Global Automobiles, a subsidiary of the Kolkata-based Xenitis group, has tied up with China's Guangzhou Motors Co for the production of entry-level cars in India, a top company official said.
"We had earlier entered into a technology transfer pact with Guangzhou Motors, a state-run enterprise of the Chinese government, to manufacture two wheelers in West Bengal," said Suparna Maitra, head of corporate strategy of Xenitis.
"Now we have signed a similar pact for producing small cars as well," Maitra told IANS. The price, he added, would range between Rs 100,000 and Rs 125,000 ($2,400-$3,000).
"It will be a no frills car. We will be able to see them on road by the end of 2008. We are also looking for land near our motorcycle factory and hopefully we will be able to have things in place in a couple of months."
The company's four-stroke 125 cc bike, Expression, rolled out last month from its factory in Chinsurah, some 60 km north of Kolkata and not too far from Tata Motor's Singur site.
Asked how they will compete with a group like the Tatas, who are also planning to roll out a small car by the end of next year, Maitra said: "We are not competing with the Tatas at all."
Maitra said they had studied the market well and felt the need for a "people's car". "We want people riding two-wheelers to graduate to four-wheelers. We will position our product in that way keeping the affordability factor in mind."
The company is also not deterred by the fact that small car sales had gone down five percent last fiscal for the first time in three years. "It's a cyclical trend. Sales will go down but we are hopeful it will go up again."
The competition in the entry-level car segment is getting tougher with a host of companies announcing their plans to enter the segment, including the Tatas, Hero Honda and Bajaj Auto.
According to industry sources, even Nissan Renault was looking at a tie-up with Mahindra and Mahindra to find their feet in the small car segment.
Xenitis, founded by Santunu Ghosh, was set up in 2002 and two years later the company started manufacturing a low cost branded computer - Aamar PC (My PC in Bangla), but diversified into two wheelers in a tie-up with Guangzhou Motors.
The state-run Guangzhou Motors Co was founded in 1992 to make motorcycles and is one of the 70 large enterprises supported emphatically by the provincial government, according to information posted on the group's website.