Mumbai: Shares in India’s Tata Motors Ltd jumped nearly 7% on Monday after farmers who had blocked work at a plant to build the low-cost Nano car called off their protest, raising hopes the car will launch as planned.
Farmers in Singur in eastern West Bengal state, who had forced Tata Motors to suspend work last week after several disruptions, said on Sunday they were suspending their protest after the state promised to return some land.
Shares in Tata Motors were up 3.5 percent at Rs434.5 in a Mumbai market that was up nearly 4%, after having risen as much as 6.7% in early trade.
“The shares are getting a boost as it looks like the confusion is beginning to get cleared and a resolution will be arrived at soon,” said Ramnath S, a vice president of research at IDFC-SSKI Securities.
“But if this drags on any further, there may be delays,” he added.
Chairman Ratan Tata said last week the company was doing everything possible to launch as planned, around October, the peak of the festival season in India.
Existing Tata Motors plants are expected to make up for any shortfall caused by the disruptions to the Singur plant, which was scheduled to have an initial capacity of 250,000 units.
Local media and analysts have suggested Tata Motors has a few hundred or a few thousand Nano cars ready, and that they can make new cars at a plant in the western Pune city or in northern Uttarakhand, which has a capacity of 2 million units.
“They clearly have a way to build the car elsewhere, but moving to an alternate location means they can’t start off with 250,000 units of dedicated capacity for Nano,” said Ian Fletcher, automotive analyst at research firm Global Insight in London.
“Shifting the location now, or further delays in Singur will cause an initial lag that could cost them. Plus, there are other cost implications, like raw materials.”
Cost overruns in Singur, as well as Tata’s ambitious fund-raising plans and a gloomy outlook for truck sales have dragged Tata Motors shares down more than 40% this year.
The Nano, billed as the world’s cheapest car, is expected to be priced at just above Rs100,000 ($2,262). Its unveiling in January has prompted other companies to make public their own plans for low-cost cars for emerging markets.
These include Bajaj Auto with Renault and Nissan Motor Co, as well as General Motors, Ford Motor, Fiat and Toyota Motor.