Renault-Nissan and Bajaj Auto, an Indian motorcycle manufacturer, are joining forces to make an “ultra-low-cost” car that will compete with Tata’s £1,250 Nano.

The move represents the latest effort to put the Third World on wheels by selling cars that cost about the same as a laptop computer.

The new joint venture will be 50 per cent-owned by Bajaj, with Renault and Nissan, which cooperate under an alliance pact, controlling 25 per cent each. The carmakers plan to produce a vehicle that will cost about $2,500 (£1,275) before taxes – virtually the same price point that will be occupied by the Nano, the world’s cheapest car, when it hits India’s roads this year.

The new car – codenamed the ULC (ultra-low-cost) – will be made and sold in India, with the first models due to come on to the market in early 2011. An initial production capacity of 400,000 units a year is planned.

Its producers hope to export to other emerging markets later, using Renault-Nissan’s established global sales network.

Tata also intends to take its small car overseas, but not for several years.

With oil prices scaling record highs, carmakers plan to follow Tata’s lead by targeting developing markets and green-minded consumers in the West with a new generation of cheap and efficient cars.

Hyundai, Toyota, Volkswagen and Ford are among those overhauling their plans. Chrysler has teamed up with Chery Automobile, of China, to develop an ultra-compact model.

General Motors has suggested that it may work with Wuling, its Chinese partner, to do the same. Volkswagen plans to sell a $3,500 car based on the Polo in India from 2010.

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