Volvo and Mercedes-Benz could co-develop engines

Mercedes-Benz and Volvo are reportedly in talks over joint engine collaboration for future internal combustion and electrified drivetrains.

According to German outlet Automobilwoche, Mercedes’ parent company Daimler and Volvo’s owner Geely have confirmed discussions are underway in a bid to reduce development costs and improve economies of scale.

The news comes as more car-makers seek joint ventures in a bid to reduce overheads, the most recent being the FCA-PSA merger.

The report says engine co-development between the two could begin as early as March, when Volvo is set to merge its drivetrain operations with parent company Geely. A Volvo manager confirmed initial talks had been held, while a Mercedes’ spokesperson said talks are “developing in a positive way”.

Daimler currently holds a 10 per cent stake in Chinese-owned Geely, and the two already hold a 50:50 joint venture for the development of the next-generation of electric Smart cars.

Volvo’s current internal combustion strategy is predicated purely on four-cylinder engines, which power everything from the XC40 city SUV through to the full-size XC90 seven-seater. It has also indicated plans to eradicate diesel engines from its line-up in the short-term.

Mercedes’ internal combustion strategy is broader, with engines in varying layouts and cylinder counts. But like Volvo, the German car-maker’s long-term focus on electrification is massive.