Aston Martin is to team up with the Mercedes to develop a new generation of engines and components.

As part of the deal, German carmaker Mercedes owner Daimler will take a stake of up to 5% in the UK luxury auto maker.

Aston Martin is to team up with the Mercedes to develop a new generation of engines and components

It is hoped the partnership will allow Aston Martin to compete more effectively with Volkswagen’s Bentley and Tata Motors’ Jaguar Land Rover.

100-year old Aston Martin makes the V8 Vantage, DB9 and Vanquish sports cars.

Aston Martin and Mercedes did not release any financial details of the deal, which they aim to complete by the end of the year.

“The proposed deal will see Aston Martin access significant Mercedes-AMG and Mercedes-Benz Cars’ resources, allowing the development of bespoke V8 powertrains and the use of certain components of electric and electronic architecture,” Ian Minards, Aston Martin’s product development director, said in a statement.

Aston Martin has been struggling of late. In the nine months to the end of September last year it sold 2,340 cars, a 19% drop on the same period in 2011.