Screech! ; Delays in production will upset Tata Motors' plans to earn money out of the low-cost car.

By the time this magazine is in your hands, there would be moreclarity on whether conditions have turned conducive for resumingwork at Singur, or whether Ratan Tata has decided to take the Rs1,500-crore project out of West Bengal to a more investmentfriendlystate. Whatever happens from hereon, it's increasingly clear thatTata Motors and its shareholders are going to feel the pinch of aproject that's delayed. Expectations of the first Nano rolling outof Singur by October or even in the October-December quarter appearoverly optimistic. That, coupled with Tata Motors' capital-raisingcompulsions for the acquisitions of Ford's Jaguar and Land Rover,have resulted in the stock having a torrid time on Dalal Street ithas slipped 24.4 per cent over the last three months, even as theBSE Sensex shed only 10.7 per cent.A delay in rolling out the Nanoisn't good for a few reasons: for one, it's a project whoseviability hangs on waferthin margins (estimated at barely 2 percent); for another, every day lost pushes back breakeven, whichanalysts expect in two years. A key to the Nano's costcompetitiveness is the integration of the adjoining vendor facility.Surinder Kapur, Managing Director, Sona Group, which is providingthe steering column to the Nano, told BT: Work on our facility iscomplete; we have moved the machinery in, and are awaiting word fromTata Motors. The burning Rs 1-lakh question, however, is whether theTatas will be in a position to position the Nano at around thatprice. It looks difficult because a delay will only compoundproblems of rising raw material costs. A quick ramp-up is animperative to break even. The initial plan for the plant calls forproduction of 150,000 units a year.Production in the six monthsbetween October and March 2009 will also be crucial to determine howlong Tata Motors takes to make profits. In a recent report, analystsat HDFC Securities were expecting only 25,000 units to roll out in2008-09. With the work having stopped, even that figure now looksoptimistic.