Earlier this month, BMW and Mercedes-Benz announced a $1.3 billion ride sharing partnership with the ultimate goal of beating Uber. Today, the German automakers have officially announced a second area of cooperation, the development of self-driving cars up to Level 4. The two companies have signed a memorandum of understanding to jointly develop the next generation of autonomous driving technology that will reach the market by the mid-2020s.

Both view this agreement as a long-term, strategic cooperation with the goal of to make next-level technologies widely available in just a few years.

"As we continue to pursue our strategy, we are combining the expertise of two technology leaders," said Klaus Frohlich, member of the BMW management board. At the BMW Group, long-term partnerships within a flexible, scalable, non-exclusive platform are fundamental to advancing the industrialization of autonomous driving."

Mercedes is also very enthusiastic about the agreement. "Autonomous driving is one of the most revolutionary trends for us at the moment, and the entire Daimler Group is working very hard on it. Instead of individual, stand-alone solutions, we want to develop a reliable overall system that offers noticeable added-value for customers," said Ola Kallenius, member of the board for Daimler.

An alliance like this between two normally bitter rivals would not have happened only a few years ago, but times are changing. New technologies are reshaping the auto industry and instead of old school competition, collaboration in specific areas is needed.

Ford and Volkswagen have also formed an alliance involving pickup trucks and commercial vehicles that could further expand into AI cooperation. Honda and GM made a similar deal last year as well. Interestingly, BMW and Mercedes will continue existing self-driving technology projects and not combine them. This latest announcement is only for new efforts going forward.