NEW DELHI (Reuters) -- General Motors wants to launch a second small car in India in the next two years as it looks to capitalize on growth in emerging markets to offset any sluggishness in U.S. sales, a senior company official said.

The model will not compete directly with Tata Motors' low-cost Nano but will be cheaper than GM's current lowest priced car in India, David Reilly, GM group vice-president, told a news conference on Monday.

Small cars less make up nearly three-quarters of India's market. GM offers the Chevrolet Spark in the sector for about 300,000 rupees ($7,350).

"We need some thing lower than what we have got now. I think if we could find a vehicle less than that, it would not only benefit India but could benefit other places also," Reilly said, without detailing how much the new model would cost.

"But I would not call it an equivalent of Nano."

Tata Motors unveiled the $2,500 Nano, the world's cheapest car, in January and said the new four-seater would roll out later in the year from its West Bengal factory.

Reilly said sales growth in emerging markets would outpace any softening in established markets like the United States and would help maintain the firm's total global sales expansion.

"I don't predict a slowdown, but this year U.S. would be tough," he said.

GM, which has a 3 percent share of the Indian vehicle market, has a manufacturing plant in the western state of Gujarat and is building a second facility near Pune in neighboring Maharashtra state.

Reilly said the first trial car from the Pune plant, which will begin commercial production in the last quarter of 2008 with an initial production capacity of 140,000 vehicles, would be rolled out on Wednesday.

The company also plans to build an engine plant in India, but Reilly would not share details.

"We are still in some negotiations ... We absolutely intend to go ahead with it," he said, adding that the company would be give further information within the next two months.