Mercedes and Bmw, rumoured alliance for plug-in hybrid petrol engines

Mercedes-Benz is reportedly negotiating with Bmw on the purchase of petrol engines. The alliance for this potential cooperation between Bmw and the Stuttgart-based group is said to have originated from an initiative by the Star's CEO Ola Kallenius some nine months ago. So much so that a decision is expected in the next two months. If the boards of both brands come to an agreement, Bmw could supply four-cylinder petrol engines to Mercedes from 2027. The cooperation could then expand.

Mercedes has long been committed to an electric strategy, while Bmw has continued to work towards a future with combustion engines as well. So much so that it has the production capacity to assemble combustion units in Steyr, Austria. Mercedes, however, does not intend to rely solely on Geely's engines initially used on the new CLA, as these are units from China, which are politically problematic in markets such as the US.

The agreement between the two brands would be framed as a strategic step to reduce development costs. For Mercedes, it would mean having power supplies confirmed to Euro 7, which can be used for the plug-in hybrid offering. For BMW, should the cooperation be expanded, it could also include joint engine production in the United States to avoid tariffs. Not to mention that a joint venture for such tight production would not run into possible antitrust issues.

The cooperation would also guarantee full utilisation of BMW's Steyer factory in Austria with revenues in the hundreds of millions for the Munich-based manufacturer. In general, then, should the agreement be signed, it would be a historic first involving two rival German premium car manufacturers sharing engines, but potentially also transmissions, but without further investment in the development of four-cylinder powertrains.