Zetsche said the alliance would also seek to expand their cooperation beyond the currently agreed areas.

"Right away we are strengthening our competitiveness in the small and compact car segment and are reducing our CO2 footprint, both on a long-term basis," Zetsche said.

"We will work together to examine further possible areas of cooperation," he added.

Renault Chief Executive Carlos Ghosn said the new alliance was just the latest step of the French carmakers' consolidation strategy.

"The name of the game is to be present everywhere," Ghosn said, "so we are going to move for more and more consolidation."

"Do not be surprised if we continue to add scale," he said

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