Geely CEO Li Shufu has tightened his connection to Daimler with a joint venture that sends all … [+]
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Mercedes-Benz confirmed this morning that it would send almost all of its development and production of four-cylinder gasoline engines to China’s Geely by 2024.
The two companies will also develop plug-in hybrid (PHEV) systems together in China, with both the engines and powertrains likely to be exported back to Germany and fitted to Mercedes-Benz cars for sale globally.
Geely admitted today that the two companies are about to cooperate on both the development and the production of a “drive system for hybrid applications”, with “the export of the engine from China is considered to be an option”.
Responding to reports in the German newspaper Handelsblatt on a story initially broken by Autocar’s Greg Kable, Mercedes-Benz’s parent Daimler confirmed it would be developing and building its four-cylinder engines through a joint venture in China.
Geely’s founder, Li Shufu, owns 9.6 percent of Daimler and has been pushing behind the scenes for closer synergies, while Daimler has been looking for ways to shed fixed costs.
The move means Daimler will follow BMW in off-shoring combustion engine manufacturing. BMW announced this week it would send production of all of its automotive combustion engines to either England or Austria, all while upgrading its German plants to make electric vehicles (EVs).
Daimler wouldn’t be the first European automaker to entrust core development to a Chinese offshoot or joint venture, with Peugeot, Volkswagen and BMW all having significant tech footprints in the Asian powerhouse.
Increased hybridization and electrification mean the Daimler and Geely cooperation will need … [+]
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The plan calls for the two automakers to forge much closer ties, developing and building a new four-cylinder engine family for plug-in hybrid powertrains in a new Chinese factory from 2024.
Four-cylinder motors are currently found in Mercedes-Benz’s A-, B, C- and E-Classes, along with its GLA, GLB and GLC SUVs, with production numbering in the hundreds of thousands every year in both stand-alone and plug-in hybrid powertrains.
“By 2039, our ambition is a completely carbon-neutral new passenger car fleet,” Daimler’s Board Member for Research and Mercedes-Benz Cars COO Markus Schäfer said.
“The consequent electrification of our powertrain portfolio therefore is an integral part of our drivetrain strategy.
“To this end, we are systematically converting our portfolio, so that by 2030 more than half of our passenger car sales will be comprised of plug-in hybrids or purely electric vehicles.
“At Mercedes-Benz, the newly established unit Mercedes-Benz Drive Systems will spearhead the project and create cost efficiencies.”
Daimler insists the cooperation will boost its global competitiveness and create economies of scale in engineering, sourcing, efficiency and industrialization that it would never have achieved alone.
The downside is that the same technology will inevitably find its way into Mercedes-Benz’s own competitors, mostly via Geely’s Volvo brand, but also through its Lotus sportscar operation. The Lynk & Co, Geely and Proton brands don’t compete with Mercedes-Benz.
Geely also bought half of Daimler’s troubled smart citycar operation in 2018, which is moving its production from France to China as an EV-only brand. The joint venture plans to develop and build new smarts in China, including a replacement for the aging fortwo and a new compact SUV EV.
“Clean and highly efficient powertrains are integral to our core competitiveness,” Geely Holding Group President and CEO An Conghui said.
“With our full commitment to electrification supported by our new ‘Sustainable Experience Architecture (SEA)’ as the core pillar, we will continue to seek competitive advantages in R&D, Production, Supplier Management and other fields and focus on the development of premium electrified vehicles.
“This project reflects the need for economies of scale and targeted research and development investment in clean and highly efficient powertrains and hybrid drive systems and their applications. Together with our partner, we will jointly develop next generation of advanced technologies in order to remain at the top in the industry in times of wide-ranging change.”
Far from responding to trends in Europe to announce the shut down of combustion power by 2030, the off-shoring of Daimler’s small engine development and production has been part of an evolving plan for more than a year as part of its “Ambition 2039” strategy.
Daimler insists that highly efficient combustion engines will be a critical part of the transition to EVs to meet different market needs around the world.
