Mercedes and BMW, longtime rivals in the automotive industry, are exploring a potential partnership. According to German publication Manager Magazin, Mercedes plans to use BMW's 4-cylinder engines to reduce development costs for future internal combustion engine models as it transitions to an all-electric lineup.

The first Mercedes models with BMW engines could appear as early as 2027. Discussions also encompass shared transmissions and even electrified powertrains, suggesting a more extensive collaboration than just an engine deal.

This partnership would significantly reduce Mercedes' research and development expenses for future 4-cylinder models, allowing them to focus on 6 and 8-cylinder engines. Meanwhile, BMW would increase revenue and utilize excess capacity at its Steyr plant in Austria.

The 2026 Mercedes CLA uses a new turbocharged 1.5-liter 4-cylinder engine, developed in-house in Germany but produced in China by Horse, a joint venture between Geely and Renault. Photo: Mercedes

The 2026 Mercedes CLA uses a new turbocharged 1.5-liter 4-cylinder engine, developed in-house in Germany but produced in China by Horse, a joint venture between Geely and Renault. Photo: Mercedes

According to Autocar, discussions are at an advanced planning and negotiation stage, with an official announcement expected before the end of 2025.

Partnering with BMW offers several advantages for Mercedes, particularly in markets like North America. Mercedes currently has an engine supply agreement with China's Geely, but a European partner like BMW is seen as a better fit.

BMW's turbocharged 2-liter B48 engine, widely used in BMW and Mini models, is under consideration due to its compatibility with both longitudinal and transverse layouts, support for plug-in hybrid setups, and potential use as a range extender in some applications.

For Mercedes, this move would secure a supply of Euro 7 compliant engines—crucial for continued production of combustion engine models—while allowing them to expand their plug-in hybrid electric vehicle (PHEV) lineup without further investment in 4-cylinder engine development.

Mercedes is currently introducing its new turbocharged 1.5-liter M252 4-cylinder engine, developed in-house in Germany but manufactured in China by Horse, a joint venture between Geely and Renault.

Featured in the new CLA, the M252 engine is available in three power outputs—136 hp, 163 hp, and 190 hp—paired with an 8-speed dual-clutch automatic transmission and a 27 hp electric motor.

However, inside sources note that while the M252 is well-suited for mild hybrid applications, it's not currently designed for PHEV or range-extender use—a gap the BMW-supplied engine could fill.

The proposed partnership could also extend to global production hubs, including a potential joint engine plant in the US to avoid rising import tariffs.

If the deal goes through, it would be the first time the two German luxury automakers have shared engines and transmissions long-term.

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