Core Viewpoint - Mercedes-Benz and BMW, once competitors, are in advanced negotiations for engine collaboration, potentially starting in 2027, to reduce R&D costs and meet new Euro 7 emission standards [2][3][4]. Group 1: Collaboration Details - The collaboration focuses on BMW supplying a new generation of gasoline engines to Mercedes-Benz, covering several key models [3]. - The partnership aims to lower R&D costs significantly, with estimates suggesting over 30% savings for Mercedes-Benz by utilizing BMW's existing engine technology [6]. - Mercedes-Benz's current engine limitations necessitate this collaboration, as their existing 1.5T engine cannot meet the demands for plug-in hybrid vehicles [3][4]. Group 2: Market and Financial Implications - Approximately 60% of Mercedes-Benz's global sales in 2024 are expected to come from gasoline and hybrid vehicles, making compliance with Euro 7 standards critical to avoid losing a substantial customer base [4]. - BMW's B48 engine has a production capacity exceeding 2 million units annually, providing a cost-effective solution for Mercedes-Benz while optimizing BMW's idle production capacity [6]. Group 3: Strategic and Technological Trends - The collaboration reflects a broader trend in the automotive industry, moving from full in-house development to strategic partnerships to manage rising R&D costs [8]. - By focusing on engine collaboration, Mercedes-Benz can allocate more resources to high-margin technologies like six-cylinder engines and solid-state batteries, which have a higher profit margin compared to lower-tier engines [9]. - The partnership may evolve into deeper collaborations in other areas such as transmission and electric drive systems, indicating a shift towards more integrated industry relationships [10].