Washington and Baltimore are the leadoff cities in one of the most ambitious foreign-auto marketing campaigns since the U.S. introduction of the Volkswagen Beetle in 1955.

Ambitious? Call it audacious. Consider: A Yugoslavian auto manufacturer, Zavodi Crvena Zastava, will send the first of an annual U.S. allotment of 40,000 minicars to Baltimore Harbor by Aug. 14.

The cars, itty-bitty 1.1-liter, four-cylinder, four-speed manual transmission jobs called Yugos, will go on sale Aug. 26 at Washington's Capital City Motor Cars, officially the first dealer in the United States to offer the new imports, according to the Embassy of Yugoslavia.

The cars will carry a port-of-entry price of $3,990. Destination charges in this area could boost that base price to $4,215. An AM radio might get the price up to about $4,300. Adding an air conditioner would kick the sticker into the $4,900 range before taxes, title and other locally applicable fees.

But buyers who could live without a radio and artificial air conceivably could drive away for under $4,500 -- nearly $1,000 less than the average price of a 3-year-old used car in the Washington area, and less than the 1985 base price of $5,195 for the Mazda GLC three-door model, one of the least expensive new cars sold in this country.

"You can put this car on your MasterCharge Card," said Wayne Phillips, general manager of Capital City Motor Cars. "We're going to get a lot of people who've been shut out of the market by new-car prices, and we're going to get people who can't get into used cars, too," Phillips said.

But Phillips and William E. Prior, president of the Montvale, N.J.-based Yugo America Inc., said that their strategy isn't limited to selling price.

"We're offering a good value," said Prior, who was in Washington last week with several Yugoslavian government officials to inaugurate Capital City as Yugo's "Dealer Number One."

The estimated 54 dealers -- five of them in metropolitan Washington -- who will start selling Yugos in the Northeast are being urged to market the minicars as entry-level, basic transportation.

"The engine and transmission in this car are basically elementary. But they're bulletproof. They're durable. People in Yugoslavia have to hang on to their cars a long, long time. The cars have to last," Prior said.

Prior conceded that there is much doubt within the U.S. auto industry about any manufacturer's ability to offer a quality car for $4,000. The dealers' profit margin on that kind of car would be too low, the labor and materials costs too high, and the distribution and parts supply schemes too expensive to make such a car profitable, the critics say.

But Prior contends that Yugo has many things going for it that the critics fail to consider.

Zastava's assembly workers are paid between 60 cents and $1 an hour in U.S. dollars. The company produces 92 percent of its own components and raw materials, including steel. And Yugo America Inc. has a streamlined distribution system -- backed by a computer-controlled, centrally located parts supply operation -- "that will help us to offer quality at this price $4,000 for as long as is humanly possible," Prior said.

"I'm not really concerned about our number of unit sales in year one or year two," said Prior, whose company effectively is the importer and U.S. distributor of the Yugos.

"Our real concern is that there is about a three-year window between now and the time that minicars will become a booming segment of the U.S. auto market," Prior said. "We have to use that window to create a brand name for Yugo -- to make it the generic name for minicars in the United States."

There will be lots of competition. Japanese auto makers, such as Isuzu Motors Ltd. and Suzuki Motor Co. Ltd., already are shipping "smaller-than-sub" subcompacts to the United States. South Korea's Hyundai Group and Daewoo Motor Co. Ltd. also have plans to introduce subcompacts into this country within the next two model years.

Minicars will account for less than 1 percent of projected U.S. auto sales for 1985, but are expected to constitute 13 percent (1.5 million cars) of the domestic market in 1989, according to automotive market studies by Merrill Lynch, Pierce, Fenner & Smith Inc.

Prior and Yugo dealers like Phillips are betting that they can keep overall service and product quality high enough and prices low enough to make their mark. They hope to increase their Yugo imports by 100 percent in the 1987-model year and, by 1988, to improve their product mix by adding larger cars such as the 1.5-liter Yugo Model 103.

Prior believes that Yugo America eventually could have 300 dealers nationally.

"What it really comes down to is keeping your promises at a price that is affordable," Prior said. "We're not going to represent ourselves to be any more than the car -- basic transportation with quality and durability."

Shades of Volkswagen. The trusty VW Beetle entered the U.S. market in 1955 with a base manufacturer's sticker price of $1,595. VW has had its ups and downs in the United States since then. But its initial success opened the road for imports and, thus, created lasting changes in the range, quality and marketing of automotive products sold in this country.