Mumbai, March 10: Tata Motors has entered into a partnership agreement with Volkswagen Group to develop auto components and vehicles both for the Indian market and elsewhere, with the first rollout expected in 2019.

The agreement was signed by Guenter Butschek, CEO & MD of Tata Motors, Matthias Muller, CEO of Volkswagen AG, and Bernhard Maier, CEO of Skoda Auto, Tata Motors said in a statement today.

Under the memorandum of understanding signed among the partners, Skoda Auto will take the lead on behalf of Volkswagen Group to drive forward work towards the development of vehicle concepts in the economy segment.

The announcement comes as both the automakers look to hit the reset button in India after falling behind more nimble rivals such as Maruti Suzuki and Hyundai Motor.

The partnership comes as Tata Motors tries to turn around its loss-making domestic business by launching more vehicles, improving efficiencies and streamlining its organisation.

"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," Butschek said.

This is in alignment with Tata Motors' efforts to make itself "FutuReady" by embracing new technologies, fostering higher platform efficiency and offering solutions that connect with the aspirations of our customers, he added.

For Volkswagen, the tie-up will provide an opportunity to make more headway into India, which analysts say is expected to become the world's third-largest market behind the United States and leader China by 2020.

Commenting on the development, Muller said, "Our aim with the envisaged strategic partnership with Tata Motors is to lay the foundations in the group and the brands that will enable us to offer customer-oriented mobility solutions in the emerging, fast-growing automobile markets, as elsewhere."

He further said that by offering the appropriate products, Volkswagen intended to achieve sustainable and profitable growth in very different parts of the world.

"That is why we are systematically pursuing our regional growth strategy," he added.

Bernhard Maier, CEO of Skoda Auto, said, "Together with Tata, we will be specifying the concrete opportunities for collaboration over the coming months."

Tata Motors and Skoda Auto, representing Volkswagen Group, will detail the guiding principles and terms of co-operation in the next few months, the statement said.

Shares of Tata Motors reacted positively to the announcement and the scrip ended at Rs 468.95 against its previous close of Rs 467.60, a gain of less than a per cent.