to alternative fuels is expected to make serious leeway in the coming years, with both the hydrogen and synthetic fuel markets poised to boom.
According to think tank Allied Market Research, the global synthetic fuels market will be worth US$22.5bn by the early 2030s, compared to just US$3.9bn in 2021.
Fund HydrogenOne anticipates the hydrogen market could be worth up to US$1trn by 2040 in comparison, with fuel cells alone representing a US$15bn segment alone come 2030.
Unlike many rival firms which are largely committed to electric vehicles, Renault and Geely’s new firm will focus specifically on alternative fuels.
Both do indeed offer electric vehicle ranges, though Tuesday’s commitment to pump €7bn (£5.4bn) into the new business marks a substantial bet on other alternatives.
“Synthetic fuels including e-fuels, and hydrogen are part of the solution for decarbonisation in the automotive industry,” the companies said in a statement.
They also hinted new powertrains could be built “for the internal combustion engine vehicles on the road today,” meaning powering existing models for longer.
Subsidiaries such as Volvo, Proton, Nissan and Mitsubishi will be supplied by the new joint venture, they laid out, which will be half-owned by Renault and Geely, with a potential investment yet to come from oil firm Aramco.
Third Bridge analyst Orwa Mohamad pointed out that the change in rules on internal combustion engines was also only set to fully affect the EU and US.
"There is a market for internal combustion engine vehicles that will need to be maintained," he said, "particularly given the lack of infrastructure for electric Vehicles in other parts of the world."
Lithium shortage?
One key downside of the electric vehicle market, which is estimated by Precedence to be worth some US$1.13trn by 2030, is repeated warnings over shortages of critical metals.
Whether it be through buying stakes in mining companies or investing in recycling initiatives, carmakers are already foreseeing a shortage of key battery component lithium.
Ford Motor Company (NYSE:F) has penned several agreements to ensure its supply of lithium in the years ahead, while the likes of Volkswagen have entered partnerships with battery-recycling firms.
According to the International Energy Agency (IEA), global lithium demand tripled between 2017 and 2022 alone, forcing prices up, with supply shortages potentially causing issues as early as 2025.
Global development of low-emission alternatives, such as synthetic fuels, are not on track to support the limiting of global warming to 1.5C by 2050 meanwhile, the IEA has warned.
“No one can claim to have all the solutions,” Renault boss Luca de Meo commented in light of the global transport sectors’ challenges in transitioning to lower emissions.
“When it comes about the global race for decarbonizing road transports, there is no time to lose, and it will not be business as usual.”
"The joint venture between Geely and Renault is a smart move," Mohamad added, "nobody is investing very much in internal combustion engines".