The pair will share development costs for batteries for electric cars as part of plans to roll out battery-powered vehicles.
The two auto companies struck a partnership on Dec. 1 to share eco-friendly technologies, including in the joint development of lithium-ion batteries for next-generation electric cars.
Under the deal, the German automaker will also provide diesel engines for Toyota as the Japanese auto giant looks to boost sales in Europe, where more than half of passenger cars are diesel powered.
Toyota has struggled to boost its European market share with its gasoline-electric hybrid vehicles, despite its leading position in the low-emission technology.
Meanwhile, the pair will share development costs for batteries for electric cars as part of plans to roll out battery-powered vehicles.
"Toyota Motor Europe (TME), Toyota Motor Corp.'s European subsidiary, and BMW have entered into a contract under which BMW is to supply 1.6 liter and 2.0 liter diesel engines to TME starting in 2014," they said .
"Through this agreement, Toyota plans to expand its European lineup and sales of fuel-efficient, low CO2-emission diesel-powered vehicles."
Demand for lower-emission diesel vehicles is forecast to grow, with further technological advances in the field seen as crucial due to toughening vehicle emissions standards.
"Supplying Toyota with our fuel efficient and dynamic diesel engines represents another important step in the planned expansion of our sales activities for engines and powertrain systems," BMW Chairman Norbert Reithofer said.
Their pact comes after Toyota struck a deal in August to develop hybrid-vehicle systems with Ford, while BMW inked a deal with France's PSA Peugeot Citroen Group to jointly develop hybrid systems for subcompacts.
Suzuki and Volkswagen agreed in 2009 to share green technology and small car know-how, but their ill-fated alliance crumbled with Suzuki demanding its German partner sell a nearly 20% stake in the Japanese firm. Volkswagen has refused to end its messy marriage with Suzuki, which last week filed a complaint at the International Court of Arbitration in a bid to end the alliance.
Copyright Agence France-Presse, 2011