NEW DELHI - Renault, Nissan Motor Co and their Indian partner will launch an ultra low-cost car in India in 2012 that will cost less than Tata Motor's Nano, the world's cheapest car.

Carlos Ghosn, chief executive of both the French and Japanese car makers, said on Tuesday an agreement has been signed with India's Bajaj Auto, building on a May 2008 plan for an ultra-low-cost car code-named ULC.

The design, manufacturing and sourcing for the car would be done by Bajaj, with Renault and Nissan handling marketing in India and overseas, Ghosn told reporters in New Delhi.

I can tell you the cost of this car would be lower than any car today made in India, he said, adding there would be a difference between the cost and price.

India would be the first and main market for the car, Ghosn said, with exports a possibility. He said it would be a competitive and novel product compared to what was currently available.

The closest competitor for now would appear to be the Nano, the world's cheapest car which sold for around $2,000 when it hit the road earlier this year, but other global majors are also looking to launch small cars for the Indian market.

General Motors plans to launch a small car for India at the end of 2010, and Toyota Motor Corp is designing a small car for India that it expects to be ready by late 2011.

Ford Motor Co plans to begin production of a small car in India early next year, although it has said it would not compete directly with the Nano.

India was selected for the project because it was one of the most important markets for growth for autos, Ghosn said, and was also a good source of parts and products to be exported.

Growth is going to continue and is going to be very important for the years to come, he said.

India sold 1.5 million passenger vehicles in 2008/09 and is expected to sell 2 million vehicles this year, according to industry estimates.

Renault-Nissan is building a passenger car plant in Chennai in southern India with a capacity to make 400,000 units a year.


Ghosn said the ultra-low-cost car project had taken time to be worked out.

We have now a clear definition of the product not only in terms of cost.. in terms of geometry, but even in terms of fuel efficiency.

Under the terms agreed in 2008, Bajaj would own 50 percent in the project and Renault and Nissan would have 25 percent each. There was no update on this on Tuesday, and contractual details are yet to be decided and the car could be produced outside a formal joint venture between the three firms.

Ghosn said Nissan's venture with Indian truck maker Ashok Leyland to make light trucks in Chennai was on track.

Everything is OK there, and hopefully we will see concrete new products coming out of this collaboration, he said.

He also said there were no major problems with Renault's joint venture with India's Mahindra & Mahindra to make the Logan sedan, although sales had not met expectations.

The Logan is more than 4 metres long, which sees it hit with a 20 percent factory gate duty that makes it more expensive than competitors in its segment.

Production in 2008/09 was less than a third of capacity and and the joint venture lost 4.9 billion rupees ($105 million). ($1=46.5 rupees) (Reporting by C.J.Kuncheria & Devidutta Tripathy; Writing by Janaki Krishnan; Editing by John Mair and Muralikumar Anantharaman)