Volkswagen’s (VOWG p.DE) software company Cariad and auto supplier Bosch are collaborating to create automated driving software for use in Volkswagen vehicles, according to a joint statement released on Tuesday.

The partners will use data from Volkswagen’s fleet to develop Level 2 autonomous driving software, which will allow for hands-free driving in towns, rural regions, and on the highway, as well as a Level 3 system that will take over all driving functions on the highway.

Volkswagen vehicles will be equipped with Level 2 software starting in 2023.

Bosch will bring the technology to the outside market after an undisclosed lead time, according to Matthias Pillin, the company’s software leader.

Partnerships in software development are not unusual… once you have generated the relevant IP you can pursue your own paths,” Cariad CEO Dirk Hilgenberg said.

The partnership is the second announced this year by the companies, which last week said they would set up a joint venture to equip battery cell factories with machinery.

They did not disclose how much they would invest in either deal.

Both Volkswagen and Bosch have bundled their software operations into single divisions to strengthen their offering in the face of competition primarily from Tesla (TSLA.O), as well as companies like Alphabet (GOOGL.O) increasingly venturing into the autos sector.

Volkswagen aims for Cariad to supply 60% of software in Volkswagen vehicles by 2025, up from 10% when the unit was founded in 2020.

However, competition for expertise is tough, and the significant upfront expenditure required to develop software skills from scratch, when many carmakers also require funding for electrification and battery research, has led to several carmakers creating partnerships.

Volkswagen has invested $2.6 billion in Argo AI, a self-driving startup that is creating Level 4 vehicles for shared fleets. Level 4 vehicles can conduct most situations independently, but drivers can request control.

The cooperation between Bosch and Daimler (DAIGn.DE) was announced in 2017 with ambitions to develop a joint ‘Robo-taxi’ autonomous driving fleet, but it was canceled in 2021, months after Daimler’s CEO emphasized the huge costs and hazards involved.

In December, Daimler became the first company to receive regulatory certification for its hands-free driving technology. This approval has not yet been granted to Volkswagen and Bosch, according to Hilgenberg.