Tata Sons Limited Chairman Ratan Tata’s dream project, the ‘people’s car for Rs. 1 lakh ($2200) is all set to become a reality by 2008. “It is in the prototype stage and prototypes are running.

Its cost will be somewhere between a motorcycle and an entry-level car,” Tata said in an interview. He said that the new vehicle might also be exported to other developing countries depending on its success in India.

The Tata’s have competition from Bajaj Auto. Bajaj, the largest three-wheeler maker in the country, is also planning to launch cars in the same price range. Bajaj Auto has taken up the challenge of Ratan Tata’s ambitious car project. Bajaj claims that a two and three-wheeler maker will be better positioned to manufacture a low-cost car than a conventional carmaker. According to Rajiv Bajaj, managing director Bajaj Auto, “It won’t be tough to make a car for $2200. The tough part will be making money out of it.”

Tata Motor’s competitors do not—at least publicly—believe it is practical. An Indian financial daily said, “With taxes accounting for almost half of a car’s ex-factory cost, Tata will have to produce a car within Rs.75,000 ($1600) for it to be priced at Rs 1 lakh in the market.” At present, the daily claims, it is not possible to make a car for less than $3000 and costs will only increase over the next five years.

India’s largest car maker Maruti Udyog’s managing director Jagdish Khattar said that he did not believe it is possible for Maruti to bring out a car model that costs less than $2500. In the next few years, the possibility of having to meet Euro III or IV emission norms would make it even costlier.

($1=Rs. 45)