Hindustan Motors' Struggle for Survival

Background Note Contd...

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.

However in 1981, with the entry of MUL, the scenario changed drastically. MUL's small, fuel-efficient and well-designed car, Maruti 800, became a huge success.

By the late 1980s, MUL became the market leader, leaving Hindustan Motors way behind in the war for market share.

During the 1980s, HM was in the news only because of its tie-ups with GM and its subsidiary Vauxhall Motors (VM).

In 1984, HM launched the Contessa, which was labeled one of the first 'upmarket' cars in India, in technical collaboration with VM. In 1987, the company launched the Contessa Classic considered the most powerful car available then. The Contessa was a reasonably successful car, though it never managed to match Ambassador's success. In 1995, HM entered into a collaboration with the Japanese automobile major Mitsubishi Motor Corporation (Mitsubishi), wherein Mitsubishi agreed to provide technical assistance to HM to manufacture its products in India. HM produced a mid-size luxury car, Opel Astra in collaboration with GM in 1996. In 1997, the Contessa GXL version with power steering was launched. HM terminated the GM joint venture in 1999, by selling off its stake to GM.

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4] PAL was established in 1944 by the Watlchand Hirachand family in technical collaboration with the Italian automobile
major Fiat.

Case Details

Case Code : BSTR021
Themes: Turnaround Strategy
Case Length : 10 Pages
Period : 1998-2002
Organization : Hindustan Motors
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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