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DEUTZ to expand ICE business with Daimler Truck agreement

DEUTZ to expand ICE business with Daimler Truck agreement
Photo courtesy of DEUTZ AG

DEUTZ AG has taken an important step in further expanding its modern internal combustion engine (ICE) business. The German engine manufacturer has signed an agreement with Daimler Truck AG, one of the world’s largest commercial vehicle manufacturers headquartered in Leinfelden-Echterdingen, Germany, giving DEUTZ access to Daimler engines by the end of the  decade.

These include both medium-duty engines (Daimler Truck MDEG series), which are  suitable for use in applications such as construction equipment, and heavy-duty engines  (Daimler Truck HDEP series), which can be used to power heavy agricultural machinery, for  example. 

As a result, DEUTZ will be able to attract new customer groups, save on  development costs, expand its range of modern internal combustion engines, and thereby  lay the foundations for further growth in this business. 

The cooperation between the two companies, which is supported by the stake Daimler  Truck takes in DEUTZ, is focused on two areas: 

  • DEUTZ will acquire license rights from Daimler Truck so that it can further develop the  heavy-duty Daimler Truck HDEP series for use in off-highway applications. It will also  distribute these engines independently. 
  • DEUTZ will acquire the on-highway IP to Daimler Truckโ€™s medium-duty MDEG engines  so that it can further develop them itself, including for use in off-highway applications such  as agricultural machinery and construction equipment.  

The cooperation provides for various production arrangements. The heavy-duty engines will  continue to be built by Daimler Truck at the Mercedes-Benz plant in Mannheim, Germany, and shipped  to DEUTZ for final assembly. The medium-duty engines will be completely produced at DEUTZ. The engine variants that will be marketed by DEUTZ are scheduled to go into  production in 2028.  

The cooperation between the two companies is a first sign of DEUTZโ€™s recently announced  Dual+ strategy, under which it will not only step up the development of a climate-neutral  product portfolio but also optimise and further develop its classic engines. 

โ€œThe cooperation with Daimler Truck will significantly improve our starting position in a consolidating market as  we will gain access to technologically advanced engines and will be able to attract new  customer groups at the same time. Heavy-duty applications and agriculture still require  conventional powertrain systems based on internal combustion engines, and these can be  made more environmentally friendly by running them on synthetic fuels. In the next few years,  we will therefore not only enhance our climate-neutral product portfolio but also further  expand our classic engine business,โ€ said DEUTZ CEO Dr. Sebastian C. Schulte.  

Under its new strategy, DEUTZ announced in mid-January that, as well as investing in a  green product portfolio, it also intends to establish itself permanently among the top three  independent engine manufacturers, including through acquisitions and cooperations. The  company intends to play an active part in the consolidation of the engine  market. 

โ€œWe are delighted to be forming a partnership with the  established and independent drive specialist DEUTZ. In line with our strategic focus on  transportation that is carbon-neutral at local level, we announced last year that Daimler Truck  would not be investing any more of its own money in the further development of its medium duty engines for the Euro VII emissions standard,โ€ said Dr. Andreas Gorbach, member of the Board of Management of Daimler Truck AG and  responsible for Truck Technology.

Payment for the two transactions is in the mid-double-digit millions of euros. DEUTZ will pay  a cash sum in installments for the acquisition of the license rights for the heavy-duty engines.  To acquire the on-highway IP for the medium-duty engines, DEUTZ will use the existing  authorized capital to issue approx. 5.285 million new no-par-value bearer shares by way of  a capital increase in kind. Daimler Truck will hold 4.19% of the issued capital of  DEUTZ AG. The new DEUTZ shares will be admitted for trading after entry in the commercial  register. 

Final completion of the transactions is subject to an audit of the non-cash contributions and  to the usual approvals from the authorities.