According to Tata Motors' Managing Director, Ravi Kant, work on the Rs 100,000 ($ 2,467) car was proceeding as per schedule and it will be launched in the Auto Expo to be held in January 2008 at Delhi.

The company is also developing a new line of small hatchbacks and mid-sized sedans to be launched in 2008 as well.

The four-door car would be the cheapest offering in the small car segment. Currently, the Maruti [Get Quote] 800 produced by Suzuki's Maruti unit, is the cheapest and sells for more than $4,000. Similar cars sell for much more in rich countries.

However, competitors and critics have expressed doubt about the quality of the car.

For instance, Tata's car will not conform to European safety and emissions norms. This is significant since the company sells cars in overseas markets such as South Africa and a few European markets. However, according to Tata Motors it would upgrade the car as and when it plans to export it.

The project has seen some turbulence including a land dispute in West Bengal where the plant is located and surge in raw material prices that forced the company to change the car design. However, despite these the company has claimed it will launch the vehicle on time.

Global carmakers such as Toyota, General Motors and Ford, which have launched their own cheap cars in the past, are keenly watching Tata's progress.

Meanwhile another car giant Renault/Nissan's Chief Executive, Carlos Ghosn said the group is working on an even cheaper variant of the Logan, the global no-frills sedan it launched in April in India, where it sells for under $10,000.