A small Quebec company is in the fast lane to help meet the growing demand for tiny cars, already popular in Europe and soon to hit the roads in India.

CVTech-IBC will provide the automatic transmissions for Tata Motors' five-passenger car, touted as the cheapest in the world, which attracted worldwide attention when it was unveiled at the New Delhi Auto Expo this month.

With a base-model sticker price of $2,500, the Nano is to enter production late this summer. Indian automotive giant Tata expects to sell 200,000 to 250,000 units in the first year, and calls for annual sales of one million units in three to five years.

Entering a market of this magnitude will be a big change of speed for CVTech, based in Drummondville.

It also means the company will finally start to reap rewards on the investments it has made since 2004 when it signed an exclusive agreement with Tata Motors to develop a new version of its continuous variable transmission (CVT) for the Nano.

CVTech is already the leading provider of automatic transmissions for this growing car category in Europe, where 35,000 minicars take to the streets every year, particularly in France and Italy. There are about a dozen manufacturers in Europe for the cars, which can be driven by someone without a driver's licence but are not usually allowed on expressways.

The Nano, however, is a regular car, at its most basic expression. It has been described as an accessible "people's car," like the first Volkswagon.

The first Nano models will have a standard transmission, with CVTech's automatic transmission added later, leaving some uncertainty about which model Indian customers will prefer, since either option costs the same.

Industry watchers expect the Nano to stimulate the automotive market worldwide. Other car companies have also announced projects to develop low-cost, no-frills vehicles for the masses in emerging countries.

For example, Maruti Suzuki, an Indian-Japanese joint venture, showed off a minicar prototype at the New Delhi show, while Ford has announced plans to invest $500 million to develop a small car in India.

Tata Motors is already in discussion to produce a Nano in China, CVTech chief executive Andre Laramee said. "If they ever build one or more plants in China to produce the Nano, we would be talking about two million autos a year. I think that car is destined for a phenomenal success."

CVTech-IBX, founded in 1969 to service snowmobile transmissions, was one of the partners selected by Tata to develop a car cheap enough to allow Indian families to replace their motorcycles, the dream of Ratan Tata, chair of the Tata Group conglomerate.

"At the time a lot of companies didn't believe it was possible to manufacture a car that would sell for $2,500," recalled Laramée. "We decided to take the challenge."

Part of that challenge is to have very low production costs. One of the conditions by Tata from the start was that CVTech fabricate the transmission in India.

CVTech is currently manufacturing in Drummondville the assembly line modules for the new Indian plant, which will be set up in rented premises near New Delhi.

It will have relatively few employees, about 50 to 75, because the plant will assemble parts purchased from suppliers in India, explained Mario Trahan, chief financial officer. By contrast, the company's Drummondville plant has always made its CVT transmissions right from raw materials.

Stock analyst Stephane Gaudreault at Desjardins Securities says CVTech should be able to make a reasonable profit on its Tata partnership, since "They have a lot of experience in making transmissions.

Gaudreault, based at Ste-Foy, added that the Thiro subsidiary provides CVTech group with a stable source of income.

Laramee noted that while Tata is putting the marketing focus on India, "there is no reason to think that in the future this car could not be exported to other countries, in Asia, Africa, South America, even Europe.

"We can expect this, and we'll have to follow them, wherever the little Nano will take us."