Is Mercedes-Benz throwing up the white flag? Mercedes is in talks with its biggest luxury rival over a potential tie-up that could shake things up.
Mercedes and BMW team up to take on luxury rivals
Even with massive discounts, Mercedes is still struggling to sell electric vehicles. In the US, the luxury automaker’s EV sales plummed 55% in the first half of 2025.
Sales of the EQE, EQB, and EQS are down significantly this year as Mercedes faces an influx of new luxury rivals.
In Europe, the situation isn’t much better. Mercedes’ new car registrations are down 2% through June compared to the same period in 2024.
According to a new report from Germany’s Manager Magazin, Mercedes is in talks with its luxury rival, BMW, to help it turn things around. The partnership would involve Mercedes buying new four-cylinder engines from BMW to use in a wide range of upcoming vehicles.
BMW’s engines could be used to power everything from the CLA to the Mercedes GLC, GLB, C-Class, E-Class, and more.
The engines are likely to be a modified version of the four-cylinder B48 engine, which currently powers nearly all BMW and Mini vehicles.
A source from Mercedes confirmed the potential tie-up to Autocar, claiming the luxury rivals are already in the late stages of negotiations. An official announcement is expected by the end of the year.
The potential partnership comes despite Mercedes phasing in its new in-house 1.5 L turbo engine, produced in China. Although it’s fit for mild hybrids, it isn’t well-suited for plug-in or extended-range vehicles.
If it becomes official, the partnership could expand into much more. The report mentions a potential shared engine plant in the US as BMW and Mercedes look to overcome the new auto tariffs on imported vehicles.
With Mercedes blaming “slower-than-expected” demand for EVs, it’s expected to use the new engines from its luxury rival to fill the gap with PHEVs and EREVs.
Electrek’s Take
Top comment by Johnny
People that want luxury don't want to deal with a cheap cheesy bottonless and knobless touchscreen that's cumbersome and frustrating to use. The wealthier demographic doesn't want to cook under the heat of an all glass roof. They appreciate classic exterior design and classic interior appointments. Not some egg shaped futuristic blob. The luxury EV industry is dying because most everything that makes a proper EV is cheap and tacky. If Mercedes would focus on keeping their ICE design by ONLY changing the powertrain to electric, they would do much better. It's as if the auto industry wants to purposely kill off EVs by making ugly cheaply designed cars for the immature "ooohs and aaahs" crowd when that is not their buying demographic at all.
Will we see the BMW and Mercedes partnership expand into electric vehicles? Mercedes has already paused orders in the US on several EV models, including the electric EQS sedan, EQS SUV, EQE Sedan, and EQE SUV.
Mercedes blamed the “current market conditions.” Starting September 1, the company plans to halt production of the EQS and EQE SUV at its plant in Alabama to sell in the US. However, it will continue building models to sell overseas.
Meanwhile, the luxury automaker is preparing for its “largest product offensive” in company history. The 2026 CLA is rolling out, and Mercedes will unveil the new GLC EV next month at the Munich Motor Show.
It wouldn’t be a total shock to see the two partner up to take on EV leaders like BYD and Tesla globally. We should learn more soon. Check back for the latest.
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