What The Rise and Fall of the Ambassador Teaches About Business

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A lot of iconic things have defined the Indian middle class. However, few remain as enduring as the classic white car that became the king of the Indian roads – The Ambassador.

However, despite being the beloved of a generation, the car’s production stopped in 2014. The failure of Hindustan Motors to capitalize on the Ambassador’s potential serves as a reminder to all in business to never take customer loyalty for granted.

The Rise and Rise of Hindustan Motors

Just five years before Independence, Morris Motors and the Birla family of India came together to create Hindustan Motors Limited. The company established its first factory in Port Okha in Gujarat.  In 1948, the operations were moved to Uttarpara in West Bengal. This new location eventually became the home of India’s first integrated automobile plant. In 1958, the company began manufacturing the Ambassador car.

The car was actually based on the Oxford Series III model created by Morris Motors. The car was a sedan model, featuring a three-box configuration and eye-like headlights, with a separate compartment for the engine and storage. Though the car came in a variety of colors, white became the most dominant color on the road.

Once India’s Dominant Automobile Brand, Few Would Recognize the Hindustan Motors Logo Today

Over time, the car began to be associated with government babus. It was the ultimate status symbol. It was an Indian brand, a family car, a symbol of success and importance, and the mark of bureaucratic power. But it was this same symbolization that eventually lead to the downfall of the Ambassador.

Failing to Keep Step

Till the 1980s, the Ambassador and its parent Hindustan Motors operated in a very protected environment. Like most Indian industries, car making was protected by government restrictions on competition and foreign involvement. The idea was to make sure that Indian industries were fit to compete before opening up the market.

However, Hindustan Motors became complacent. They had no competition to threaten their position, and government patronage was at an all-time high. Thus, they found no reason to improve the Ambassador. Almost all upgrades to the car were cosmetic, and no technical improvements were made.

Then in 1991, the Indian economy began to open up. Suddenly, competition arrived. The entry of the Maruti Udyog – Suzuki Motors collaboration in 1983 through the Maruti 800 marked a turning point. The Indian middle class now had a number of new cars with state-of-the-art features. These were also increasingly cheaper and better performing than the Ambassador. The once-coveted car was now being dismissed as clunky and inefficient.

The Hard Way Down

The lack of innovation in the past years proved costly for Hindustan Motors. By the late 80s, Maruti Suzuki became the market leader in automobile in India. But the arrival of competition was not what sealed the company’s fate. In the end, it was its own poor decision making that brought the company down.

The Classic White Ambassador

When new cars began to arrive in India, Hindustan Motors was too slow to react. There are some major areas in which it failed –

  • First, it did not capitalize on its existing reputation and that of the Ambassador. The car had been a symbol of wealth and prestige for decades. A few technical upgrades could have made the car a favorite of an entire new generation. Instead, Hindustan Motors let this opportunity slip by. They did not reduce the car’s price, introduce safety features, or increase mileage.
  • Secondly, productivity and efficiency difficulties at its plants became more and more apparent as the years went by. It continued to use a labor-excessive and low-technology approach, leading to high production costs and low output. The after sales service failed to match what competitors had to offer.
  • Cars are not an impulse buy – for many, they are one of the most expensive investment people make. This is the reason why companies spend so much on advertising and building trust with consumers. Hindustan Motors failed to advertise itself effectively.
Gone and Forgotten – The Lessons to Learn

Hindustan Motors stopped the production of the Ambassador in 2014. The brand was then sold off to French carmaker Peugeot SA for 80 crores in 2017. The company is now divesting many of its assets as it continues its struggle for survival.

In the end, the company’s fate was sealed by poor top level management. It seemed that the Birlas had more or less given up on the company and their automobile ambitions. Most of the cars introduced by Hindustan Motors between 1990s and 2000s were not ‘the complete package’ that people were now looking for. This showed a lack of thought process in introducing these models to the world, which reflected in their poor sales.

Taking success for granted can cost even the most beloved brands. It is thus important to keep up with customer needs and desires, and innovate. Keeping in touch with customers, be it through after sales service or advertising, is also very important.

It is possible that Hindustan Motors may rise again. Many brands have made comebacks under worst circumstances. But the company’s story has many lessons for businesses. Customer loyalty is fickle, and trends change on a dime.

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