India's Tata Group has unveiled what has been called "the world's cheapest car" - a compact family vehicle set to revolutionise a market of 1.1 billion people.

The Tata 'Nano' is a four-door five-seater car, due to hit the market later in 2008, and is priced at just 100,000 rupees ($2,500).

The Nano has a small 33bhp, 624cc engine and is targeted at Indians hoping to trade up to four wheels from a motorcycle.

However, the car has no air conditioning, no electric windows, one windscreen wiper and no power steering for the basic model, although two deluxe models will be on offer.

Ratan Tata, the business tycoon heading the the tea-to-steel group, compared the unveiling of the car at AutoExpo, India's largest auto show, in New Delhi on Thursday, as a landmark in the history of transportation.

He likened it to the first powered flight by the Wright brothers and the first lunar landing.

He said he wanted to make "a safe, affordable and all weather transport - a people's car, designed to meet all safety standards and emissions laws and accessible to all" and "a car that most people said could not be manufactured at that price".

Pollution fears

Environmentalists, however, fear the Nano will further jam up India's clogged roads and add to choking pollution.

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Souparno Banerjee, an official at Delhi's Centre for Science and Environment, said: "With more cars you have more emissions and that adds to global warming."

"We need public transport."

Rajendra Pachauri, the UN climate scientist chief, and winner of last year's Nobel Peace Prize, said last month that he was "having nightmares" about the prospect of the low-cost car.

But Tata dismissed fears the cheap car would herald more congestion and pollution, arguing the car would be better and far safer than most motorcycles on India's roads.

"Dr Pachauri need not have nightmares," Tata said.

The 70-year-old said the Nano had passed emission standards and would average about 50 miles per gallon (20km per litre).

Road revolution

Tata's Nano looks set to be followed by other low-cost cars.

Germany's Volkswagen, Bajaj Auto, a leading Indian motorbike maker and France's Renault and Ford among others, have said they are planning new cheap cars for India where small autos comprise two-thirds of annual passenger vehicle sales of one million.

Tata, which has been on an aggressive overseas expansion drive, is also expected to win its reported $2bn bid for the British Land Rover and Jaguar brands.

The move would put Tata in the unusual position of making two prestige cars as well as the world's lowest-cost automobile.