Indian automaker Tata Motors plans to raise $US450m from global markets to fund its expansion plans, according to a local report.

The Associated Press (AP) said the Mumbai-based company is working on a keenly anticipated small car that will retail for INR100,000 ($2,450), making it the cheapest in the Indian market.

Tata reportedly hopes the vehicle will fill a gap between two-wheelers and standard cars and said it would issue foreign currency convertible alternative reference securities, the report added.

Citing a Tata release to the Bombay Stock Exchange on Wednesday, AP said the company was raising the money to meet “capital and product development expenditure” for its expansion in the commercial vehicle and passenger car segments.

The Associated Press added that, earlier this week, Tata launched two new passenger vans, one targeting the rural market and the other aimed at inter-city travel. Both vehicles, which have diesel engines, will be sold across the country.

The report said Tata, which controls 65% of the Indian commercial vehicle market and 19% of the passenger car market, plans to expand capacity for most of its products in the face of competition from foreign automakers like Ford, Hyundai, Toyota and General Motors.

Also this week, Nissan announced plans for a $3,000 car for India, which will be built in a JV plant with Renault and Mahindra.