Daimler eyes huge cost savings with Geely engine collaboration

Following the news that Daimler and Geely are to collaborate on developing and manufacturing next generation hybrid powertrains;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view: 

“Cost saving is clearly a major driver here. GlobalData estimates that Daimler could achieve cost savings of up to EUR1,800 per vehicle on hybrids equipped with engines manufactured at very high volume and at low-cost in China.

“This collaboration will see both parties make savings in hybrid system development costs as well as exploit large scale economies in manufacturing. Daimler is eyeing huge savings as it sources more hybrid four-cylinder engines from China.

“Daimler will also gradually retool European factories for electric powertrain systems and that makes sense as electric cars start to take a much higher share of the global car market in the second half of this decade, with Europe’s market leading the way.

“Internal combustion engines can account for as much as 40% of the cost of a vehicle and producing a four-cylinder engine at high-volume at a plant in China allows unit costs to fall dramatically.

“With this collaboration, Daimler can adjust its manufacturing and sourcing mix according to global demand by powertrain type to optimize on costs.”

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