Tata Engineering is in talks with Detroit Diesel, a subsidiary of German-American automobile giant DaimlerChrysler, to co-develop a high-performance diesel engine.

Telco is learnt to be working on a 2-litre common rail direct injection engine. Once developed, the new engine would be used to power the Safari, Telco's sports utility vehicle, sources familiar with the development said.

However, Safaris fitted with the CRDI engine will be meant only for export.

The move comes after Telco, having hit a slack patch in the domestic market, decided on a major export thrust for its vehicles.

A Telco spokesperson declined to either confirm or deny the development. Incidentally, Daimler-Chrysler holds more than a 7 per cent stake in Telco.

Detroit Diesel has also helped Hyundai Motor India develop the engine for its Accent CRDI.

At present, Mahindra & Mahindra is also in talks with multinational automobile companies to source CRDI engines for its Scorpio, especially for export.

Automobile analysts said although Telco would initially export the higher-priced, CRDI engine-fitted Safari, it might also offer it to domestic customers willing to pay more.

Senior company executives have already said the Safari, which currently comes with a 2-litre indirect injection engine that delivers 90 bhp, is underpowered.

Analysts said competition might force Telco to opt for a more powerful engine for the Safari.

Already, a number of multinationals are eyeing the sports utility vehicle segment in India. They are offering superior performance, albeit for a premium.