As auto manufacturers face rapidly rising energy and material costs, those with the slimmest margins may be particularly vulnerable - especially those making low-cost cars.

India's Economic Times newspaper today reports that while the uncertainty on whether Tata Motors' Nano would be able to maintain its Rs 1-lakh launch tag continues, the $2,500 small-car from Bajaj Auto and Renault-Nissan could be dearer by at least $500 once it is launched.

The newspaper said that people close to the deal say the ex-factory price would go up following rises in steel and crude prices.

The paper noted that Renault-Nissan chief Carlos Ghosn had earlier stated that Renault was looking for a $3,000 small car in India.

The car code-named ULC was to be rolled out at a price tag of $2,500 for the basic model.

Tata Motors' officials maintain that they, too, are facing cost pressures, but would not increase prices. Nissan officials say they are waiting for consumer response to Nano, which is likely to be rolled out in October this year.

That's when the three companies would be signing MoU, the officials told ET. It was earlier announced that plant for the ultra low-cost car would be set up in Chakan in Maharashtra, rollout set for 2011.

Bajaj Auto holds 50% in the JV while Nissan and Renault hold 25% each.