Peugeot buys the iconic Ambassador car brand for INR 80 crore

India's oldest car maker, Hindustan Motors has announced that they have sold the iconic Ambassador car brand to Peugeot for a sum of INR 80 crore.

India has always been in the radar of Peugeot. They were among the first foreign car manufacturers to enter India in September 1995, after Indian government opened up investment from MNCs. After several unsuccessful attempts, the French company is all-set to make yet another attempt to form a footing in India.

This time, they are going to enter India by forming a JV with the Birla Group, who are also the owners of Hindustan Motors. Earlier today, in a filing at the Bombay Stock Exchange, Hindustan Motors revealed that they have sold their iconic Ambassador car brand to Peugeot for INR 80 crores.

Ambassador aka Amby

Founded in 1942, Hindustan Motors is one of the few original car manufacturers of India. They first started operations in Gujarat (near Port Okha), but later moved to West Bengal near Uttarpara, where operations began in 1948. It is here that HM made their home. They not only provided jobs to people from surrounding villages, but also helped in the development of the surroundings. Today, there are close to a dozen schools in HindMotor (yes, that is what the place is known as) for the benefit of the children from Uttarpara and Konnagar.

Speaking about the Ambassador, fondly nicknamed as The King of Indian Roads, it was first launched in 1958. Based on the British car – Morris Oxford III, the Ambassador soon became India’s best selling car. In the 70’s and 80’s, HM was selling close to 24,000 Ambassador’s a year. Everyone related to the car, and it soon became the people’s car. From common man to politicians, everyone wanted to be seen in a HM Ambassador.

hindmotor produced ambassador encore

Then came Maruti 800 in 1984, and that was the beginning of downfall for HM Ambassador. By the end of 1995, HM Ambassador sales had declined to just 12,000 units a year, a 50% decline as compared to their sales 10 years ago. Sales decline continued as new brands came to India. In the period between 1995 to 2005, Tata launched Indica, Hyundai launched Santro, Ford too arrived in India. This made sure that the sales decline of HM Ambassador continued. By 2005, Ambassador sales were down to 6,000 units a year.

Decline in demand continued. In the last few days, HM Ambassador production averaged at about 5 units per day (the company needs to produce and sell 1,500 Amby’s to break even), while workers claiming that there were days when they did not produce a single car! Ironically, Maruti produces about 5,000 cars per day.

So why this decline? Well, there are many reasons. One of them being not updating the car. Hindustan Motors did not revive their iconic product as per the changing times. This made sure that the car remained classy, but at the same time majority of the buyers started looking at younger and more advanced cars.

There came a point that these HM gas guzzlers were only bought by politicians. There was a time when all politicians used to drive in a Ambassador. The white coloured Amby with red beacon was the norm for Indian politicians. Even today, many Indian politicians use the Ambassador as their official car including Congress leader Sonia Gandhi. Apart from this, high-ranked officers of the Indian Army too continue to use the Ambassador as their official vehicle. But even these Amby regulars have started preferring for much advanced and safer cars from Audi, Mercedes Benz and BMW.

Over the last few years, HM management has tried to revive the brand but all attempts failed. In May 2014, the company announced the end of road for Ambassador. Hindustan Motors suspended operations indefinitely at their Uttarpara plant in West Bengal. This was announced to their 2,500 employees who turned in for work on that morning in May 2014.

Peugeot India’s Story So Far

In 1995, France’s largest car maker, Peugeot tied up with one of the oldest car manufacturers in India Premier Automobiles Limited (PAL was setup in 1941). The first product they launched, was the outdated version of Peugeot 309 (above image). But to the surprise of many, the product clicked (in spite many buyers not aware of the brand, nor knowing how to pronounce Peugeot). Pal-Peugeot received over 1 lakh bookings for the 309 from all over India.

Sadly, of the 1 lakh bookings, only 10,000 cars were delivered by 1996, while remaining 90,000 bookings were cancelled. Due to internal issues between PAL and Peugeot, the French company pulled out of the JV in 1997. The PAL-Peugeot JV is yet to clear the dues of about 40,000 customers, who had paid Rs 25,000 up-front to book the 309 sedan. Most are still fighting case in consumer forum.

Peugeot 309 India

Then in 2001, Peugeot started talks with Telco (Tata Motors) and Hero MotoCorp (then Hero Honda), to enter the car and motorcycle segment in India. Both never materialized.

Between 2001 and 2010, the company conducted multiple studies to enter India, but none ever materialized. Then in 2011, Peugeot went solo and announced re-entry into India. They signed agreement with Gujarat government, and also celebrated the ground breaking ceremony at the plant site in Sanand. The company backed out from this later in 2013, due to global economic downturn, and their worsening condition in Europe.

Peugeot plans return to India
Peugeot officials in India at their new plant site in Sanand in 2011.

In 2015, the French company had again hired consultants who are researching different options for Peugeot’s re-entry into India. One of the avenues of their re-entry could be along with their Chinese partner Dongfeng. Apart from this, they are also open to enter as a solo brand, or use their connection with Mahindra.

Peugeot’s current Chairman, Carlos Tavares, a former COO at Renault-Nissan, is believed to be the motivation behind Peugeot’s re-entry into India this time around. Already on good terms with top level officials in Mahindra, Mr Tavares is already familiar with India as he was part of the Mahindra-Renault JV. It is believed that his association with Mahindra played a major role in Mahindra buying a controlling stake in Peugeot’s two wheeler business.

India being projected as one of the fastest growing auto markets by 2020, person close to the latest development reveals that Peugeot has plans to bring their entire business to India. They plan to launch their entire range of two wheelers by 2017, and once established as a brand, will bring their cars into India by 2020. But it is not clear whether they will revive the Ambassador brand!