Says a Goldman Sachs analyst on Telco's Mint: "We estimate Telco will make a net loss of Rs 180 crore or about Rs 7.1 per share on the small car project in fiscal 2000, based on 50,000 unit sales."

Gloomy projections are being made for all three car makers as a combination of recession and a break-even target of 100,000 unit sales has made all the previous projections redundant. All three car makers are targeting the small car segment based on India's most successful automobile, Maruti 800, which has a monopoly in the Rs 2-3 lakh segment.

Analysts say with a volume of 100,000 units for breaking even, all the small car aspirants will have gloomy financials for the next three years. ``In the fiscal 1998, car sales have plummeted 50 per cent over the last year. We do not expect any of the new models to sell more than 12,000 units each,'' says an auto analyst with a Mumbai-based FII.

According to an auto analyst with ICICI Securities, Telco would be able to sell maximum of about 4,000 to 5,000 `Mints' per month in the rest of the fiscal 1998. ``Even if we take an optimistic view, Telco would end up selling 25,000 cars in the current fiscal. It would be interesting to see whether the car would cut into Maruti's sales or simply carves a niche for itself,'' he said.

``The estimated net loss for Telco accounts for almost 35 per cent of fiscal 2000 net profits (excluding the small car project) estimate of Rs 520 crore. The losses from the car project detract from the full impact of any recovery in commercial vehicle demand on Telco's total earnings,'' says Goldman Sachs. The FII expects Telco to sell 230,000 vehicles including 50,000 small cars in fiscal 2000 and estimate net profit of Rs 340 crore.

"The losses can aggravate if the car fails to reach the desired level of volumes from its third year and the management delays withdrawal,'' said an UTI Securities analyst who wished not to be quoted.

``Telco may then contemplate launching new products/variants. In the event of a failure, Telco has the flexibility to adapt 80 per cent of its investment in the car project to the manufacture of LCVs and MCVs. It may also contemplate hiving off its passenger car business as a separate venture to cut losses to the parent company,'' he said.

``We think the 50,000 car sale of Mint by fiscal 2000 is an extremely optimistic view as 50,000 cars equal around 12 per cent of total car sales in the fiscal 1998. As there is some uncertainty on the level of demand Telco's small car is likely to attract... we think the downside risk to fiscal 2000 earnings is higher than the potential upside,'' Goldman Sachs analysts said.

One of the advantages Telco would enjoy over the Daewoo and Hyundai is of having the lowest capital cost per unit as it has imported a second hand plant from Nissan and has a high degree of local content. Besides, the Telco has a well established brand name and service capabilities, analysts said.