Mumbai: Tata Motors will start selling its Rs1 lakh small car by mid-2008, its managing director Ravi Kant said on the sidelines of the Society of Indian Automobiles Manufacturers'' annual conference.

He said construction of the plant for making the car was in progress.

The small car project is running behind schedule due to political turmoil over land acquisition at Singur in West Bengal. The company, however, has been saying it would put in all efforts to make up for the lost time.

He, however, said high input cost was making it "challenging" for the company to maintain price of its people''s car at Rs1-lakh level.

"Higher input cost has made it more challenging to maintain price at the Rs1 lakh level, but whether we will launch the car at a higher price or not, will be evident only when we introduce the product," he said.

Kant said the company''s sales have been hit primarily by two reasons - high interest rate in the domestic market and appreciation of the rupee.

"It''s a double whammy for us. On one hand, high interest rates are pulling down domestic demand on the other rupee appreciation has hit exports. In business, you need certainty, and thus interest rates needs to be stabilised," Kant added.

The company, he said, will soon introduce upgraded variants of its Indica and Indigo models.