Tata 1 lakh car to put India on global auto map

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the government and Japan's Suzuki Motor, played a similar role in the 1980s, offering a modern alternative to the limited options available.

Today, helped by rising middle-class incomes, small cars, led by models such as Maruti's Alto and the Hyundai Santro, make up more than two-thirds of a domestic car market that should nearly double to 2 million units a year by 2010.

"Small cars have always been popular in India, even when oil prices were low," said Ashvin Chotai, Asian auto analyst based in London, who will be at Thursday's unveiling in New Delhi.

"Globally, higher oil prices are accelerating a shift towards compact and small cars, and regulatory developments such as C02 standards in Europe, and congestion and parking constraints are reinforcing it," he said, adding this was not a short-lived fad.

But environmentalists worry that a car so cheap could be more damaging, adding more pollution and increasing India's dependence on oil imports.

Anumita Roychoudhury, at the Centre for Science and Environment in New Delhi, has said the shift to greater car ownership could be a "timebomb ticking away".

"When you lower the price that drastically, how will you be able to meet safety and emissions standards?" she told The Observer newspaper, adding, to Reuters: "It's just not sustainable, whether from an environmental point of view or in terms of congestion."

Tata, which has said the 4-seater 'People's Car' will have a 600cc engine, will have an initial production run of 250,000 units. It expects eventual annual demand of 1 million cars, which may be assembled by dealers or satellite units.

Tata Motors may also export the car, which would probably sell well in Africa and South and Central America, Chotai said.

India Advantage

With car ownership in India at just 8 per 1,000, there is huge potential to upgrade two-wheeler owners, who bought about 7 million bikes and scooters in 2006/07. An entry-level motorbike costs 35,000-40,000 rupees.

Already, South Korea's Hyundai, which will have the capacity to make 600,000 cars annually, has made India a small car production hub, and Suzuki is increasing its capacity to 1 million units a year.

They will be closely watching reactions to the Tata car.

"The quality of the initial launch must meet minimum expectations of the global industry, otherwise the whole project could be discredited," Chotai said.

But even a thumping success will not have all car makers rushing to build low-cost models.