Geely's Horse Powerplay: How Its JV with Renault Secures EV Powertrain Dominance

The automotive industry's shift toward electrification is no longer a question of if, but how. For Geely Automobile (HK:0175), the answer lies in its strategic joint venture (JV) with Renault—HORSE Powertrain—a $15 billion powerhouse that could redefine the global EV supply chain. By committing a reported EUR1.742 billion to the venture, Geely has positioned itself at the nexus of hybrid innovation, alternative fuels, and decarbonization, while avoiding the financial drag of full ownership. Here's why investors should take note.

Strategic Synergies: Combining Renault's Know-How with Geely's Scale

The 50-50 JV between Geely and Renault, formed in May 2024, merges two decades of powertrain expertise. Renault's HORSE division brings advanced hybrid and combustion engine technologies, while Geely's Aurobay unit contributes battery and alternative fuel systems. The result? A portfolio spanning full hybrids, plug-in hybrids, and ICEs optimized for ethanol, methanol, and hydrogen.

The crown jewel is the drop-in hybrid system, a compact unit that converts EVs into hybrids with minimal retooling. This technology, slated for series production in 2028, allows automakers like Volvo and Nissan (both HORSE clients) to leverage existing EV platforms while catering to markets where combustion engines still dominate—think Brazil, Southeast Asia, or regions with underdeveloped charging infrastructure.

The partnership's global footprint is equally compelling: 17 plants, 5 R&D centers, and 19,000 employees spread across 130 countries. By serving nine major automakers—including Geely's own brands (Volvo, Polestar) and Renault's global network—HORSE is already on track to produce 5 million powertrains annually, a scale that could rival Tesla's Gigafactories in criticality.

Financial Nuance: Non-Consolidation as a Competitive Advantage

Critically, Geely's 50% stake (now diluted to 45% post-Aramco's $7.4 billion 10% investment) means the venture's earnings are not consolidated into its financials. This avoids the volatility of a new, capital-intensive business, while still granting Geely full access to HORSE's IP and revenue streams.

Consider the implications:
- Lower Balance Sheet Risk: No need to fund HORSE's $15 billion annual revenue target alone.
- Upside Capture: Geely benefits from HORSE's growth without shouldering upfront liabilities.
- Strategic Flexibility: The JV's autonomy allows it to pivot quickly to emerging markets or tech shifts, such as hydrogen engines or synthetic fuels.

Tech Leadership: Bridging EVs and Combustion Engines

HORSE's technology-neutral approach is its secret weapon. The JV isn't just chasing all-electric vehicles—it's hedging bets on dual-fuel systems and 800-volt battery compatibility, which cater to regions where hybrids are a pragmatic stepping stone to full electrification.

Renault's partnership with Aramco further amplifies this advantage. The oil giant's $7.4 billion stake brings expertise in synthetic fuels and lubricants, enabling HORSE to develop ICEs that run on carbon-neutral alternatives. This could make combustion engines viable until 2040, when over half of global vehicles are still projected to rely on them.

Market Outlook: A $15 Billion Runway for Dominance

The EV supply chain is a high-margin battleground, with powertrain components commanding premium pricing. HORSE's focus on hybrid systems and alternative fuels positions it to capture $100 billion+ in annual hybrid powertrain demand by 2030, as automakers balance emissions targets with consumer preferences.

Geely's stock (HK:0175) is a pure play on this trend. Unlike Tesla (TSLA), which stakes its future on all-EVs, Geely's hybrid bet offers exposure to both legacy and emerging markets. With HORSE's tech now set to power Volvo's next-gen SUVs and Renault's global lineup, the venture's scalability is undeniable.

Investment Thesis: HK:0175 as an EV Supply Chain Winner

The case for Geely is twofold:
1. Valuation Lift: HORSE's $7.4 billion Aramco-led valuation (€7.4 billion for 10%) implies a $74 billion total value. Geely's 45% stake alone could add $33 billion to its intrinsic value, a massive tailwind for a stock currently trading at 8x forward EV/EBITDA.
2. Margin Expansion: As HORSE's 5 million units hit scale, Geely's margins could benefit from IP licensing fees and cross-brand synergies (e.g., selling HORSE tech to Polestar or Proton).

Conclusion: A Play on Realities, Not Ideals

The EV revolution isn't a binary choice between combustion and batteries—it's a spectrum. Geely's JV with Renault nails this nuance, offering a pragmatic path to decarbonization that serves both developed and emerging markets. With HORSE's tech stack and Aramco's fuel innovation, Geely Automobile (HK:0175) isn't just keeping pace—it's setting the pace.

For investors, this is a decade-long opportunity. Buy the dip.

Risk Factors: Dependence on regulatory approvals, battery metal supply chain volatility, and competition from Tesla's all-EV model.

Disclosure: This analysis is for informational purposes only and does not constitute investment advice.