Months of secret talks are expected to lead to a joint collaboration deal with Tata – the company that will soon be building the UK firm's next supermini model for further vehicles.
The dramatic development was revealed after Tata unveiled the Indigo SW stationwagon, the latest version of its MG Rover Indica donor car, at the Geneva Motor Show.
Ratan Tata, chairman of the Indian company, said: 'We are happy our model will carry this famous British name. Being associated with MG Rover will lift our profile as we attempt to market the Indica range in key areas of Europe over the next few months.
'But this will represent only the start of a relationship that could grow. Officials from MG Rover have expressed an interest in the SW, but we have also talked about other models and realistic ways of doing things together.
'We want to work together to develop cars for both companies – we see this as saving both sides a lot of money and providing significant benefits of scale. We are exploring this very seriously. If we work well together on our initial project, we will undoubtedly extend our collaboration to other vehicles.
'Should we find there is a problem with the chemistry between each side, we would be less inclined to extend – but all the signs so far indicate that we will have a good working relationship. Both of us feel we need each other – and that is the best reason why we should come together.'
Other vehicles based on the Indica platform are thought to be the focus of joint design and development plans – the first being a roadster stemming from a concept on the Tata stand at last year's Geneva event. This could provide a new generation version of the classic 1960s MG Midget.
Tata said: 'We had a good response to this concept, but decided against going ahead with it because our domestic market is too small to justify the investment. With MG Rover on board, this is a different matter, of course.'
An MG Rover spokesman said: 'Our agreement with Tata extends only to the small car we will introduce in September. But it is true that other conversations are going on.'