Bajaj Auto [Get Quote] is looking at acquiring a car company to break into the higher segments of the market as part of its long-term passenger car strategy.

The company is also developing an electric car jointly with Austria's KTM Sportsmotorcycle AG, in which it recently bought 22 per cent.

The company, which unveiled its small car yesterday, has also decided that it will not make cars in the B (Zen, Alto) and C (City, Verna) segments of the market.

Speaking to Business Standard, Managing Director Rajiv Bajaj said: "The strategy of a company is best illustrated by what it decides not to do."

He added that Bajaj had expertise in light vehicles and, therefore, will build only a small car.

"For bigger cars we can acquire a company that does this best rather than doing it ourselves. And there are many companies available to do so," he added.

Bajaj also said the company is targeting a pre-tax margin of 10 to 15 per cent on the car project.

On the electric car, Stefan Pierer, chief executive officer of KTM, which makes high-end bikes, said: "Electric cars have a bright future especially with many European cities now restricting entry of petrol cars for a certain period every day to reduce pollution and congestion. We are talking about how we can provide 'urban mobility' in Europe."

Added Bajaj: "Urbanisation and oil at $100 have become big issues and we are creating solutions to address this."

Elaborating on his claim that his company's target is to make a car that will yield double the fuel efficiency of current small cars Bajaj said, "Most of the small cars give an on-road mileage of 15 to 20 km a litre. We are looking at a car that will give between 30 and 40 km to a litre."