On Sunday, Carlos Ghosn, chief executive of the Renault-Nissan alliance, forecast the Indian car market to reach 2 million units in the current fiscal year, and to triple to 6 million in the next 10 years. The key to reaching Indian consumers—who are ditching bicycles and scooters for four-wheel personal vehicles—is producing ultra-cheap cars.

Tata Nano

Tata Nano.

India’s Tata Motors starting selling the Nano, a $2,500 car, last year. But the company has delivered just 10,500 units since the car hit Indian roads in July. According to The New York Times, the Nano has been plagued by problems, such as protests by farmers to scrap plans for a new factory in eastern India, and a defect which caused some Nanos to catch fire.

The rate of adoption of personal vehicles in India will come second only to China. The rapid rise of personal car ownership will push the number of cars on roads globally to about 1 billion next year—and 2 billion by 2030. These levels are unsustainable from an environmental perspective.

Last January, Tata suggested that fuel-efficient versions of the Nano—using diesel, micro-hybrid and electric technology—might be available one day. The current 2-cylinder gas version achieves about 50 mpg in the city and 60 mpg on the highway.

Japanese Competition

Ghosn said Nissan-Renault plans to compete against the Nano by selling a small car in India in 2012, a year later than planned. Bloomberg reported that delays resulted from “fixing details of the product with its Indian partner.” Mr. Ghosn said the delay was not surprising, given that none of the three participants had ever made such a vehicle. The car will be manufactured by Bajaj Auto, the Indian scooter and rickshaw company. In a Bloomberg interview, Ghosn said the micro-car will be priced at about $3,000.

Last Friday, Toyota said it will introduce its own small car in India, with a 1.2-liter gasoline engine and perhaps a diesel option. “We are well on track to launch the small car by the end of 2010 and will showcase it during the upcoming New Delhi Auto Expo in January,” Sandeep Singh, deputy managing director at Toyota Kirloskar Motor Pvt. Ltd., told reporters.

Toyota Kirloskar, which is 89 percent owned by Toyota, also plans to unveil the Toyota Prius at the show. Toyota will only introduce the Prius—likely to be pricey by Indian standards—if the company receivespositive feedback from customers at the New Delhi show, Singh said.

Nissan and Toyota trail behind Suzuki, Hyundai, and Tata in the Indian market. Ford, General Motors and Volkswagen are also hoping to sell small cars in India.

Honda said Wednesday that it will go in a different direction. Instead of producing a low-cost minicar, Honda is developing a slightly larger, but still quite small car that will cost less than its existing Jazz (Fit) hatchback model.