Indian automaker, Tata Motors has agreed to buy a Ford manufacturing plant in the western state of Gujarat for 7.26bn rupees ($91.5m).
The deal comes as Tata moves to boost its car production to meet demand.
The deal between Tata’s electric vehicle subsidiary and the US car maker’s Indian unit covers land, machinery and all “eligible employees”.
Ford stopped production in India last year after struggling for more than two decades to generate profits there.
“With our manufacturing capacity nearing saturation, this acquisition is timely and a win-win for all stakeholders,” Tata Motors said in a statement.
The parent company of the UK’s Jaguar Land Rover added that annual production at the Sanand plant will initially give it a new capacity of 300,000 vehicles a year, which could be increased to 420,000.
The announcement marks an important step forward in Ford’s efforts to restructure its Indian business, Ford transformation officer Steve Armstrong said.
In September last year, Ford said it would close its Indian car factories as part of a move that would cost it around $2bn.
At the time, the US carmaker said that about 4,000 workers would be affected by the decision.
Ford’s operations in India had seen losses of $2bn in the previous ten years.
The major scaling back in its Indian operations was in stark contrast with the company’s previous ambition to make the country one of its biggest markets.
But some Indian car makers have seen demand rise. One of Tata’s rivals Mahindra Mahindra said on Friday that demand for its vehicles was outstripping production as people rushed to buy its popular sport-utility vehicles.
That helped boost its quarterly profits as sales of its passenger vehicles soared by 74% from a year earlier.
“We have kicked off capacity expansion programmes but had not anticipated this kind of demand,” Mahindra and Mahindra’s executive director, Rajesh Jejurikar said.
Tata Motors is the vehicle-making division of the Indian multinational conglomerate Tata Group.
In the UK, Tata Motors bought Jaguar and Land Rover from Ford in 2008 and merged the British luxury car brands into one company.
BBC reports that Tata Group owns a range of major businesses around the world including Tata Steel Europe, which includes former British Steel assets in the UK.