MG Rover hopes to appease retailers who have been calling for a new small car after agreeing a supply deal with Indian industrial giant Tata.

Production of an Indica-based supermini will start in Pune, India, in the second half of the year, with the car expected to go on UK and mainland European sale late summer/early autumn.

MGR will make several changes – both technical and cosmetic – to the model, which plugs a gap below the Rover 25. Reports claim it will be badged the Rover 15.

“This new car, which will fit perfectly into our existing product portfolio, will reach a whole new customer base,” says MGR chief executive Kevin Howe.

Competing with VW Lupo, Ford Ka and Peugeot 106, it will be priced at around £6500 and will feature upgraded seats and trim as well as the Rover family-look grille. MGR also intends to reconfigure handling and ride to meet European tastes.

Reports in India claim Tata believes the contract will involve exporting 12,000 vehicles in the first year, rising to around 60,000 in five years, although MGR would not be drawn on exact figures.

“This small car will be a good vehicle for dealers – it will also bring people into the showroom,” says an MGR spokesman. “It will help us to build up our dealer network in mainland Europe.”

Tata relaunched the Indica last month with a choice of 85bhp petrol and 62bhp diesel. Local reports claim quality issues have been dealt with and the car handles well, although the engines lack refinement. Perhaps the greatest complement was the comment that “it does not feel like an Indica”.

MGR will be hoping that with the changes it makes to handling, ride and looks (plus the addition of its own engines, most likely 1.1 and 1.4-litre petrol and a diesel), its UK customers will also feel that way.