Renault-Nissan, Bajaj in car venture

The companies had been talking about such a plan amid efforts by many carmakers to woo India's burgeoning middle class with models priced around that level .

Nissan, which has been eager to move ahead with plans for a cheap car offering in India, said the car, code-named ULC, will be made at a new plant in Chakan in India, with annual production capacity of 400,000 vehicles.

Sales are scheduled to start in early 2011 in India, Nissan said. The joint venture will be 50 percent owned by Bajaj, 25 percent by Renault SA and 25 percent by Nissan Motor Co.

The Nano car from Tata Motors Ltd. of India is expected to roll off assembly lines later this year and is expected to sell for 100,000 rupees, around US$2,400 at current exchange rates.

Others, including General Motors Corp. of the U.S. and Toyota Motor Corp. -the world's two biggest carmakers -are also working on cheap cars targeting India and other emerging markets.

It is uncertain whether such major automakers will be able to hold prices down at the level of Tata's Nano, which in its basic version has no radio, passenger-side mirror, central locking, power steering or air conditioning. It also has only one windshield wiper.

The emergence of the Nano has also fueled a host of concerns, including that more drivers on the roads will cause greater pollution and increase the demand for fuel. As well, the recent rise in material costs such as steel is introducing new challenges for Tata.

India's car market is attractive for automakers because it is believed to be growing at a faster pace than China's.

Tata has said it plans to sell Nano only in India for now, and hopes to export it to developing nations across Asia, Latin America and Africa in two or three years.