(REUTERS) - Tata Steel Europe said it is investing 2.3 million euros (S$3.9 million) at its IJmuiden facility in the Netherlands to develop next-generation steels for the auto industry that are lighter, stronger and better able to withstand crashes.

The Indian company's European branch, Tata Steel UK Ltd , is Europe's second largest steel producer.

European steelmakers have been struggling to make profits in the last couple of years, in a fast shrinking market.

"The R&D investment follows close collaboration between Tata Steel and three major European car manufacturers to understand their requirements for future car models," Tata said in a statement.

The automotive sector, a major market for the steel industry, has come under pressure to produce lighter and more environmentally friendly cars and this has pushed steelmakers to invest in developing new, lighter materials.

Tata and other producers are speeding up a switch to products that add more value and help them withstand aggressive imports of basic grades of steel.