Think of it as having common interests.
Automakers collaborating on projects is nothing new. One recent example is the BMW-Toyota sports car project that spawned the new Z4 and Supra. BMW apparently thinks joining forces is a good idea as it's looking to strike a deal with another automaker for another future model, only this time that automaker also hails from Germany.
According to Automotive News Europe via German newspaper Handelsblatt, BMW and Mercedes-Benz are said to be in early talks to develop a next-generation compact car. That means the future BMW 1 Series and Mercedes A-Class could ride on the same platform. The potential deal could also include sharing technology for autonomous cars. But the most significant short term money-saver, assuming the deal is signed, would be sharing a new compact car architecture. Doing so would save each automaker billions of dollars.
Talks are still at a preliminary stage and the first joint compact cars wouldn't even hit the market until 2025, at the earliest. Another issue that could possibly kill the deal is the automakers' engineering teams. You see, BMW and Mercedes engineers often approach vehicles a bit differently so it may be difficult to find enough common ground to make this new small car platform acceptable for both parties.
However, we suspect that the bean counters will be able to push engineers to find a way to cooperate. It wouldn't be the first time finance people push engineers around. After all, the money has to come from somewhere and the money saved here could be budgeted elsewhere.
As far as autonomous technology goes, both automakers reportedly already agree that they need to better control these expenditures, so it's possible there's a better chance for an agreement in this area. Neither side wants to lose their technological edge to the likes of Waymo. This potential deal also wouldn't be the first time BMW and Mercedes have worked together.
Back in 2015, the automakers along with Audi teamed up to buy Nokia's mapping company, called Here. If there is a deal to be made, then it'll likely need to be signed soon because development of this compact car platform will need to get underway shortly in order to meet that 2025 launch year.