The Tata Nano, the world's cheapest car, will be launched in Mumbai today but customers face a three-year waiting list for the £1,400 motor.

Analysts estimate that there will be as many as 500,000 applications for Nanos when the company begins to take bookings for "the people's car" next month.

The rush of interest could overwhelm production capacity, which is expected to languish as low as 50,000 units over the coming year. A new factory, capable of producing an estimated 250,000 Nanos a year, will come online next spring after an industrial dispute forced Tata to abandon its original plant and delayed the launch of the car by seven months.

Waiting times for the two-stroke run-about could stretch until 2012, by which time the model is likely to face competition from other low-cost models currently under development.

Rival projects include a joint venture between Renault-Nissan and Bajaj, the Indian two-wheeler manufacturer, which last week said it was on track to produce a Nano-type super-compact car by 2011.

Tata is expected to announce an electronic lottery system to pick the first buyers, which it hopes will help it avoid controversy over the allocation of the first new Nanos. It is also expected to demand a relatively large deposit, of about 70,000 rupees (£953), to deter tire-kickers.

Nevertheless, the potential for bad feeling among those consumers who lose out in the lottery may prove to be the latest pitfall for a project widely regarded as emblematic of India’s economic ambitions, but which has been forced to negotiate a rocky road on its way from the drawing board to the nation’s showrooms.

Tata’s problems began in earnest last year when a row erupted over the land on which the company was building a factory to produce the car.

Farmers in the state of West Bengal alleged that the site was stolen from them and mounted violent demonstrations that forced Tata to abandon the partly-built plant at a cost of as much as $350 million (£240.1 million). The Nano is being launched seven months behind schedule because of the disruption.

The company has since begun to build a factory at a new location, in the western state of Gujarat, but production is not expected to begin there until 2010.

The delay in the launch of the Nano has contributed to a wretched period for Tata Motors, which recently posted its first quarterly loss in seven years and whose shares have lost three quarters of their value in the past year.

Compounding the company’s woes, its credit rating has been downgraded to junk status in the wake of its debt-fuelled acquisition of Jaguar Land Rover last year.

Analysts believe that Tata may have to wait six years for the Nano to show a profit. To lift margins, the company is expected to charge extra for transporting the vehicle from the factory to the showroom.

It is also expected to limit the number of basic models it produces, and to push higher specification models, fitted with extras such as air conditioning, instead.

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