Decades-Long Reign for Ambassador Comes to an End; Hindustan Motors’ Aging Sedan, A Symbol of India’s Ascent, Rides Into the Sunset

Decades-Long Reign for Ambassador Comes to an End

Hindustan Motors’ Aging Sedan, A Symbol of India’s Ascent, Rides Into the Sunset

SANTANU CHOUDHURY

May 25, 2014 2:50 p.m. ET

NEW DELHI—The Hindustan Motors 500500.BY +19.82% Ambassador—the frozen-in-time four-door that for more than a half-century defined India as sticking to its own automotive road map—has ceased production.

Based on the British-designed Morris Oxford of the early 1950s, the Ambassador boasts a rounded silhouette that has barely changed in decades. Once the favored car of India’s politically powerful—and today instantly recognizable as a popular taxi in many big cities—its popularity declined as India’s auto industry opened to more contemporary rivals.

On Saturday, Hindustan Motors Ltd. of Kolkata said it closed indefinitely the factory where Ambassadors were made. The company cited “low productivity, growing indiscipline, critical shortage of funds” and a “lack of demand for its core product the Ambassador.”

Last year, Indian car buyers nationwide snapped up some 2.5 million new cars. In contrast, only 2,214 Ambassadors were sold in the 12 months ended March 31, according to a regulatory filing.

The company, controlled by the CK Birla Group, said the suspension of work would allow it to control the mounting liabilities and restructure the organization and “bring in a situation conducive to reopening of the plant.”

After India gained independence from the colonial British, the Ambassador stood as an icon of the nation’s desire to become self-reliant on the strength of a largely closed economy. The shuttering of the factory comes as India appears to be steering away from this past. This month, voters swept the long-ruling Congress party from power in favor of Narendra Modi, the Bharatiya Janata Party candidate who campaigned on a platform of economic development and eliminating red tape and will be sworn in as prime minister on Monday.

Over the years, the Ambassador failed to adapt quickly enough to modern design tastes and engineering expectations. New Delhi taxi driver Sanjay Kumar, who currently has a 14-year-old Ambassador, says it will be his last.

“The air conditioner is no good, the body is not made of quality metal, screws that should be metal are plastic, and the engine is not as powerful,” he said of the latest models.

He is in the market for a new car, and he’ll be switching to a Maruti, an Indian brand that is made by a subsidiary of Suzuki Motor Corp. 7269.TO +2.40% , the Japanese company. “It is cheaper and spare parts are readily available,” he said.

Ambassador sales took a hit after the Indian government enforced stricter emission standards in 17 cities starting in 2010. The company last year introduced a new version of the Ambassador that complied with the stricter pollution controls, but sales failed to rebound, partly because the car is increasingly seen as too pricey compared with rival vehicles. A new Ambassador costs around 500,000 rupees ($8,560), whereas another popular taxi option, the Maruti Suzuki Wagon R, costs 352,103 rupees.

Hindustan Motors has reported annual losses for years. For the quarter ended December 31 it reported an after-tax loss of 155 million rupees.

The Ambassador has been produced at a factory at Uttarpara in the eastern state of West Bengal. Last year, Hindustan Motors said it was looking for potential investors to fend off its financial difficulties with the Uttarpara plant.

Broader car sales at Hindustan Motors haven’t fared well. The company sold just 3,755 cars in the financial year ended March 31, compared with 12,329 cars sold in 2007. Last year’s figure includes sales of the Ambassador and Mitsubishi cars, which Hindustan Motors assembles in a plant in Tiruvallur, near the southern city of Chennai.

The auto maker assembles vehicles in India on behalf of Japan’s Mitsubishi Motors Corp. 7211.TO +0.78% In June, Hindustan Motors signed a pact with Isuzu Motors Ltd. 7202.TO +1.00% to manufacture the DMAX pickup truck and the MU-7 sport-utility vehicle at its Tiruvallur plant.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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