Aston Martin yesterday said it had entered into a technical partnership with German carmaker Mercedes to help it develop a new generation of models with V8 engines.

As part of the deal, Mercedes owner Daimler will take a stake of up to 5 percent in the 100-year-old maker of the DB9 and Vanquish sports cars.

The investment will help Aston Martin compete better with Volkswagen's Bentley and rival UK luxury car manufacturer Jaguar Land Rover, which was bought by India's Tata Motors in 2008 and has since achieved huge sales growth, especially in China.

No value for the deal was provided but the two companies said that a supply agreement between Mercedes-AMG, Daimler AG and Aston Martin was an essential element of the arrangement.

"The proposed deal will see Aston Martin access significant Mercedes-AMG GmbH 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 sold 2,340 cars in the nine months to September 30 last year, down 19 percent on 2011.

Italian private equity group Investindustrial last year bought a 37.5 percent stake in Aston Martin for US$241 million via a capital increase agreed with majority Kuwaiti owner Investment Dar.

Aston Martin said the deal would enable it to invest in new products and a technology program to 2018.