Tata Motors, Volkswagen To Explore Joint Vehicle Development

Tata Motors Ltd. inked a pact with Volkswagen Group and Skoda on Friday to explore "joint development projects".

The memorandum of understanding will form the basis of a long-term strategic alliance for future products, the Indian carmaker said in a media statement.

Volkswagen’s Skoda Auto will lead the project for the German automaker and work toward development of vehicle concepts in the economy or the smaller car segment, the statement added.

“We strongly believe that both the companies, by working together, can leverage from each other’s strengths to create synergies and develop smart innovative solutions for the Indian and overseas market," Guenter Butschek, chief executive officer and managing director of Tata Motors, said in the statement.

The companies will arrive at the details of the pact over the "next few months".

Tata Motors aims to launch products in the Indian market starting 2019 based on the collaboration with Volkswagen.

The Indian carmaker’s stock erased losses following the announcement and rose 0.5 percent on the Bombay Stock Exchange.

Volkswagen has been struggling for years to develop low-cost vehicles for emerging economies as its own technology proved too expensive. The alliance would give Tata Motors access to the German automaker’s expertise, and sharing development will help both companies cut costs.

Tata Motors has, of late, been losing money in India and relies on the Jaguar and Land Rover luxury brands to provide most of its revenue.