M038;M small car to cost Rs 2.5-3.5 lakh

Mamp;M has selected four primary vendors for the project codenamed BRL and also shared the prototype with them. The vendors,who refused to be identified,are specialists in powertrain,lamps and steering systems respectively. Production is expected to start in 2013-14.

Analysts are positive about the company8217;s move,since Mahindra has already clocked success with its other passenger vehicles. The company has a mass customer base for its SUV Scorpio and the Verito clocked around 1,500 sales in June.

Competition in the compact car space seems to be hotting up,with Hyundai8217;s small car planned for December and the proposed Mahindra car set to challenge market leader Alto from Maruti Suzuki.

June auto sales show Mamp;M has emerged as an outperformer. Sales grew 32 year-on-year to 58,314 units. While domestic sales were up 29 at 33,772 units,exports grew 51 y-o-y to 1,812 units. The big surprise came from tractors,which grew 37 to 22,730 units.

The bulk of this was accounted by domestic sales,up 40 at 21,552 units.

The farm equipment sector is estimated to grow 11-13 in FY12,on expectations of a better monsoon. Increase in farm mechanisation caused by labour shortage has boosted demand for tractors.