When Indian auto maker Tata unveiled the Nano a couple of years ago, it stunned the automotive establishment. No one expected to see a car that sold for only $2,500.

And the industry was even more surprised to see how Tata designed it.

Auto makers traditionally try to take cost out of a vehicle by removing features and using cheaper materials. Tata’s engineers did the opposite.

They were used to designing motorbikes and scooters. For them, the Nano was all about adding features and using better materials. But because they approached it with their low-cost motorbike mentality, they came up with a clever design that almost anyone could afford.

And yet, they didn’t go far enough. Even though the Nano was a big step up for the people buying it, it didn’t have creature comforts such as air conditioning or safety features such as airbags, antilock brakes and electronic stability control.

This is when the light bulb went on at the big automotive suppliers, and they saw an opportunity. They began working feverishly to redesign components to dramatically cut the cost of their technology, but doing it in a way that still met customer expectations.

In fact, this is one of the greatest engineering challenges going on in the industry today.

A good example is the antilock-brake-control module that German-supplier Continental developed for low-cost cars. It is nearly half the size, one third the weight and substantially cheaper than the version it sells in developed countries.

Continental’s engineers found the key to lower-cost designs was integrating electronic functions and using fewer components. The motherboard in Continental’s ABS controller for emerging markets is considerably smaller thanks to this approach.

Suppliers also are finding the secret to lowering cost is to simply offer a lower level of performance that is perfectly acceptable in emerging economies.

For example, developing nations don’t need adaptive cruise control systems designed for the Autobahn. Because low-cost cars are never going to be driven at triple-digit speeds, much cheaper components can be used that still provide most of the benefits.

This same approach now is being applied by many suppliers designing airbag modules, ESC, automatic transmissions, miniature turbochargers, power steering and creature comforts such as air conditioning.

Today, many auto makers are racing to come out with low-cost cars. Honda is working on its New Small Concept. Nissan and Indian auto maker Bajaj want their own $2,500 car.

Chinese automaker Geely claims it will price its plug-in hybrid-electric at only $1,500!

Geely may never hit that price, but emerging markets such as China, India, Brazil and Russia are going to drive growth in the auto industry for decades to come. The companies that can figure out how to provide those customers with the vehicles they want, at a price they can afford, are going to be the winners.

It will all come down to clever design, because coming up with low-cost cars is not as easy as it sounds.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline” for WTVS-Channel 56, Detroit, and “Autoline Daily,” the online video newscast.