A new joint venture between their parent companies will see Mercedes-Benz and Volvo Cars sharing hybrid powertrains.

Daimler and Geely Holding on Friday announced plans to "collaborate on developing highly efficient powertrain systems for next generation hybrid vehicle applications".

The cooperation is expected to see the pair work together on hybrid powertrains to "enhance their global competitiveness and create true economies of scale". Areas of potential cooperation include engineering, sourcing, 'industrialisation' and efficiency measures.  

Both groups said they saw efficient drivetrain technologies as central to the ongoing transformation of the automotive industry, and will accelerate the transition to emission free driving. Both will use global R&D networks to work together on a next generation petrol engine specified for hybrid applications to be produced at their powertrain factories in Europe and China which "could be utilised by Mercedes-Benz together with its established partners in China as well as the wider Geely Holding Group portfolio of brands including Volvo Cars".

Export of the engines from China is considered to be an option. 

Daimler research head Markus Schaefer said: "By 2030 more than half of our passenger car sales will be comprised of plug-in hybrids or purely electric vehicles. We are looking forward to the future; when, together with Volvo's ICE unit and Geely, we will further extend our synergies in the field of highly efficient drivetrain systems in China and the world. The newly established Mercedes-Benz Drive Systems will spearhead the project and create cost efficiencies."  

An Conghui, CEO of Geely Auto, said: "This project reflects the need for economies of scale and targeted research and development investment in clean and highly efficient powertrains and hybrid drive systems and their applications."

Daimler and Geely are already working together to develop the Smart EV brand worldwide and to provide premium ride-hailing services in China.