The article, which quotes Tata Group chairman Ratan Tata on core issues, assumes significance as Tata Engineering has so far maintained that the feasibility study is for a three-box sedan on the PC platform for the Indian market.

The report adds that the proposed vehicle would be manufactured in Peugeot's Brazilian factory for the Latin American market and by Tata at home for its local and South-East Asian markets.

The magazine goes on to add: "The deal is interesting in two ways: First, Indians rather than Europeans will be doing the high-value engineering development work, at one-third of the European cost; second, it could lead to closer collaboration with the French group, which might even buy into Tata's car business."

When contacted, Tata Engineering general manager (passenger car vehicles unit) Rajiv Dube said: "We are currently doing the feasibility study for the project which will be completed by mid-2001. The platform for the new car has not been decided yet."

However, Tata Engineering has maintained that it is purely a technical and licence-manufacturing agreement with no equity participation involved, adding part's of the story are the magazine's own views.

The Economist further adds: "Peugeot's chief executive Jean-Martin Folz is desperate to build on his company's purely European success by selective expansion in fast-growing markets such as India."

Peugeot of France, which was one of the earlier entrants into India post-liberalisation, had a rather unsuccessful joint venture with Premier Automobiles. Analysts say that maybe Peugeot is adopting a much more cautious stance this time. Financial institutions were also reported to have reservations about the re-entry of Peugeot in the country.

Tata Engineering's car business has been going through troubled times with its `Indica' running into various quality related problems. This, coupled with staggering third quarter losses, amounting to Rs 121 crore, has added to its woes. But the Tatas have consistently denied having any plans to hive off their passenger car business. Analysts tracking the sector feel that it would be too early to hazard a guess as to whether Peugeot was ultimately aiming at a stake in the Tata passenger car business.