STUTTGART - Mercedes parent company Daimler has announced that it will cooperate with China's Geely to build next-generation combustion engines for use in hybrid vehicles.
These efforts to share development costs come as the growth potential for combustion engines faces the twin threat of the Covid-19 crisis and stricter fuel-efficiency and emission rules.
"The companies plan to develop a highly efficient modular engine," a spokesman for Daimler said, adding that it would be used in hybrid drivetrains and manufactured in Europe and China. Geely declined to comment.
The modular engine will be used in cars under different brands at Geely (which owns Volvo) and Daimler, a person familiar with the matter said on condition of anonymity as the companies are still in the early stages of developing the engine.
News of the alliance was a surprise to Daimler's works council at its factory in Untertuerkheim, which specialises in electric and petrol powertrain assembly.
"We are speechless. There was not even a discussion about potential alternative manufacturing locations," said Michael Haeberle, the works council chief for Untertuerkheim.
"We have the ability to build four cylinder engines in Untertuerkheim but there were no talks about it."
Daimler said German factories will be retooled gradually to add electric drivetrains production.
Most of the next-generation combustion engines will be made in China, business daily Handelsblatt reported. The alliance with Geely, which owns a 9.69% stake in Daimler, means that parts of the German carmaker's existing partnership with Renault could be pared back.
A Renault source told Reuters that the Daimler-Geely project does not mean an end of cooperation between Daimler and Renault.
Citing Daimler sources, Handelsblatt said the Daimler-Geely pact would save the German carmaker a "triple-digit million sum".
Reuters