Bajaj Auto [Get Quote], India's second-largest two-wheeler maker, plans to price its first car between Rs 2 lakh and Rs 5 lakh.

A concept vehicle will be showcased in January 2008 at the annual Auto Expo.

Describing the offering as a "four-wheel passenger vehicle", rather than a small car as commonly assumed, Managing Director Rajiv Bajaj clarified that it would not be within the Tata Motors [Get Quote] small car price tag of Rs 1 lakh.

"We are aiming to come up with a concept passenger vehicle by January 2008 and if the response is good, it will take us three years to go in for commercial production," he added.

As a starting point, Bajaj said the company was working on the commercial launch of a four-wheel goods carrier by 2009.

"The engine, transmission and platform that we build will be the basis for our passenger vehicle," he said.

He also said the main reason to opt for a goods carrier to start the group's foray into four-wheelers instead of a passenger vehicle was that it did not have much competition. The company has earmarked Rs 750 crore for a four-wheeler production plant to manufacture 40,000 to 50,000 vehicles annually.

Bajaj will join the dozen-odd entrants to foray into the 1.2 million passenger car market that is growing at 10 to 12 per cent. Small cars (less than 1,000 cc) account for 60 per cent of domestic sales.

The small car market has attracted the attention of a lot of players. Tata Motors is expected to showcase its small car in the same Auto Expo and the industry expects the car to be launched by the middle of the year.

Renault-Nissan have also talked about a sub-$3,000 passenger car. Honda, Toyota and General Motors have all announced a range of cars that will be priced below Rs 5 lakh.

Bajaj, however, said apart from Tata Motors, no one in India was ahead in the race to develop a cheap passenger vehicle as the key was to have a differentiated product that people would buy.

He reiterated that consumers were not looking for the "cheapest product" but a vehicle that would offer them value and innovation.

Experts feel that with cars available at rock bottom prices and second-hand car prices falling, sales of two-wheelers could be adversely affected.

While Bajaj made it clear that the company was not shifting its focus from two-wheelers, which it thinks will continue to grow for 20-25 years, he was also not ready to be "caught on the wrong foot" should there be a shift to four-wheelers.