Jan. 15 (Bloomberg) -- The most-talked-about car at the Detroit auto show this year isn't even present: Tata Motors Ltd.'s $2,500 Nano.

The vehicle planned by India's largest truckmaker would violate emissions and safety regulations in the U.S., Europe and Japan, auto executives from those markets said. The Nano wouldn't meet consumer expectations in developed countries for creature comforts such as air conditioning, they said.

Yet they're all wondering how to respond to it. ``What we're seeing really is the automotive world is divided into two distinct markets,'' General Motors Corp. Vice Chairman Bob Lutz told reporters yesterday at the North American International Auto Show.

``It's akin to the coming of the 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 U.S. 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 percent a year.

`Pressure to Play'

For GM, Toyota and other automakers the Tata entry means ``pressure to come down to that price and play in that field,'' 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 the Nano, India's cheapest car, at the Delhi auto show on Jan. 10 is forcing established automakers to decide whether they want to go head-to-head with such entrants, said John Casesa, managing partner at Casesa Shapiro Group in New York.

``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,'' Casesa said in an interview from the auto show yesterday.

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

`Groundbreaking'

``It is a groundbreaking product,'' 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 U.S. 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).

Tata's proposed car has four doors, one long windshield wiper and a side-view mirror on the driver's side only. It has reached a top speed in tests of 105 kilometers (65 miles) an hour.

``There are hundreds of millions of people coming out of poverty in emerging markets that still won't be able to afford what we define as an automobile for many years,'' Casesa said.

GM is studying whether to export minicar models from its SAIC-GM-Wuling joint venture in China, Vice Chairman Lutz said.

The developing world ``has much more modest aspirations in terms of safety,'' said Lutz. ``Just getting people into a metal box with four wheels and getting them off of motor scooters and mopeds and ox carts and stuff like that is already an enhancement of their personal safety.''

Close to Go

Toyota has an early prototype for a model that may be able to compete with the Nano, President Katsuaki Watanabe said at the Detroit show. The vehicle is close to getting a ``go sign,'' he said, without elaborating on when sales would begin or what it would cost.

``We're not yet able to develop vehicles at that price point,'' Watanabe said. ``Give us a little more time.''

Renault, France's second-largest carmaker, and affiliate Nissan Motor Co. are in talks with Pune, India-based Bajaj Auto Ltd. to build cars that may cost about $3,000. The goal is for such vehicles to be exported to the U.S. and sold for $5,000 with modifications, Renault Chief Executive Officer Carlos Ghosn said in October.

Nissan, the Tokyo-based automaker that's 44 percent owned by Renault, will probably decide in the next two to three months on the outcome of a feasibility study, Carlos Tavares, executive vice president of Nissan, said in a Jan. 13 interview.

Nano's Challenge

The challenge for Tata's Nano will be to ``deliver on its promises beyond the price,'' Tavares said. ``You need to deliver the right durability, quality, etc.''

Even Chinese automakers, which have plans for low-priced models in Europe and North America, aren't sure a $2,500 car is possible or a good idea. Suzuki Motor Corp.'s Alto, at 29,800 yuan ($4,112), is among that nation's cheapest.

``That car doesn't have air conditioning, power steering, air bags and other features. Do you dare to buy that kind of car?'' said Wang Chuanfu, founder and chairman of BYD Co., which is selling its first model at the price of 59,800 yuan. ``Some Indian consumers may buy it, but I don't think Chinese consumers will.''

To contact the reporter on this story: Jeff Green in Detroit at jgreen16@bloomberg.net

Last Updated: January 15, 2008 07:52 EST