Tata Motors, in the process of completing its £1.15 billion purchase of Jaguar Land Rover, is facing a challenge in its efforts to dominate the small car market in India.
Tata unveiled its Nano People’s Car at the Delhi Auto Expo event in January and then to European audiences at the Geneva motor show in March.
The tiny car will go on sale in India later this year at a price of around £1,250, making it the world’s cheapest mass produced car.
However, the Indian domestic market is so vast that other manufacturers are keen for a share of the spoils.
Renault-Nissan has joined forces with Indian motorcycle maker Bajaj Auto to announce the development of a joint venture project for a new ultra-small car, which it hopes could be on sale from early 2011.
The car, codenamed the ULC (ultra-low-cost), will be priced so that it is direct competition with the Nano.
In a joint statement, the two groups said the ULC would be built at an all-new plant in Chakan, in Maharashtra, with initial output of 400,000 vehicles a year.
Despite being aimed directly at the Indian market, the groups said they believed there was growth potential in other emerging markets around the world.
The joint-venture company will be 50 per cent owned by Bajaj Auto, 25 per cent by Renault and 25 per cent by Nissan.
Tata has said its eventual aim is to take the Nano into other markets, especially Southern Africa and South America, although this won’t be for several years yet.
With oil prices now at record levels, other manufacturers plan to follow Tata’s lead and Hyundai, Toyota, Volkswagen and Ford are all thought to be looking at developing new fuel-efficient micro models. Chrysler has already teamed up with Chery Automobile, of China, to develop an ultra-compact model.