Permanent magnet synchronous (PMSM) drives become very popular in many industrial applications. Their construction provides better performance and reliability than DC drives. But there is also one significant disadvantage -actual rotor position knowledge is necessary to control the drive even in the case when only speed control is required. A position sensor has to be used increasing the drive cost. Algorithms for rotor position and speed estimation from electrical quantities have been developed by many authors. This paper presents PMSM observability analysis to be able to define conditions under which it is possible to compute rotor speed and position.