While it is still too early to tell how consumers will respond to Tata Motor's 2,500 dollar Nano, it is clear that there is strong demand for low-cost vehicles, Wagoner told reporters on the sidelines of the Detroit auto show.

"To some extent it's what content you're willing to take off and what the consumer wants too," he said.

Lower cost vehicles have failed in the United States because consumers there are unwilling to accept the trade-offs in terms of styling. Quality and strict regulations will block the introduction of truly low-cost vehicles in established markets like the US, Europe and Japan, he said.

"But who are we to tell Indians and Chinese (consumers) that they've got to buy 10,000 dollar cars as their first cars rather than something that's a lot better than a two wheeler even if it doesn't have air bags," he said.

GM already has a number of lower-cost vehicles it produces for emerging markets, including a car in China that sells for about 3,500 dollars. But Wagoner indicated that GM's plans to expand an engineering center in India is critical.

"I'm glad we've picked up on our presence in India," Wagoner said. "We've got to get them on local products as well as doing global products because we need to understand that game."

Another threat to GM's global sales is coming from Chinese automakers, Wagoner said, although he thinks it will be five to 10 years before the domestic Chinese automakers are ready to seriously export vehicles.

"If they get 100 Chinese domestically-owned manufacturers exporting that is not going to work for anybody," he said, explaining that he thinks it is likely that the Chinese automakers will consolidate to between two and four large players.

And despite suggestions that Chinese-made automobiles could reach the United States by as early as this year, Wagoner thinks it will be some time before Chinese cars threaten sales in his home market.

The Chinese will likely not make a play for the US market until they are sure they can meet the high quality expectations of US consumers, he said.

"The Chinese are very good at learning from the past so they will know that when the Japanese came in, it took a long time to repair from the (problems with) the initial entree," he said.

"I think the general trade issues are (also) leading the Chinese to perhaps be a little more conservative," he added.

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