Daimler AG said on Tuesday it will work with China’s Geely for building next-generation combustion engines for use in hybrid vehicles.
Efforts to share development costs come as the growth potential for combustion engines faces the twin threat of the coronavirus crisis and tougher fuel-efficiency and emission regulations.
“The companies plan to develop a highly efficient modular engine,” a spokesman for Daimler said, adding that it would be utilized in hybrid drivetrains and manufactured in Europe and China.
Geely refused to comment.
The modular engine will be used in cars under different marques at Geely and Daimler, a person knowledgeable with the matter said on condition of anonymity as the automakers 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 located in Untertuerkheim, which specializes in electric and gasoline 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 factories in Germany will be retooled gradually to add electric drivetrains production.
The majority of the next-generation combustion engines are going to be made in China, business daily Handelsblatt reported. The alliance with Geely, which controls a 9.69% stake in Stuttgart-based Daimler, means that parts of Daimler’s existing partnership with Renault SA could be pared back.
Citing Daimler sources, Handelsblatt said the automaker’s pact with Geely would save the German automaker a “triple-digit million sum” – implying an amount above 100 million euros ($119 million) and less than 1 billion euros ($1.18 billion).