Volkswagen AG is flanking its push into electric cars with plans to roll out battery-powered commercial vehicles targeted at urban areas as growing public concerns about air quality boost demand.

Volkswagen AG’s heavy-truck business assigned development of components for its largest vehicles to Swedish brand Scania, while MAN will be in charge of mid-sized and smaller models to reduce costs by eliminating duplicated work.

Volkswagen AG’s heavy-truck unit will continue to expand its global presence after striking a deal to buy a stake in U.S. peer Navistar International Corp., as the European manufacturer readies for technological change including rollouts of all-electric vehicles.

Daimler AG’s trucks division, seeking to recover from a profit warning last month, aims to boost future earnings with a plan to cut costs by sharing more engines, axles and other components across units in North America, Europe and Asia.

Volkswagen AG boosted its target for cost cuts at its trucks division to $1.12 billion (1 billion euros) as cooperation between its Scania and MAN units makes progress after years of tepid results.

Daimler AG, seeking to regain its position as one of the leading truck makers in Iran after a six-year absence, is bracing for a fight in the reopened market with now-entrenched Chinese rivals.

Volkswagen AG’s heavy-truck division is exploring options for growth that could include acquisitions and an initial public offering as it seeks to reap the benefits of more independence within its rapidly reorganizing parent company.

Mercedes-Benz plans to enter the pickup segment in coming years, underscoring a push by manufacturers of upscale vehicles to invade territories traditionally dominated by mass-market competitors.