Engine Manufacturer Deutz – The Long Journey of the Combustion Specialist Towards Climate Neutrality
Deutz also needs to offer more alternative drives in the long term. This means not only focusing on the optimization of the existing core business with internal combustion engines but also on the development of new, emission-free products. However, the engine manufacturers are taking their time transitioning to climate neutrality. For Deutz, additional growth and higher profitability within the framework of the "Dual+" strategy presented at the beginning of the year have priority. By implementing the new strategy, sales are expected to grow by nearly 30 percent to over 2.5 billion euros by 2025. The long-term goal is to permanently establish Deutz among the top 3 independent engine manufacturers and to offer a fully climate-neutral product and technology portfolio by 2050 at the latest.
“We have stayed the course in a challenging environment and significantly improved our results. We are building on that. With the “Dual+” strategy presented in January, we are responding to the different needs in the market and creating the conditions to continue growing in the coming years. The transformation of mobility is a great economic opportunity for us,” said Deutz CEO Dr. Sebastian C. Schulte.
Classic business as a basis for growth
With internal combustion engines (the so-called "Classic business"), Deutz has achieved the best performance in over ten years. According to CEO Schulte, the business with these engines will remain the basis for corporate growth in the coming years. However, with an optimized product portfolio, more efficient processes, and significant performance improvements, existing capacities should be utilized even better. To this end, the company is aiming for an active role in a consolidating market.
“While some players are leaving the market, we are focusing on targeted acquisitions and takeovers to continue growing. The collaboration with Daimler Truck is an important first step in this direction,” Schulte explains.
This partnership, announced a few weeks ago, allows Deutz to swiftly and efficiently modernize its product portfolio. The annual revenue resulting from this cooperation is anticipated to be in the mid-three-digit million euro range once production ramps up in 2028.
Daimler Trucks itself will not further develop combustion engines
Deutz will have access to Daimler Truck engines from the end of the decade. This includes both medium-duty engines (Daimler Truck MDEG series), suitable for applications such as construction machinery, and heavy-duty engines (Daimler Truck HDEP series), which can, for instance, power large agricultural machines. The agreements outline different production concepts: the heavy-duty engines will continue to be manufactured by Daimler Truck at the Mercedes-Benz plant in Mannheim and delivered to Deutz for completion of the engine system. Production of the medium-duty engines, on the other hand, will take place at Deutz. Production of the engine variants to be marketed by Deutz is scheduled to begin in 2028.
"We are pleased about the partnership with the established and independent drive specialist Deutz," explains Dr. Andreas Gorbach, member of the Board of Management of Daimler Truck AG, Head of Truck Technology. "As part of our strategic focus on locally CO2-neutral transport, we announced last year that Daimler Truck will no longer invest its own resources in the further development of its own medium-duty engines for the Euro VII emission standard."
Daimler Truck becomes a shareholder in Deutz
Both transactions amount to a total of a mid-double-digit million Euro amount. For the acquisition of the licensing rights of the heavy engine series, Deutz will pay a cash amount staggered over time. For the acquisition of the on-highway IP rights of the medium-duty engines, Deutz will issue approximately 5.285 million new bearer shares through a capital increase using the existing authorized capital. Daimler Truck will hold a 4.19 percent stake in the share capital of Deutz AG.
Deutz remains "technology-open"
In terms of the further development of the climate-neutral product portfolio, Deutz is taking a fundamentally technology-open approach within the Green segment. This includes the climate-neutral further development of the combustion engine, such as through the use of hydrogen or synthetic fuels, as well as the development of alternative drive systems, such as electrified drivetrains. According to its own statements, Deutz will analyze and review all activities in the Green segment for market feasibility in the coming months. The company announced that it plans to invest more than 100 million euros in the "green" business over the next three years. After the company's hydrogen engine has already been used in two pilot projects in Germany, a letter of intent was signed in February 2023 for the delivery of an initial H2 genset small series to China.
Only subsidiary Torqeedo is fully electric
With a total of 234,682 engines sold, the Deutz Group achieved a sales increase of 16.6 percent in the reporting period, with the number of combustion engines sold increasing by 12.7 percent to 181,268 units. The subsidiary Torqeedo sold 53,414 electric boat drives, achieving a sales increase of 32.2 percent compared to the same period last year. The classic segment grew by 20.9 percent to 1,889.4 million euros, while sales in the green segment increased by 18.7 percent to 64.0 million euros.
What does that mean?
Zero emissions by 2050 - that is a very distant goal. The engine manufacturer seems so confident in the combustion engine that Deutz even sees long-term capacities in Daimler Trucks' combustion engines. With this path of technological openness, Deutz could very soon be left behind.
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