Daimler AG and China's Geely Holding announced on Friday they will join forces to develop "highly efficient" powertrain systems for next-generation hybrid vehicle applications, thus confirming earlier media reports.

The partnership will involve working together on research and development and manufacturing next-generation gasoline engines specified for hybrid applications in Europe, as well as in China. The engines could then be used by Mercedes-Benz and Geely's car brands, including Volvo Cars, theautomakers noted.

"Our goal continues to be CO2-neutrality. By 2039, our ambition is a completely carbon-neutral new passenger car fleet," Mercedes-Benz Cars COO Markus Schaefer stated.