Ratan Tata, the Indian group's chairman, said the relationship with MG Rover "in many ways is fine". But if the current disagreements could not be resolved "we would talk of a dissolution". That stage had not yet been reached, he said.
The companies are expected to hold further talks, possibly in early October, to salvage a distribution partnership that has worsened since its launch in 2003.
The talks centre on the price of the CityRover, which is rebranded from Tata's Indica car, and the addition of new features to attract buyers. MG Rover wants to cut the price of the car or add free equipment to make it more competitive, and has proposed that Tata bear some of the cost.