Tata Motor's $2,500 car to put India on global autos map

Mon Jan 7, 2008 11:09pm EST

By Rina Chandran

MUMBAI (Reuters) - Only 10 years ago, India's Tata Motors Ltd (TAMO.BO: Quote, Profile, Research) unveiled its first car, a hatchback, that established the truck maker's credentials as a car maker.

On Thursday, the $7.8 billion company unveils its boldest initiative yet, a car that will sell for just $2,500, less than half the cheapest car on the market.

Dubbed the 'People's Car', it will determine Tata's (TTM.N: Quote, Profile, Research) place in the global automotive arena, where the battle is increasingly being fought in emerging economies such as India, China and Russia.

The new model, using re-engineered plastics and modern adhesives, is a far cry from the premium Jaguar and Land Rover brands Tata is negotiating to acquire from Ford Motor Co (F.N: Quote, Profile, Research).

Tata Motors' drive to produce a cheap, no-nonsense, small car was born from close observation of a local market where millions often ferry families of four, plus baggage, on motorbikes and scooters.

Critics initially derided Tata's 100,000 rupee, or 1 lakh, price target, more so as oil and steel prices rocketed. But global car makers have taken note and are scurrying for their own versions to meet growing environmental and cost concerns.

"The product has rightfully gained a lot of international attention," said Mohit Arora, managing director for India at research firm J.D. Power Asia-Pacific, who will fly in from Singapore to see the car being unveiled by Chairman Ratan Tata.