BMW AG and Toyota Motor Corp agreed on Thursday to join forces on a broad range of environmental technologies, forging a partnership between two engineering stalwarts in the increasingly competitive auto industry.

Under the agreement, the two will work together on lithium-ion battery research that is seen as key to electric cars, while the German premium brand will also supply 1.6 and 2.0 liter diesel engines to Toyota from 2014 in Europe. They will also identify possibilities for other projects.

The deal, announced at a news conference in Tokyo, comes as global automakers face ballooning research and development costs to meet tougher emissions and fuel-economy standards around the world. Car makers must also meet consumers’ varying preferences for vehicle powertrains across different regions.

Those needs have accelerated cooperation deals among carmakers, including between Toyota’s and BMW’s main rivals, Nissan Motor Co and Daimler AG, along with Nissan French partner, Renault SA.

Press release:

BMW Group and Toyota Agree to Mid-to-long-term Research Collaboration in Environment-friendly Technologies

BMW Group to Supply 1.6L and 2.0L BMW Fuel Efficient Diesel Engines to Toyota Motor

Tokio/München – December 1, 2011… BMW Group and Toyota Motor Corporation (TMC) announce that they today signed a memorandum of understanding (MOU) concerning a mid-to-long-term collaboration on next-generation environment-friendly technologies.

Under the MOU, the two companies agreed on a collaborative research in the field of next-generation lithium-ion battery technologies. Furthermore, they have agreed to identify and discuss other possible collaborative projects.

In addition, Toyota Motor Europe (TME), TMC’s European subsidiary, and BMW Group have entered into a contract under which BMW Group is to supply 1.6 liter and 2.0 liter diesel engines to TME starting in 2014. The engines will be installed in certain Toyota-produced vehicles planned for sale in the European market. Through this agreement, Toyota plans to expand its European lineup and sales of fuel-efficient, low CO2-emission diesel-powered vehicles.

Marking the announcement, Norbert Reithofer, Chairman of the Board of Management of BMW AG, said: “Toyota is the leading provider of environment-friendly series technology in the volume segment and the BMW Group is the most innovative and sustainable manufacturer of premium automobiles. We are now joining forces to further develop environment-friendly technologies and to expand our innovation leadership in each of our segments. Supplying Toyota with our fuel efficient and dynamic diesel engines represents another important step in the planned expansion of our sales activities for engines and powertrain systems.”

Representing TMC, President Akio Toyoda said: “It is a great joy and a thrill to enter into this mid-to-long-term collaborative relationship with BMW, a company with its own culture and history from its many years of car manufacturing in Europe, and a company that makes cars that are fun to drive. In the spirit of contributing to furthering the development of the auto industry and society, both companies will bring their wide-ranging knowledge – starting with that concerning environmental technologies – to the table and make ever-better cars.”