Mercedes may use BMW engines in future petrol, hybrid cars: Report

German rivals Mercedes-Benz and BMW are reportedly in advanced discussions over an unprecedented powertrain collaboration. According to Autocar, the proposed agreement would see Mercedes tapping BMW’s four-cylinder B48 turbocharged engine for a swath of upcoming petrol and plug-in hybrid vehicles, possibly with an official announcement by the end of 2025. Meanwhile, Manager Magazin first broke the story, naming it a strategic manoeuvre aimed at reducing development costs.

Engine Partnership: Scope and Strategy

The heart of the deal is the BMW B48 four-cylinder engine, a highly modular, Euro 7-compliant powerplant already in use across BMW and Mini lineups. Its flexibility for both transverse and longitudinal mounting would make it suitable for Mercedes’ range of compact to mid-size models—including the CLA, GLA, GLB, C-Class, E-Class, and even the forthcoming “Little G" SUV. This arrangement addresses a vital gap in Mercedes’ portfolio: while its 1.5-litre M252 engine delivers mild-hybrid capability, it is not engineered for plug-in hybrid or range-extender tasks—functions the B48 could seamlessly provide.

Production Scope and Geographic Flexibility

Production of the BMW-supplied engines is expected to occur at BMW’s Steyr plant in Austria. Talks are also underway to possibly establish a joint manufacturing facility in the U.S., a move that could help both automakers overcome escalating import tariffs. Manager Magazin notes that this would be the first-ever engine-sharing arrangement between the long-standing German rivals.

Strategic Rationale

For Mercedes, the advantages are multiple: instant availability of a proven, Euro 7-capable engine platform at no huge internal R&D outlay; faster growth of its plug-in hybrid portfolio; and the capacity to cope with increasingly stringent emissions standards at lower cost. The program also comes as part of an industry-wide reset, with EV takeup falling short of early estimates, leaving hybrid and ICE cars on the critical path for the short term.

For BMW, this transaction offers a profitable proposition to increase production levels and maximize capacity at Steyr with increased utilization levels.

Considerations and Implications

While seemingly logical, the proposal generates concerns regarding brand identity and long-term independence. Industry experts indicate that Mercedes could compromise its engineering heritage by contracting out a high-volume engine segment to make it available to its competitor.

Others point out the practical execution challenges: integrating a BMW engine into Mercedes platforms, even if modular, will require substantial engineering coordination and may not be as cost-effective as hoped.