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What if the Luftwaffe decided to produce only the Daimler Benz engines for their liquid cooled inline needs? BMW would still produce their air cooled radial engines, but from November 1937, when the DB601A entered mass production, Jumo engines would be phased out in favor of researching and producing only Daimler Benz aero-engines.
This would mean that the Db603 isn't cancelled in 1937 and the DB604 is researched instead of the Jumo 222 (the DB version had far less problems in the end, but was not favored, so research fell behind the Jumo engine).
By 1938 the Luftwaffe would have one type of major engine in production (radial air cooled BMW types were produced in much smaller numbers until 1942 when the BMW 801 was perfected), which would create a vast economy of scale for the aero-engine industry, which had two quite different aero-engines in production simultaneously that filled the same role. From 1941 the Db603 would be available, but lower powered (~1650hp) than the OTL versions until 1942.
The Db604 would be available by mid/late 1942 and producing 2500hp.

The big knock on effects I foresee would be more engines available, as the Luftwaffe consistently had much fewer than the Allies relative to the number of aircraft in service (IIRC Germany had a 30% reserve while the Allies maintained a 100% reserve of engines to aircraft) and the DB601 would perform better in the long run than the Jumo engines, which took too much time to catch up to the equivalent Daimler engines in performance, but Jumo was given the bulk of production capacity. It would also help simplify supply significantly, as now there wouldn't be competing production requirements and the need to ship out different parts to units in the same location.

Other effects would be higher HE111 production, as the DB601 powered version, the He111P, entered production in Autumn 1938, while the He111H, the Jumo 211 version, didn't enter production until 1939. Though virtually the same airframe, there had to be minor differences to accomodate the different engine, which reduced production efficiency. Having one type to produce earlier would help smooth production and increase economies of scale, not to mention help supply.

The major effect would happen from 1941 on IMHO. With the Daimler engines getting production exclusivity and the bulk of the research funding, which they did not have IOTL, they would be able to improve their engines sooner, avoiding some of the OTL problems, and getting useful designs like the Db603 and 604 in production in larger numbers sooner or at all. Having the DB603 in development through 1940, when it was IOTL restarted, would eliminate the teething problems that IOTL weren't worked out until late 1943 thanks to funding and time lost. It would be able to power German bombers of all types and night fighters until the Db604 became available in numbers.

With the DB604 working out, the Ju288 would enter production some time in 1942 and service in 1943. It would offer major performance upgrades over the Ju88/188. It had much higher range, speed, and payload than the Ju188 and could have helped by even 1943 especially on the Eastern Front.

The Fw190C could enter service in 1942-3, which would basically be the equivalent of having the FW190D in those years. That would give the Luftwaffe the equivalent of having their P51D over a year earlier, as IOTL the higher altitude FW190 was delayed by the Jumo 213 not being available in numbers until late 1944 and the DB603 being selected against in 1942 in Fw190 development. A Db604 version could be created too if desired.

Perhaps having the DB603 and 604 around would also cause the four propellor HE177B to enter testing sooner, enabling it to enter service in 1943? The Ju290 certainly could use the higher horsepower DB603s or 604s.

What are your thoughts?
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