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

By Rina Chandran

MUMBAI, Jan 8 (Reuters) - Only 10 years ago, India's Tata Motors Ltd (TAMO.BO) 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) 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).

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.

"It's a big, big deal for Tata Motors, and will be recorded in history books, whether or not it does well."

Volkswagen (VOWG.DE), Toyota Motor Corp (7203.T), Honda Motor Co (7267.T) and Fiat (FIA.MI) have since said they are looking to build low-cost cars. And the Nissan Motor Co (7203.T) and Renault (RENA.PA) alliance, which has done well with its no-frills Logan sedan, is developing a $3,000 car with Bajaj Auto Ltd (BJAT.BO), a local Tata rival.

"Scepticism has given way to imitation," said Ashutosh Goel, auto analyst at Edelweiss Securities.

"Every global car maker has realised the need to be in the emerging markets with a model like this for mass volumes, if not at 100,000 rupees, then perhaps at 150,000 rupees," he said.

NOSTALGIA WAVE The 'People's Car' hits the market at a time when oil prices are near $100 a barrel, a move to fuel-efficient "green" cars is gaining momentum, and drivers wallow in nostalgia with the revival of the Fiat 500 'Cinquecento' and BMW's (BMWG.DE) Mini.

In Italy, the cheap and efficient Fiat 500 replaced the scooter for millions, and its 2007 relaunch won a warm response.

In India, the mini Maruti 800, made by a venture of the government and Japan's Suzuki Motor (7269.T), played a similar role in the 1980s, offering a modern alternative to the limited options available.