Italian group Fiat said it would launch a new small car designed for India in two years time, joining the gaggle of foreign auto makers targeting the fast-growing market.

Fiat India Automobiles, a joint venture between Fiat and India's Tata Motors, said the launch in 2012 was part of its strategy to capture a 10th of Asia's third-biggest automobile market in the next five years.

"The small-car segment is seeing phenomenal growth. There is space there and we see an opportunity," said Rajeev Kapoor, chief executive officer and president. The car will be smaller than Fiat's present small model, the Grande Punto, and will be developed in Italy, he said.

More than three-quarters of all sales are small cars, with India-based Maruti Suzuki the overwhelmingly dominant producer with a 55-per cent market share.

The project "is an important step for the India market because Fiat has a lot of technology for small cars. We want to bring it (the technology) back to India", Mr Kapoor said.