Combustion engines aren’t going away anytime soon, says Saudi Aramco

In 2019, Saudi Aramco’s chief technology officer affirmed the state energy giant’s belief in the enduring power of combustion engines. During his tour of the annual Detroit car show, Ahmad Al Khowaiter, CTO of Saudi Aramco, emphatically stated, “the internal combustion engine is here to stay.”

The statement seemed conventional and counterintuitive at a time when the electric car trend was taking off, and many believed that the combustion engine’s days were numbered.

Saudi Aramco backed its belief by investing in making combustion engines more efficient. Its Detroit Research Centre was exploring technologies such as gasoline compression ignition (GCI), which delivers diesel-like fuel efficiency from petrol with much lower emissions, and mobile carbon capture, a technology that allows vehicles to capture their own CO2 emissions and store them on board for later offloading.

Five years later, the energy giant seems to be having the last laugh as the global automotive industry sees a slowing adoption rate for EVs. Some incumbent automakers have signalled caution about broader consumer acceptance, and stakeholders are increasingly aware of the lingering challenges of affordability and public charging infrastructure.

An S&P Global Mobility consumer survey corroborates this sentiment: the proportion of consumers in key global auto markets open to purchasing an EV dropped to 67 per cent in 2023, down from 71 per cent in 2022 and 86 per cent in 2021.

Saudi Aramco invests in Renault, Geely JV

In light of these broader market conditions, Saudi Aramco is doubling down on combustion engines, investing EUR740m for a 10 per cent stake in the Renault and Geely joint venture with Horse Powertrain.

The deal valued the business at EUR7bn, with Horse Powertrain set to supply petrol engines, hybrid systems, and gearboxes for thermal vehicles to multiple carmakers.

Saudi Aramco and the other Horse shareholders anticipate that the automotive industry will eventually transition away from spending on the development of proprietary combustion engines, opting instead to purchase them from external suppliers.

“It will be incredibly expensive for the world to completely stamp out or do without internal combustion engines,” said Yasser Mufti, executive vice-president at Saudi Aramco, as quoted by the Financial Times.

He added, “If you look at affordability and a lot of other factors, I do think they will be around for a very, very long time.”

Saudi Aramco has previously stated that internal combustion engines will continue to remain on the roads well past 2050.

This belief is echoed by Matias Giannini, chief executive of Horse, who said, “More than half, for sure, and up to 60 per cent of the population will still have some sort of an engine, whether it is pure combustion, a full hybrid, or a plug-in hybrid.”

The changing market dynamics and reduction in fossil fuel car numbers, along with government regulation, present an opportunity for Horse Powertrain. Giannini notes that the mixed global outlook, where Europe is moving towards EVs but other markets such as the US are not, creates an opportunity for consolidation and outsourcing of engine production.

A market in transition

The ongoing transition to EVs is creating an opportunity that Saudi Aramco aims to capitalise on.

Similarly, the changing market dynamics, and a shift in long-term outlook in fossil fuel car numbers, is where Horse Powertrain sees an opportunity.

The new company has 17 factories worldwide and is capable of building 3.2 million units a year which it wants to increase and produce upto 5 million annually, adds the FT report.

Apart from combustion engines, Saudi Aramco is also investing in building a global network of filling stations, as per the report.