And as global automakers rush into the country to set up plants to make similar small cars, both established companies and newcomers see a bigger role for India: Asia's small car export hub.
Already, South Korea's Hyundai Motor has shifted its entire production of the Atos Prime, its most popular compact, to the southern Indian town of Sriperumbudur, just outside the port of Chennai. It plans to do the same for the Getz, a premium hatchback.
A third of the cars produced at the plant are exported to 67 countries, from neighboring Sri Lanka to faraway Mexico. By October, Hyundai will complete a second factory nearby, doubling annual production to 600,000 cars, most of them compact hatchbacks that sell for about US$7,000 (HK$54,600).
"We have a very clear target. India will be our export hub, which means all our small cars will be produced here," said Heung Soo Lheem, chief executive of Hyundai's India operations.
Suzuki Motor Corp, which owns a controlling stake in Maruti Udyog, India's largest carmaker, is investing US$2 billion in India and plans to export 200,000 cars from India by 2010, chairman Osamu Suzuki said.
Homegrown Tata Motors plans to make a US$2,500 car, which could set new standards for the auto industry worldwide. The company is setting up showrooms across Africa and has tied up with Italy's Fiat to use its South American sales network.
Now newcomers like France's Renault, which has rolled out its Logan sedan and hatchback in India, are breaking into a market that for years has been dominated by Maruti, Hyundai and Tata.
Renault's alliance partner Nissan Motor has announced plans to make cars in India and export them to Europe.
Spurred by Tata's ambitions for a super-cheap car, Nissan and Renault also are exploring the viability of a sub- US$3,000 car in likely collaboration with Indian partner Mahindra & Mahindra.
General Motors Corp has started making small cars in India, including the Chevy Spark, a US$7,200 compact car that chief executive Rick Wagoner said is a "big part of our India strategy."
Honda Motor has begun building a new plant for premium hatchbacks in western India, and Toyota Motor Corp and Volkswagen are expected to announce similar ventures in coming months.
For now, most newcomers want simply to gain a foothold in India, where annual vehicle sales are predicted to nearly double to two million units by 2012.
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