Fiat Motor and Tata Motors are still discussing the possibility of building a low-cost car, according to news agency reports. Fiat CEO Sergio Marchionne said Tata Motors is the perfect partner for Fiat to develop such a car, the report added. Marchionne, who was the CEO of Ferrari before being elevated as Fiat CEO, is in Detroit for the North American International Auto Show, one of the world''s biggest.

Global automakers like Fiat are striving to bring down costs and become more competitive in the face of severe competition from Japanese and other Asian automakers. Some of these companies are forging alliances with smaller automakers in emerging markets to develop cost-effective models.

Fast growing base of component suppliers with high engineering skills and cost-effective labour force have made India an attractive destination for automobile manufacturers. While companies like Ford, Hyundai and Suzuki have been using their plants in India to supply overseas markets, others like Fiat and Renault have formed alliances with domestic companies to establish a base here.

Carlos Ghosn, CEO of both Nissan and Renault, had stated recently that global automakers should learn from Chinese and Indian manufacturers about cost management. He also cited the specific example of the low-cost small car being developed by Tata Motors, which would be the cheapest production car anywhere in the world at an expected cost of under $2,500.

Though details have not been revealed, it is likely that Fiat and Tata Motors would consider a model similar to the Renault Logan. Designed and developed by Renault''s East European subsidiary Dacia, the Logan has been well accepted across East Europe. In the more mature markets, the model is positioned as a value-for-money option for price-conscious buyers. The JV between Renault and M&M is all set to launch the Logan shortly in India.

Fiat Motor, which has struggled in the Indian market and has incurred heavy losses, announced an alliance with Tata Motors last year under which the latter took over the marketing and sales of Fiat cars in India through joint showrooms. The partnership was expanded with the formation of an equal JV which would invest Rs2,000 crore at Fiat''s plant in Ranjangaon, Maharashtra.

The Fiat-Tata Motors JV is expected to roll out a twin-cabin pick-up truck, the TL Sprint, in the domestic market this year. The model was unveiled at an auto show in Italy last year. Fiat may sell this model in Latin America while Tata Motors may launch it in Thailand through its recently formed JV with a local company. Tata Motors may also look at introducing this model in the African market, where it has been steadily expanding its presence.

The Fiat-Tata Motors JV would also launch the redesigned and upgraded hatchback model Palio from the Fiat stable this year. When the Ranjangaon plant is fully completed by next year, the JV would roll out the Grande Punto which is a big hit in Europe. A sedan version of the Grande Punto, called the Linea, would also be launched by next year to replace the unsuccessful Petra.