Daimler and BMW have agreed to co-operate on developing self-driving cars, the latest move by the rivals to share costs as a technology shift shakes up the industry.
The automakers have signed a memorandum of understanding to jointly develop the next generation of autonomous-driving technology, which should be market-ready by the middle of the next decade, they said on 28 February in an emailed statement.
Additional partners, either technology companies or automakers, could join the venture, according to the statement.
"Combining the key expertise of our two companies will boost our innovative strength and speed up the spread of this technology," said Klaus Froehlich, BMW's head of development.
The enormous cost of designing and building computer-powered vehicles has already prompted Honda to pool its efforts with General Motors, while Volkswagen is pursuing talks with Ford about an alliance on autonomous cars.
BMW and Daimler deepened their alliance for similar reasons, said Michael Hafner, head of automated driving at Mercedes-Benz research and development said in a blog post which accompanied a joint press release by the companies on 28 February.
"We have learned that the development of these systems is a bit like climbing a mountain," he said.
"Taking the first few meters from the base station to the summit seems easy. But the closer you come to the goal, the thinner the air around you becomes, the more strength is required for each further step, and the more complex become the challenges you have to resolve," Hafner said.
It made sense to distribute the technological and financial challenges of automated driving, Hafner said, so BMW and Daimler will jointly develop technology to enable automated driving on highways.
The automakers said the partnership will center on so-called level 3 and level 4 automated driving technologies, including cars that still require steering wheels and drivers.
In addition, the two partners plan to discuss the possibility of extending their collaboration to cover higher levels of automation, both on highways and in urban areas.
Daimler will pursue a separate development alliance for level 5 robotaxis between its luxury brand Mercedes-Benz and supplier Robert Bosch. Level 5 cars require no driver. Daimler will launch a pilot program with Bosch for more advanced vehicles this year in San Jose.
BMW, for its part, continues its development alliance for robotaxis with Israeli autonomous vehicle tech company Mobileye and chip maker Intel, with the aim of putting autonomous cars on the road by 2021.
Joining forces on self-driving cars will deepen Daimler and BMW's existing co-operation. The automakers already collaborate on components purchasing and bought digital-mapping company Here Technologies for €2.5 bn ($2.8 bn) in 2015 together with Audi. Last week, the pair combined their respective short-term rental platforms Car2Go and DriveNow as well as other mobility offerings.
Partnerships are also a way to become more agile in the race to dominate digital services such as ride hailing to counter cash-rich giants like Alphabet.
Daimler's Mercedes brand and BMW lead the lucrative luxury-car segment, where margins are higher than in the mass-market segment, but economies of scale are more difficult to generate. As new technology reshapes the industry, traditional competition is giving way to collaboration.
BMW created a self-driving research center near Munich in 2017, where it has been working on technology that will be featured in its iNext model. The vehicle is due out in 2021 with Level 3 autonomy, which means the car can operate on its own but requires driver supervision. The company is already co-operating with Fiat Chrysler Automobiles, as well as Intel and Mobileye.
Thursday's announcement focuses on new efforts, while Daimler and BMW's existing projects will continue and not be combined, they said in the statement.
The market for advanced driver assistance systems and autonomous vehicles is expected to grow to $96bn in 2025 and $290bn in 2035 from about $3bn in 2015, according to Goldman Sachs.