Renault-Nissan and Mercedes-Benz announced today that they will form a partnership and begin sharing platforms and engines. The next generation Smart Fortwo and Renault Twingo microcars will be built on the same platform, saving cost and allowing the companies to develop an electric powertrain. Larger passenger cars and some light commercial vehicles will also share technology. Daimler AG, the parent company of Mercedes-Benz, will receive 3.1% ownership of both Renault and Nissan, and in exchange, Renault and Nissan will each receive a 1.55% stake in Daimler.

As part of the Renault-Nissan and Mercedes-Benz partnership, the companies will work together to build a new platform for the next generations of the Smart Fortwo and Renault Twingo microcars. A four-seat Smart car is one of the plans discussed in the press release. Both the Smart Fortwo and the Renault Twingo will be available with the choice of gasoline, diesel or electric powertrains.

Renault-Nissan and Mercedes-Benz will also share engines between their larger cars. Renault will provide small, fuel efficient three and four-cylinder engines for Mercedes-Benz’ small cars. Nissan’s luxury division Infiniti will use Mercedes-Benz engines in some cars and SUVs.

The Renault-Nissan Mercedes-Benz partnership will allow Mercedes to build smaller commercial vehicles. Mercedes will source a four-cylinder diesel engine from Renault to power a new light commercial vehicle, which will allow Renault to maximize the capacity at its manufacturing plant and save money on production.