Hindustan Motors, the C.K. Birla Group-owned automobile and auto component manufacturing company, ruled the roost for nearly 3 decades from the 1950s to 1980s with its iconic Ambassador car. Back then, the Ambassador, popular amongst politicians and Govt. babus, symbolized status, wealth and power. But after the 1990s, its sales started to skid and its fortunes took a sharp U-turn. We will trace its journey from being a darling of customers, scaling record sales to losing its popularity, market position and shutting down its factory.
 

Hindustan Motors - Dwindling Car Sales


 

Post 1990: From Sizzle to Fizzle

Hindustan Motor's heydays lasted for almost 3 decades till the 1990s. Just like HMT and MTNL, Hindustan Motors was a big beneficiary of the License Raj and lack of competition before 1990s. But post liberalization, foreign auto manufacturing companies entered the fray and stole the show “ Maruti Suzuki, Hyundai and other players aggressively launched new aesthetically better looking cars equipped with better technology, features, fuel efficiency, after-sales service and aggressive marketing. While the consumer preferences started changing and evolving rapidly, Hindustan Motors response was almost muted - very few and infrequent new launches, negligible incremental innovation, poor marketing and sluggish response to change became the norm at Hindustan Motors.

1998: Sparks of Revival Fail to Create Fire

In order to contain its sagging fortunes and combat competition, Hindustan Motors launched a new car in a tie-up with Mitsubishi Motors Corp in 1998 after nearly two decades “ Mitsubishi Lancer" From 1999 to 2001, 'Lancer' registered decent sales post which its sales started declining. ˜Contessa, another launch also failed to create magic".

Hindustan Motors - Automobiles on Offer

It also forayed in SUV segment with Montreo & Outlander and in the Light Commercial Vehicle segment with Winner mini-truck in 2008; but these launches proved to be a case of too little, too late. So much so, that failure to revive sales growth and accruing losses has led to the closure of its West Bengal factory in May 2014 which manufactured Ambassador. The company announced VRS for all 2,200 odd permanent workers at this factory.

Lingering Woes Tumbling Sales Eroding Profitability

Prospero Tree View

Hindustan Motors has failed to ride the automobile boom in India which has been fueled by increasing urbanization, nuclearization, disposable income, need for convenience, luxury, ease of availability of auto loans and bourgeoning industrial activity. The domestic automobile industry has witnessed a 13% CAGR over FY08 to FY13; the recent auto sales numbers can be read here - Auto Sales. Maruti, the current market leader in passenger car segment sells around one lakh vehicles per month; in sharp contrast, Hindustan Motors sells less than 5,000 vehicles annually. Despite the early headstart in gaining mind-share and market-share, Hindustan Motors has failed to deliver on its top line because of its inability to keep pace with competition and changing consumer tastes. It'll not be surprising if its obituary will be written soon.

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