French automotive giant Renault and India’s second largest two-wheeler maker Bajaj Auto today confirmed that they are holding talks for assessing ‘very competitive vehicles’ for the Indian market. If concluded favourably, the alliance could lead to a long-term partnership, according to a joint press release by Bajaj Auto and Renault.

The discussions will not only be for the $3,000 small car of Renault, but also for exploring the option of launching other vehicles. This could include commercial vehicles as well.

Speculation has been around for a while that Renault is talking to Bajaj Auto after its other Indian partner, Mahindra and Mahindra (M&M), did not show interest in participating in the French firm’s small car project on grounds that it does not fit in with its global aspiration of becoming a sports utility vehicle maker.

For Bajaj Auto, which has so far avoided going in for equity tie-ups (it has a technical tie-up with Kawasaki for bikes), the key question is whether it will go in for a project where substantial control would be with a foreign company.

However, Rajiv Bajaj, the managing director of the company, had told Business Standard earlier that they were looking for a “four-wheeler passenger vehicle” in tune with the changes in market demand.

Bajaj Auto is also in the process of developing a small car which will compete with small vans.

The prototype of the vehicle will be out by January 2008 at the Auto Expo. Bajaj said the company was working on the commercial launch of a four-wheel goods carrier by 2009.

The company has earmarked Rs 750 crore for a four-wheeler production plant to manufacture 40,000 to 50,000 vehicles annually. Unlike the Tata Ace Magic or Maruti Omni, Bajaj is planning to offer both petrol and diesel engine options for its new vehicle. The new brand is expected to be priced competitively.

Renault already has two separate joint ventures with M&M – one for manufacturing the Logan at Nashik, and the other, a project in Chennai that also includes Nissan.