Hindustan Motors' Struggle for Survival

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Troubled Waters? Contd...

In late 2001, HM announced its plans to launch another car, the Mitsubishi Pajero. The company planned to import fully assembled cars and sell them by early 2002. Analysts remarked that the Pajero could do little to revive the company's fortunes as despite many efforts to turn itself around, HM had failed to regain its 4-decade long leadership in the Indian passenger car market. Its 3.3% market share in the half-year ending September 2001, proved beyond doubt that the company was struggling to stay afloat.

Background Note HM was incorporated in 1942 by the GP-CK Birla Group of companies in collaboration with General Motors (GM)4, USA. The CK Birla group was one of the well known family-owned business houses in India, with 17 companies in businesses such as automobiles, engineering, paper, and auto-components. Some of them were Hyderabad Industries Ltd., Oriented Papers & Industries Ltd., National Engineering Industries Ltd., Gujarat Instruments Ltd., Hindustan Powerplus Ltd., India Gypsum Ltd., Malabar Building Products Ltd., Birla Horizons International Ltd., and Birla Techneftegas Ltd. HM's manufacturing facilities were located at Uttarpara in West Bengal, Pithampur in Madhya Pradesh, Thiruvallur and Hosur in Tamil Nadu, and Pondicherry. Over the years, HM built up a vast dealer network comprising 115 dealers, 50 service and parts dealers and 60 additional exclusive parts dealers.

Initially, the company concentrated on its auto components business, producing its first car only in 1949. In 1954, HM started production of the Landmaster in technical collaboration with UK-based Morris Motors Ltd. (Morris). The company upgraded the Oxford model of Morris and launched it as the Ambassador in 1957 - the car went on to become the flagship brand of the company in the years to come.

In 1963, HM commenced the production of Ambassador Mark 2, made available in two variants - diesel and Ambassador ISZ. HM entered the earth moving equipment business in 1971 and the power products business in 1983 (Refer Exhibit II for the sales break up of HM from various units). Until the 1980s, HM's Ambassador and Premier Automobiles Ltd's⁴ (PAL) Padmini were the only two cars available in the Indian market.

Ambassador was the vehicle of choice, Government of India, and the official car for almost every Indian Prime Minister after independence. Though there was no executive order that said that the government departments have to buy only Ambassador cars HM derived a major part of its sales from senior politicians, top civil servants, bank managers and defence personnel.

Ambassador was very popular in the taxi segment as well. Even in 2001, the segment accounted for almost 65% of Ambassador's sales. This was because of the perception that the Ambassador was better suited for the rough Indian roads and its strong structure was believed to be able to withstand the impact of accidents much better than any other car.

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4] GM was the world's largest car manufacturer with a host of successful popular brands and facilities in over 100 countries across the world.
4] PAL was established in 1944 by the Watlchand Hirachand family in technical collaboration with the Italian automobile major Fiat.