The Renault-Nissan Alliance is still in talks with India’s Bajaj Auto to develop an ultra low-cost vehicle despite reports that the deal has been in trouble.

Giles Norman, Nissan’s corporate vice-president for the India, Africa and Middle-East region, told reporters than discussions are ongoing.

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This followed speculation that the joint venture was failing because Renault and Nissan were unhappy with Bajaj over the pace of the project.

Bajaj said in July that it plans to establish its fourth and largest plant near the Mundra port in the state of Gujarat, adding that the passenger car, being developed with Nissan-Renault, will also be manufactured in the plant.

The new small car is not expected to be ready until the end of next year.

Nissan has just unveiled its second ‘made-in-India’ car in the domestic market, the midsize sedan Sunny, and speaking at the launch, Normand said that the company would launch a low-cost small car.

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“Almost 45% of the Indian market belongs to the cars below Micra. If we want to be a reasonable player in the market we have to get into this segment. We will have a low cost car some point in time,” he said.

“Until we say otherwise, the tripartite alliance very much exists. We have been holding discussions with them. Our next announcement regarding the project will be a joint announcement. It will take place soon.”

Nissan is also expanding its sales network in India, increasing its dealership from 45 to 100 by March 2013, covering 85% of the market.

Normand added that Nissan’s exports from India will pass 100,000 units this fiscal year, ending next March. These will mostly by Micras while Sunny exports will begin towards the end of fiscal year.