General Motors India Ltd. is betting on Reva Electric Car Co. Ltd. just as the neophyte, low-volume producer of electric vehicles appears poised to take the next step.

Last week, General Motor Co. and Bangalore-based Reva announced they would collaborate to develop new products for the Indian market, with GM saying it was drawn to the Indian auto maker for its “capability in developing electric drivetrains and control systems.”

Little-known Reva is in the process of building a new plant near Bangalore, where it will have capacity for 30,000 of its next-generation of low-cost electric hatchbacks. Production is slated to begin by January.

During seven short years of existence, the company has sold only 3,000 Reva-i models fueled by lead-acid batteries and limited to a range and maximum per-hour speed of just 50 miles (80 km).

Half of those vehicles were exported to some 20 cities across Europe, Asia and South America branded as the G-Wiz. The car sells for less than $7,000 in India and about $12,200 abroad.

Reva is targeting sales of 8,000 EVs next year.

The company holds 10 U.S. patents for its car’s energy-management system and has drawn $20 million in venture capital from Draper Fisher Jurvesto, Global Environment Fund and Melon HBV Master Global Event Drive Fund. It also has a partnership with California’s AEV LLC

As a student at the University of Michigan, Reva Deputy Chairman and Chief Technology Officer Chetan Maini built a solar-powered electric car.

The project to make an EV started in California and was moved to India in 2001 after the California Air Resources Board reversed its 1990 directive calling for 10% of all vehicles sold to be zero-emission vehicles.

The new NXR due early next year and NXG expected in 2011, both displayed at the recent Frankfurt auto show, use more powerful lithium-ion batteries that boost range to 125 miles (200 km) and top speed to 80 mph (129 km/h), plus reduce recharging time.

Reva may rename the new models the Revival and L-ion, respectively. The 3-door models seat four and include modern features. Prices are expected to range from $14,700 to $33,800.

Despite the relatively low cost, improved performance and early jump on the nascent EV market, Reva faces some skepticism.

Pawan Goenka, now president of Society of Indian Automobile Manufacturers, says the biggest challenge is to make the economics of EVs work in a price-sensitive Indian market.

But Stanford-educated Maini says, “The opportunity today is very high.” He sees the Reva as a second car for most Indian households, of which 40% now have more than one vehicle.

A deal with Reliance Digital may help on the marketing front. Beginning in 2012, Reliance will sell Revas in its 150 stores alongside consumer electronics, such as home theater systems, audio components, microwave ovens and laptop computers.

The partnership with GM may give Reva wider distribution in Europe.