BMW to supply diesel engines to Toyota

TOKYO/OSAKA: Bayerische Motoren Werke AG, the world's largest maker of luxury vehicles, will supply Toyota Motor Corp. with diesel engines as part of a cooperation agreement that will initially focus on developing car batteries.

The manufacturers will collaborate on research into next- generation lithium-ion batteries and explore other projects to develop fuel-saving technologies, the automakers said today in Tokyo. As part of the cooperation, BMW will supply Toyota with 1.6-liter and 2-liter engines for the Japanese company's models in Europe starting in 2014.

The agreement allows Toyota, Asia's largest carmaker, to expand its European lineup of diesel-powered vehicles. For BMW, the partnership paves the way for the company to team up with the biggest producer of hybrid vehicles, as it seeks to fend off Volkswagen AG's Audi, which aims to take the luxury-car lead.

"It's positive for BMW to expand its range of partners among mass-market carmakers," said Daniel Schwarz, an analyst with Commerzbank in Frankfurt. "One of the problems for premium manufacturers is generating scale for environmental technology, and this will help."

BMW already cooperates with PSA Peugeot Citroen, Europe's secondlargest carmaker, on hybrid technology and engines for the Mini brand. The company is developing a line of electric- powered cars under its new "i" sub-brand.

The first vehicle, the i3 city car, is due to be introduced in 2013, followed by the i8 plug-in hybrid supercar in 2014. BMW has been looking to sell components to other manufacturers to boost revenue.