“It’s akin to the coming of Ford Model T,” Aaron Bragman, an analyst at Global Insight Inc in Lexington, Massachusetts, said in an interview, also at Detroit’s annual exhibit of the industry’s latest models.

With the US market coming off its slowest year in a decade, sales down in Japan and Western Europe stagnating, GM, Toyota Motor Corp and other automakers are turning to emerging markets such as India and China, where sales are growing more than 10 per cent a year.

Going head-to-head

For GM, Toyota and other automakers the Tata entry means “pressure to come down to that price and play in that field,” Mr Bragman said. “It’s a huge untapped market, and they will either have to find a way to do it themselves or find someone who can and partner up.”

Mumbai-based Tata’s unveiling of a prototype of Nano, at the Delhi auto show is forcing established automakers to decide whether they want to go head-to-head with such entrants, said New York-based Casesa Shapiro Group  Managing Partner John Casesa. “The reason why it’s important for the GMs and the Toyotas of the world is because if these products are successful, they will give these new companies scale, earnings and experience to move farther upmarket where they would compete directly against the European, Japanese and U.S. models,” Mr Casesa said in an interview from the auto show.

Ford Motor Co decided to announce plans for an Indian investment away from the Delhi show last week to avoid being overshadowed by Nano news, Ford Executive Vice President John Parker told reporters.

“It is a groundbreaking product,” Mr Parker said. The Nano will “cause people to think differently about the car. I have a lot of respect for Tata.”

The cheapest car in the US is the $9,995 Chevrolet Aveo from GM. In Japan that distinction goes to the Daihatsu Esse at about $6,000. In Europe the Dacia Logan from Renault SA starts at just under 8,000 euros ($11,900).
GM is studying whether to export minicar models from its SAIC-GM-Wuling joint venture in China, Vice Chairman Lutz said. Toyota has an early prototype for a model that may be able to compete with Nano, President Katsuaki Watanabe said.

The vehicle is close to getting a “go sign,” he said, without elaborating on what it would cost. “We're not yet able to develop vehicles at that price point,” Mr Watanabe said. “Give us a little more time.”