Prototypes are already being tested at its main production plant and the car is expected to first launch in India in 2008. It is not yet known if the new model will come to the UK although the brand is currently in the process of reviewing its network and brand positioning here.

The trend for cheap new cars has already been seized upon by Western manufacturers keen to gain a foothold in the emerging markets. Under its budget Dacia brand, Renault launched the Logan in Eastern Europe in 2005. The €7,500 (£5,000) car has proved so popular the French carmaker is considering plans to bring the car to the more mature Western European markets.

Additionally, Volkswagen plans to launch its own low-cost super-compact mini within a few years. The UP will be priced at approximately €6,000 (£4,500) for the entry-level model. Meanwhile, Tata claims to have turned a $110m loss into a $110m profit in five years by using low cost suppliers and improved sourcing initiatives. Tata managing director Ravi Kant said that after posting a loss of 5bn rupees in 2001, the company implemented a three-phase recovery strategy which has paid dividends. “Our reaction was to try to understand what had gone wrong and to create a path for the future to ensure that we never got in that situation again,” said Kant.