The world's cheapest car, with a meagre price tag of US$2,500, was unveiled in India today by Tata Motors.

The compact four-door car, called the Tata Nano, can fit as many as five people in a squeeze. While higher-end models are planned, the current version has been built without a radio, air conditioning or passenger-side mirror.

Tata Motors says it eventually hopes to export the car but for now it will only be sold in India.

The Nano is expected to make owning a vehicle a real possibility for tens of millions in the country.

But critics of the cheap car fear it will lead to millions more vehicles on the already jam-packed roads of India -- adding to air and noise pollution problems.

Chief UN climate scientist Rajendra Pachauri, who shared the 2007 Nobel Peace Prize, said in December that he was "having nightmares" about the vehicle.

Company chairman Ratan Tata, who unveiled the car at an auto show in New Delhi Thursday, said the Nano will meet domestic and European emission standards.

He also said it would average about 20 kilometres per litre of gasoline.

"Dr. Pachauri need not have nightmares,'' said Tata. "For us it's a milestone and I hope we can make a contribution to the country.''

In 2005, vehicles in India released 219 million tons of carbon dioxide.

By 2035, the number is projected to jump to 1,467 million tons -- supported by the expanding middle-class and the rise of low-cost cars, says the Asian Development Bank.

"The cheaper and cheaper vehicles become, the quicker those pollution levels will increase,'' Jamie Leather, a transport specialist with the bank, told The Associated Press.

In an effort to compete, French auto maker Renault SA and its Japanese partner, Nissan, are trying to determine if they too can create a car for less than $3,000.

With files from The Associated Press