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Life at the bottom of India’s automotive food chain is soon going to get more crowded, and a lot more competitive. France’s Renault and its partner, the Nissan Motor Company of Japan, and Bajaj Auto, India’s second-largest motorcycle manufacturer, announced details of a low-cost city car coming to the Indian market in 2012. The goal: to take the fight to the Tata Nano, a jellybean-shaped sedan with a starting price of about $2,200.

On sale since mid-2009, the Nano created the ultralow-cost car market in India. Hundreds of dollars cheaper than its nearest rivals, the Nano has been hailed as “the people’s car of India” thanks to an affordable price, which makes car ownership possible for millions of new customers. Ratan Tata, the chairman of Tata Motors, said inspiration to build the Nano came from seeing Indian families forced to travel on overloaded scooters and motorcycles.

Speaking with reporters in New Delhi, Rajiv Bajaj, managing director of Bajaj Auto, formally announced that the car being developed with Renault-Nissan will sell for $2,500 and go on sale by 2012. “We remain very clear whether the car is 100,000 rupees or 150,000 rupees is not what’s important,” Mr. Bajaj said, according to a report by the Agence France-Presse. “What counts just as much is mileage, maintenance and carbon emissions.”

Mr. Bajaj said the car would have better fuel mileage (up to 70 miles per gallon) and lower carbon dioxide emissions than the Tata Nano. The gasoline-powered Nano is capable of roughly 50 m.p.g. in a mix of city and highway driving. Bajaj Auto said it would keep costs to a minimum via extensive parts sharing between the company’s motorcycle and three-wheeler (auto rickshaw) divisions. This marks the first time Bajaj Auto has built a four-wheeled passenger car.

The news signifies a bolder step into the Indian market for Renault-Nissan. An existing joint venture between Renault and Mahindra & Mahindra – a manufacturer of S.U.V.’s and crossover vehicles – recently came to an end after sales of the Mahindra-Renault-badged Logan sedan fell far short of expectations. Renault will now build and market vehicles in India using its own nameplate and distribution network. A new $1.2 billion factory in Chennai, shared between Renault-Nissan, offers an annual capacity of 400,000 cars, though it’s likely the low-cost car will be built at one of Bajaj Auto’s factories.
Renault designers said the car would sit lower and look more dynamic than the oval-shaped Nano. The only previous hint to the car’s shape was a bland and boxy concept, known only as the “U.L.C.” (for Ultra Low Cost), that was shown at the 2008 New Delhi Auto Expo. Expect the finished product to include four doors, a hatchback and seating for at least four adults.

Like the Nano, the Renault-Bajaj city car could have a future outside of the Indian market. The Nano is expected to reach European markets as early as next year, and Tata Motors has routinely said United States sales are planned.
By NICK KURCZEWSKI