Volkswagen and Tata Motors are teaming up to develop vehicles in India.
In a statement today, the firms said they had signed a memorandum of understanding on a partnership that would lead to the launch of new vehicles by Tata Motors in 2019.
VW's Skoda will take the lead on the project developing cheap cars for the Indian market as VW makes a fresh push to gain ground in emerging markets.
Volkswagen boss Matthias Müller said the tie-up will foster its "sustainable and profitable growth in very different parts of the world" and the firm was "systematically pursuing" its regional growth strategy.
Guenter Butschek, chief executive and managing director, Tata Motors, said,
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.
More comprehensive details of the agreement will be set out in the coming months and for now Tata and VW's Skoda division will work on market studies for developing mobility services, vehicle components and models.
Tata, which owns Jaguar Land Rover, will hope to tap into VW's significant global presence as it looks to fend off competition in India from the likes of Fiat Chrysler and PSA.
In January, the French car firm said it will return to India after two decades of absence, announcing a deal with CK Birla Group to produce 100,000 cars a year.