Geely Teams With Japan’s Aisin to Make Auto Transmissions

China’s largest private automaker, Geely Holding Group Co. Ltd., has formed a joint venture with Japan’s Aisin to develop automatic transmissions.

The move is Geely’s latest effort to meet Beijing’s increasingly stringent regulatory requirements on fuel consumption standards.

The joint venture, with a total investment of $117 million, will be co-owned by Geely subsidiary Geely Luoyou, and Aisin AW, a unit of Aisin AW Co. Ltd., Geely said in a statement Tuesday.

Geely Luoyou will hold a 40% stake, while Aisin AW will own 60%. The new entity will “principally engage in the manufacture and sale of front-wheel drive 6-speed automatic transmissions and related parts and components,” the statement said.

Geely said the new company will start operations in 2020 and will have an annual production capacity of approximately 400,000 automatic-transmission units.

The move comes after China rolled out strict private-sector policies for vehicle-makers, as the country struggles to tackle severe pollution.

A 2016 rule required a lowering of the average energy consumption of fossil fuel-powered traditional combustion engines to less than 5 gallons per 100 kilometers (62 miles) from 6.9 gallons 100 kilometers in 2015.

Geely is China's largest private automaker, with reported revenue of 270 billion yuan ($42.8 billion) for 2017. It sold 1.2 million units in total last year, a 63% increase compared to 2016.

The Zhejiang province-based automaker, which bought Swedish passenger car-maker Volvo Cars in 2010, has also accelerated its global expansion.

In February, Geely CEO Li Shufu said the company had acquired a 9.69% stake in Daimler AG, owner of the Mercedes-Benz brand, becoming the German firm’s largest single shareholder.

Aisin mainly develops and produces components and systems for the automotive industry in Japan and internationally.

Contact reporter Mo Yelin (yelinmo@caixin.com)