Daimler AG and Geely Holding are to collaborate on developing engines for “highly efficient” hybrid powertrains, powering the next generation of Mercedes-Benz and Volvo models.

The next-generation petrol engine will be used for hybrid applications in a move to “accelerate the transition to emission-free driving”

The two firms will cooperate on R&D for a next-generation petrol engine to be used for hybrid applications in a move to “accelerate the transition to emission-free driving”.

The engines will be produced in both Europe and China and used by Mercedes-Benz AG together with its partners in China as well as the wider Geely Holding Group range of brands, including Volvo. The plans could include exporting engines from China.

Under its ‘Ambition 2039’, Mercedes-Benz is planning for a completely carbon-neutral new car fleet in less than two decades, while by as soon as 2030 the company is targeting to have more than 50% of passenger car unit sales made up of plug-in hybrids or fully electric vehicles.

Markus Schäfer, Member of the Board of Management of Daimler AG and Mercedes-Benz AG, said: “Our goal continues to be CO2-neutrality. By 2039, our ambition is a completely carbon-neutral new passenger car fleet. 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.”

The new tie-up advances existing work by Daimler AG and Geely Holding to turn Smart into an all-electric carmaker and to form a premium ride-hailing joint venture in the Chinese market.