Bajaj Auto's new four-wheeled people-carrier might well create an entirely new category.

Two days before the Delhi Auto Expo, Bajaj Auto showcased the RE60, an "intra-city passenger carrier". It was initially meant to be a low-cost small car, developed in collaboration with the Renault-Nissan combine, to take on the Nano.

What has finally come out, according to Bajaj Auto, is not a challenger to the Nano so much as a product that seeks to replace the five million or so three-wheelers in the country.

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In fact, Rajiv Bajaj, the managing director of Bajaj Auto, has made it very clear that the RE60 is not a car. He knows that once it is positioned as a replacement for three-wheelers, the RE60 will never be perceived as a car.

Clearly, Bajaj Auto is prepared to stay away from the car market for some more time.

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That may not be a bad thing. While there is cut-throat competition in the small car market, a small public transport vehicle is a uniquely emerging-market product, and that's why large automobile companies - Japanese, Korean, American or European - have not bothered to invest in this direction.

It's not their core competence. That shields the RE60 from global automobile makers for the time being.

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Developing a car can be expensive. Worldwide, it can cost over Rs 3,000 crore. In India, the bill can be smaller, given frugal engineering skills.

The Mahindra XUV500, for example, cost Rs 850 crore to develop.

Bajaj Auto has not disclosed how much it cost to develop the RE60, though it has said the amount is closer to what it takes to develop a two-wheeler - Rs 200 crore (Rs 2 billion) or thereabouts. This should keep its price competitive.

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The RE60's rivals will be the three-wheeler passenger carriers made by Bajaj Auto, Piaggio, Mahindra & Mahindra and Atul Auto, as well as the Tata Magic.

Since Bajaj Auto leads the market with a share of 80 per cent, it could eat into the company's three-wheeler sales.

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But the company is hopeful that it will also open a new category of enclosed, small, passenger carriers.

In the automobile market, most companies now like to have more than one product in each segment. It gives the consumer more choice.

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So, the RE60 should help Bajaj Auto to expand its market share. It will be a while before others in the business catch up with it.

Bajaj Auto exports almost 60 per cent of the 500,000 three-wheelers it makes to markets in Asia, Africa and South America.

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The RE60 too can be sold there. It is these possibilities that made Rajiv Bajaj comment that Renault and Nissan can walk away from the RE60 if they don't like it.

The two car makers, who were supposed to brand, market and sell the product, have seen the RE60 only on their computer screens; they will see it in flesh and blood at the Auto Expo.