The agreement expands the existing relationship between the two firms and will include Aston Martin gaining access to Mercedes technology - including electric and hybrid powertrains - that will form a key part of its expansion plans.
Aston Martin said the deal included "powertrain architecture (for conventional, hybrid, and electric vehicles) and future-oriented electric/electronic architecture for all product launches through to 2027."
While the firm declined to outline exactly what products were planned under the new agreement, new Aston Martin CEO Tobias Moers said that the first Aston Martin cars utilising technology from the deal would be launched late next year.
He said that "it needs a little time to get the technology in different products" but added there would be "a kind of product firework in 2023".
With the new agreement in place, Aston Martin has targeted selling around 10,000 vehicles a year by 2025 and is aiming for revenues of around £2 billion and EBITDA profits of around £500 million. For comparison, the marque sold 5862 cars in 2019.
Lawrence Stroll, whose investment consortium completed its takeover of Aston Martin earlier this year, said that the 10,000 sales would be comprised of front- and mid-engined sports cars and "a portfolio of SUV products", hinting at new models joining the recently launched DBX. Around 20-30% of Aston Martin's sales by 2024 will be hybrid models. Stroll said the firm didn't plan to launch a full EV until 2025.
In return for the technology, Mercedes will gradually increase its stake in Aston Martin up to a maximum of 20%, providing a welcome boost in investment for Aston Martin and making the German giant one of its largest shareholders. The technology will be supplied "on commercial terms". Mercedes previously owned around 2.3% of Aston Martin shares as part of a deal that involved its AMG performance arm developing a bespoke V8 for the company.
Stroll called the agreement “a transformational moment”. He added: “Through this new expanded agreement, we secure access to world-class technologies to support our long-term product expansion plans, including electric and hybrid powertrains, and this partnership underpins our confidence in the future.
“This is truly game-changing. We now have the right team, partner, plan and funding in place to transform the company to be one of the greatest luxury car brands in the world.”
Moers, who joined Aston Martin from his previous role as the head of AMG, said: “We have updated our plans for the business, incorporating the benefits of our enhanced partnership we are announcing today. We're targeting delivery of significant growth and margin expansion in the medium term, not just through product expansion but also by incorporating a strategy to deliver a level of operational excellence and efficiency throughout every aspect of the organisation.
“The capabilities of Mercedes-Benz AG technology will be fundamental to ensure our future products remain competitive and will allow us to invest efficiently in the areas that truly differentiate our products.”