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.
Based on the strategic alliance, Tata Motors plans to launch products in the Indian market starting calendar year 2019, it added.
Under the Memorandum of understanding signed between the partners, Skoda Auto will take the lead on behalf of the Volkswagen Group to drive forward work towards development of vehicle concepts in the economy segment.
"The document lays down the scope and objectives in order to reach agreement on the modalities and terms of a long-term cooperation in identified areas of partnership," it 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," 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.
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, VW 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 the Volkswagen Group, will detail the guiding principles and terms of cooperation in the next few months, the statement said.
"Post successful completion of definitive agreements, thetwo companies will start joint development work and jointvalue-chain activities," it added.