A recent announcement by Fiat group CEO Sergio Marchione caught the Brazilian subsidiary somewhat by surprise. He confirmed to Reuters the production of an affordable car both here and in other emerging markets but mentioned only the Palio, when he actually meant the Uno.

Launched in 1984, this compact hatch is the oldest car still produced in Brazil. Renamed Mille (after its 1,000cc or one litre engine), it ranks sixth in sales and is the lowest-priced car on sale here.

Marchionne's misnaming was promptly corrected by Fiat in Betim, as the new Palio has just been launched. Marchione, however, was not that wrong.

The Mille successor (it may be called Uno again) will be built on a simplified version of the Palio's current platform. The idea is to achieve a retail price around $7,000, ie, 20% down from current Mille sold here for around $9,500, high taxation included. Without tax, the Mille's heir would cost some $5,000.

About one year ago, Volkswagen of Brazil said it was giving up designing a car for this category. But since Wolfsburg recently admitted plans in this direction, the engineers at São Bernardo do Campo (SP) have resumed their studies.

On the other hand, the Brazilian unit of GM has never claimed not to be working on a cheaper model than the low-end Celta. "The challenge I put to our São Caetano do Sul (SP) tech center is still valid", said Ray Young, the company's CEO for Mercosur.

Ford has remained silent, but next November will replace the Ka, which is now marketed at lower prices than the Mille in the State of São Paulo in a special promotional deal.

The current focus on low-cost cars is not due to the arrival of the Renault Logan here, for it will not be less costly than the Clio. It is the Chinese that have the Brazilian auto industry worried.

There have been reports that Chery is setting up a CKD assembly operation in neighbouring - and fellow Mercosur member country - Uruguay.

That poses the risk the automaker from the far east could invade Brazil and its neighbours with a duty-free, truly low-priced car.

Fernando Calmon