BMW and Jaguar Land Rover (JLR) are to join forces on developing electric car technologies.
The car giants said they would work together to develop electric motors, transmissions and power electronics.
Both firms have struggled to maintain profit margins amid falling car sales and higher costs as well as the need to invest in future technologies.
Car firms are being forced to make low emission vehicles to meet more stringent anti-pollution rules.
There have been a number of similar tie-ups aimed at sharing the costs of developing electric cars.
Volkswagen and Ford, for example, are working together on new vehicles. Meanwhile, rivals FiatChrysler and Renault are exploring a $35bn tie-up.
BMW board member Klaus Froehlich said: "Together, we have the opportunity to cater more effectively for customer needs by shortening development time and bringing vehicles and state-of-the-art technologies more rapidly to market."
BMW and Jaguar Land Rover said they will save costs through shared research, shared production planning, and by jointly buying electric car components.
Jaguar Land Rover is still run by former BMW managers, including Ralf Speth the company's chief executive who spent 20 years at BMW prior to joining JLR.
BMW has been developing an electric motor, transmission and power electronics in one housing that it calls "Gen 5" of its "eDrive" technology.
A joint team of BMW and JLR engineers in Munich will further develop this Gen 5 technology, then both companies will produce their own electric drivetrains, BMW said.
JLR will produce these drivetrains at its Wolverhampton plant, which employs 1,600 people.
Nick Rogers, Jaguar Land Rover's engineering director, said: "We've proven we can build world-beating electric cars but now we need to scale the technology to support the next generation of Jaguar and Land Rover products."
Car manufacturers are increasingly open to sharing electric car parts because the technology is expensive.
"Carmakers are much less precious about sharing electric car technology because it is much harder to create product differentiation with electric car tech. They all accelerate fast, and everybody can do quality and ride and handling," according to Carl-Peter Forster, a former chief executive of Tata Motors and a former BMW executive.