The car will figure in the segment of mid-size sedans, also called the C segment, even though its dimensions may be different.

With the entry of Maruti Udyog's [Get Quote] SX4 and Mahindra Renault's Logan, it has become one of the fastest-growing segments of the Indian passenger car market. Both the new entrants have been giving sleepless nights to Honda Siel, whose City had a free run until recently.

Skoda Auto Chairman Detlef Wittig told Indian journalists on the sidelines of the Frankfurt Motor Show that the company would launch Fabia in the price band of Rs 5 lakh to Rs 6 lakh, in petrol and diesel variants.

Skoda will launch the compact car with up to 10 per cent local content to begin with and raise it to 30 per cent by the end of the first year. Production will begin by the end of October this year and the company will have 500 cars ready by the time of the launch.

The company plans to produce 20,000 units of Fabia in the first year. It hopes to sell 13,000 units of Octavia, Laura, Superb and the Fabia in the current financial year.

Skoda's recent sales of A4 platform-based Octavia have been waning in recent months, while those of premium A5 Laura have grown 130 per cent this year. However, the diminishing performance of Octavia has not stopped Skoda from continuing to manufacture the car.

"We sold 65,000 cars last year in several markets and we have seen higher growth in 2007, so we don't plan to phase out the car even in 2008, as we had originally intended to do," Dr Wittig said.

The company is exploring options to transfer some of its manufacturing to Volkswagen's upcoming plant in Chakan, near Pune, and also share its supplier base with VW.

"Since the plant at Chakan is a VW group plant, we can exercise that option, if necessary," Wittig said.

The company operates from its plant in Aurangabad, where both Audi and VW also assemble the A6 and Passat respectively.

Meanwhile, Skoda is gearing up for the launch of the new Superb luxury saloon at the Geneva Motor Show in March next year.

The car will replace the existing Superb in world markets, including India, where it plans to launch the new saloon in August-September 2008.