The Nano, the world's cheapest car, will hit Indian roads in July, with expectations that demand from millions of aspiring car owners will far outstrip supply.

Launching six months behind schedule in a subdued market, with production in the first year severely constrained, and the threat of further ratings downgrades hanging over the company, it will take over a year to deliver the first 100,000 cars.

Owners will be randomly selected from bookings made between April 9 and 25, and their prices will be protected, said Chairman Ratan Tata, who had promised a 100,000 rupee ($1,980) dealer price at a glitzy unveiling more than a year ago.

We are at the gates offering a new form of transportation to the people of India, and later I hope other markets as well, Tata told a news conference.

A European variant will be launched by 2011, and the company is also looking at the United States, as the current economic situation has made low-cost cars even more attractive, even though that had not been the original intention.

I think, driven mainly by the change in demand that we see elsewhere in the world, we suddenly felt we had a product that could be of considerable interest as a low-cost product in western Europe, eastern Europe, the UK and even the U.S., Tata said ahead of the launch where the retail price will be revealed.

The Nano can be booked at more than 30,000 locations in 1,000 cities across India, including Tata-owned department and electronics stores, with booking forms costing 300 rupees each.

Dealers expect advance bookings to require a downpayment that Managing Director Ravi Kant said would be very close to the price.

We have had a stupendous response so far, breaking all class and other barriers, Kant said of the enquiries so far.

TREMENDOUS ABERRATIONS

Heavy bookings could help the firm battling falling sales of commercial vehicles, its mainstay, and help repay $2 billion of bridge loans due in June. The bridge loan was taken for the acquisition of the Jaguar and Land Rover brands last year.

Tata said costs had changed a lot since the Nano was first proposed, and even since last January, but the company had decided to hold the price for the first 100,000 cars.

There have been tremendous aberrations in the cost of steel, the cost of technology used etcetra, and we could again have taken a view that we would revise the price, but we have kept the price the same, he said.

It's often asked whether this project is going to be an act of philanthropy which I assure you it will not, Tata said.

Analysts say Tata will most likely raise prices soon, but the slim margins, initial capacity constraints and depressed market sentiment mean that breakeven on the project will take 5-6 years.

But it is not just analysts and ratings agencies that are concerned: environmentalists are fretting about the effect of thousands of Nanos adding to India's already-polluted cities and congested streets.

Tata Motors can currently produce about 60,000 Nanos a year until its 250,000-unit plant in Gujarat state comes on stream by the year-end. It has said the Nano is less polluting than the millions of motorbikes that ply Indian streets.

I just hope the dream that we've all had and we've worked so hard for proves itself to be the kind of product that we would like it to be, Tata said.

(Reporting by John Mair; Writing by Rina Chandran; Editing by Ranjit Gangadharan)

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