BMW and Toyota have formally kicked off their research partnership by working on creating increased capacity and higher-performance lithium ion batteries, the two automakers said today in a joint statement.

The two brands first announced their intended cooperation late last year, but their plans were not formalized until this week. A memorandum of understanding was signed on December 1, 2011. Both brands are seeking to stay abreast ofVolkswagen in Europe.

BMW says that the focus of the work will initially kick off with research into new materials used for cathodes, anodes and electrolytes.

As part of the deal, BMW will also supply Toyota with 1.6-liter and 2.0-liter diesel four-cylinder powertrains for the Japanese automaker’s European-market offerings beginning in 2014. BMW has long been looking for a powertrain partner in order to increase its engine production volume.