Tata Motors Ltd.’s “one lakh minicar,” due in early 2008, is ready and undergoing road tests, Chairman Ratan Tata says at the Geneva Motor Show this week.

A lakh is a unit in the Indian numbering system that is equal to 100,000.

Tata says the minicar will cost no more than Rs100,000 ($2,250) out the plant gate, even though steel and tire prices have gone up.

However, by the time the minicar reaches dealer showrooms, the cost will have risen to Rs125,000 ($2,829) due to excise duty, sales tax and transportation costs, the auto maker says.

The steel-bodied, single-box Indian-built minicar will have a 0.6L rear engine, four doors and meet international standards on emissions, crash tests and other safety requirements, he says. It will seat up to five passengers.

Ratan Tata brags the vehicle will be “the cheapest car in the world. It is bound to push Tata Group into a different paradigm in the global market,” he says.

The affordable minicar will create a new segment that is expected to eat into India’s high-end 2-wheelers and low-end passenger cars. While its main market will be India, Tata is eying Indonesia, Malaysia and some African countries, as well.

Meanwhile, Tata says it has acquired a passenger-car plant vacated by Nissan Motors Co. Ltd. in South Africa that will become a base to export small cars to the European Union.

The plant will build a new-generation Indica car based on Tata’s Elegante concept on display at the Geneva show. The auto maker will enjoy the advantage of the regional free-trade agreement between South Africa and the EU for duty-free exports, it says.

The new compact cars also will be launched in the Indian market.

The Elegante is larger than the Indigo sedan and will offer a 4-cyl. common-rail direct-injection turbodiesel engine that meets Euro 5 emission standards, plus a range of compact V-6 gasoline mills.

Additionally, Tata, along with Mahindra & Mahindra Ltd. and three others domestic auto makers, have joined an Indian auto industry project to develop compressed-natural-gas fuel in combination with fuel cells to increase fuel efficiency and contain emissions.