Sat Mar 11, 2017 4:1PM
A street in India's capital with traffic congestion
A street in India's capital with traffic congestion

German car maker Volkswagen has signed a memorandum of understanding with India's Tata Motors to boost budget car sales in Indian subcontinent and beyond.

Volkswagen CEO, Matthias Mueller said the MoU would help “achieve sustainable and profitable growth in very different parts of the world."

The signing of MoU comes as VW has fallen behind its rivals like Maruti Suzuki and Hyundai Motor Co.

"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," said the Chief Executive and Managing Director of Tata Motors, Guenter Butschek.

Estimations say the new partnership could potentially lead to Tata Motors launching new vehicles by 2019.

With its 1.3 billion population, India is an attractive market for Western car makers. But the country is a tough market to crack for automakers due to different demand trends across the country and rapid changes in customer preferences.

Automakers like Fiat Chrysler and France's Peugeot and Citroen are already active in the Asian country.

Reports say light vehicle sales in India are expected to more than double to 7.1 million cars by 2025 from 3.4 million in 2016.

 Struggling with the aftermath of an emissions-cheating scandal, VW is hardly seeking to expand into new markets.

In January, the company pleaded guilty to three criminal charges in the US. It is set to pay out a $4.3 billion settlement.