World's Cheapest Car Gets a Bit Costlier -- and Greener

Tata Motors (TTM), the Indian automaker that manufactures the world's cheapest car, said Thursday it needs to raise the prices of its vehicles to cover increased costs associated with new emissions standards set to go into effect in India on April 1, according to an article in The Wall Street Journal.

While the exact amounts of the price hikes have yet to be determined, the cars must be able to run on fuel that is compliant with Bharat Stage-IV standards, which are similar to Euro-IV, the European emission standard, according to the article.

Although the price increase, the second in less than two months, could affect Tata's sales in India, the company would ultimately have had to roll out cars that complied with European emission standards anyway, given that it hopes to bring its $2,500 vehicle, the Tata Nano, to Europe in 2011.

While the company has long touted its lineup of cars as cheap, safe and fuel efficient, Tata has had challenges, including production delays, mechanical problems and questions about profit margins.

Most recently, a Tata Nano burst into flames just as it was driven out of the showroom. Although the incident raised concerns about the safety of the Nano, the company said it believes it was a one-time event. A year ago, three customers also complained that their Nanos had started to smoke. (The smoke was reportedly caused by a short circuit that led to plastic parts smoking from the heat. Tata replaced the supplier of the faulty part.)

Mechanical problems haven't been Tata's only concern. In August 2008, the company's Nano plant, under construction in Singur, was surrounded by a mob of 30,000 angry protesters who claimed that the land for the plant had been illegally acquired by the state. Several months later, the company relocated the factory.