Fiat to go ahead with plans for low-cost car

Italy's Fiat said it would go ahead with plans to build a low-cost car, joining a growing number of automakers seeking to emulate Renault's success with the Logan.

"This will be our answer to the Logan," CEO Sergio Marchionne said in a speech Thursday, March 15, at a ceremony where he received an award.

Marchionne said Fiat would build the car in Brazil and might expand the manufacturing of it to China, India, and Turkey where it has plants.

He said the car would be the successor to the Palio, a cheap model with which Fiat had had success in Brazil, one of its most important markets.

Marchionne reiterated that the car would not be made with Tata Motors, Fiat's Indian partner that is working on its own low-cost car.

Last week, he had told reporters at the Geneva auto show that Fiat management was considering the idea of a low-cost car but had yet to make a final decision.

Faced with flat growth and increasing competition in their respective home markets, Fiat and other automakers are expanding in the developing world where markets are growing very fast.

The goal of a low-cost car is to meet growing demand for cheap yet rugged transportation.

France's Renault has had a big hit with the Logan, which costs about 5,000 to 6,000 euros ($6,600 to $8,000) in its most basic form. Built in Romania at the Dacia subsidiary, the Logan was intended for developing countries but has become a hit in Europe, too.

Renault aims to launch the next model of the Logan in Brazil toward the end of this year before a European launch in 2008.

Toyota Motor Corp. has said it was close to creating a prototype for its own no-frills model, seeing a huge market potential among buyers bent on cheap, basic transportation