Daimler will work with Volvo to develop internal combustion engine to cut costs

Daimler, the German luxury carmaker and the parent company of Mercedes-Benz, is considering a partnership with Volvo Cars, a subsidiary of China’s Geely, to cut the cost of developing an internal combustion engine, according to sources. Volvo has held preliminary talks with Daimler, but has no specific plans, according to a Volvo source. A spokesman for the company said it was too early to talk about the company’s project, but did not rule anything out.

Daimler will work with Volvo to develop internal combustion engine to cut costs

A Daimler spokesman said the company’s partnership with Geely was moving in a positive direction, but declined to comment further. Geely also owns 10% of Daimler.

The global car industry is cooling and higher investment demands for electric and self-driving cars are forcing automakers to look for new ways to cut and share costs.

In October, Volvo said it would merge its engine development and manufacturing assets with Geely to create a division to supply internal brands and other brands that might own the next generation of combustion and hybrid engines. Eurochief said the new unit, which will be operational by the end of March, could be a starting point for a partnership with Daimler, with the next step likely to be to develop electric drivetrains.

Geely and Daimler have said they plan to build the next generation of smart electric cars in China through a joint venture, and the two companies will also work together in a high-end service in China.

In 2010, Geely bought Volvo Cars from Ford, allowing the Swedish brand to operate independently. But in recent years, it has deepened the collaboration between the two brands. Volvo already supplies engines to some Geely-branded cars, shares technology through Geely’s Necker brand, and develops a common car platform.

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