The new deal builds on the two firms' existing partnership on engines and will see the development of hybrid components for use in front-wheel-drive vehicles with electric drivetrains.

In a statement, BMW and PSA said that the cooperation will leverage significant economies of scale and will also allow them to standardise key elements for electric vehicles.

Norbert Reithofer, chairman of the Board of Management of BMW AG, said: 'This cooperation will deliver a major contribution towards a competitive cost structure in the field of electrification. It also represents another important step on the road to sustainable mobility.'

'We are pleased to broaden our long-standing cooperation based on the strong relationship that exists between our two companies,' added Philippe Varin, chairman of the Managing Board of PSA Peugeot Citroen. 'Combining both partners' expertise in hybrid technologies will clearly create competitive advantage.'

Earlier this year, PSA and BMW announced that they are working together on the next generation of their jointly designed four-cylinder petrol engine, which is currently used in a number of MINI, Peugeot and Citroen brand models.