Hyundai Motor India is studying the feasibility of building a cheap small car to take on competition, a senior company official told a news agency.

Hyundai India president Ashok Jha told Reuters the automaker is looking at building a car priced at between 100,000 and 200,000 rupees ($US2,500-$5,000).

Engineers at its research and development centre in southern city of Hyderabad were studying the feasibility of such a car, he reportedly said, without disclosing details.

Reuters noted that Tata Motors Ltd , India's third largest car maker after Maruti Suzuki and Hyundai, is scheduled to launch a small car priced at $2,500, the cheapest in the market, next year.

Renault is studying the feasibility of making a $3,000 car in India with motorcycle maker Bajaj Auto, the report added.