HINDUSTAN MOTORS1

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HHINDUSTANINDUSTAN MMOTORSOTORS

STRUGGLE F OR SURVIVAL



Quick FactsQuick Facts

y Founder : B.M. Birla y Country : India

y Year of Establishment: 1942y

Business Group: CK Birla Group y Listings & its codes

NSE: HINDMOTORBSE: 500500

y

Work Station: Uttarpara (West Bengal), Thiruvallar (Tamil Nadu), Pithampur (Madhya Pradesh)

y Website http://www.hindmotor.com/



Hindustan Motors (HM):Hindustan Motors (HM):

y Hindustan Motors (HM) is the flagship company of the C.K. Birla Group, established by Mr. B.M. Birla.

y Ambassador, Contessa and Mitsubishi Lancer are the

most successful brands in the Indian market.

y In MUV segment the company has given Trekker, Porter and Pushpak .

y RTV is also one of the remarkable brand of HM.



Segment & Brands of Segment & Brands of

Hind

ustan

MotorsHind

ustan

Motors

y Ambassador

y

Mitsubishi Montero

y Mitsubishi Pajero

y Mitsubishi Cedia

y Mitsubishi Lancer



Overview Overview

yH industan Motors is an automobile manufacturer from India. It is part of the Birla group of industries.

y The company was the largest car manufacturer in India before the rise of Maruti Udyog (MUL).

y

It is the producer of the famous Ambassador car, widely used as a taxicab and as a government limousine.



Key Personnel Key Personnel Hindustan MotorsHindustan Motors

Limited :Limited :y Mr.C. K. Birla, Chair man (Birla Group of Companies)

Chairman of G.P - C.K. Birla group of companies and

grandson of the founder, Mr. B.M. Birla and son of

Mr.G.P. Birla.

y Besides Hindustan Motors Ltd., Mr. C.K. Birla also heads

National Engineering Industries Ltd., Hyderabad

Industries Ltd, Orient Paper & Industries Ltd., Gmmco

Ltd, BirlaSoft Ltd.

y Mr. R Santhanam, Managing Dir ector



y Maruti Udyog Ltd. (MUL) is the first automobile company in the world to be honoured with an ISO 9000:2000 certificate.

y The company has a joint venture with Suzuki

Motor Corporation of Japan. It is said that the company takes only 14 hours to make a car.y One of the original three car manufacturers in

India, founded in 1942, it was a leader in car sales until the 1980s, when the industry wasopened up from protection.

y Hindustan has a joint venture with Mitsubishi,producing versions of the Lancer and Pajero, but is best known for its own models.





MilestonesMilestones

y 1942 Incorporation at Port Ok ha in Gujarat as

a small assembly plant for passenger cars.

y 1948 Shifted its activities to Uttarpara in West

Bengal (close to Howrah) and set up facilitiesfor manufacture of cars and truck s.

y 1971 The company further diversif ied its

activities by setting up an Earthmoving

Equipment Division at Tiruvallur, near Chennai, Tamil Nadu for the manufacture of Earthmoving

equipment such as dumpers, front-end loaders,

crawler tractors and so on.



y 1985 The company commenced a Power

Products Division at Hosur (Karnataka) for

manufacture of heavy duty transmission

required for Earth moving Equipments.y 1986 Commencement of the manufacture of

Heavy CommercialVehicles at Commercial

Vehicle Division,Vadodara (Gujarat).

y 1987 Commenced production of petrol enginesand transmissions at Pithampur (Madhya

Pradesh) in collaboration with Isuzu Motor

Company, Japan.



y 1996 The company modernized, upgraded

and expanded its three existing divisions

Earthmoving Equipment Division, Power

Plant Division and the Uttarpara Plant.

y 1997 Began the production of the Road

Trusted Vehicle.

y 1998 Commenced the Mitsubishi Lancer Car project.



y 2001 Earthmoving Equipment Division

plant was sold off to Caterpillar (USA).

y 2002 Launched Mitsubishi Pajero,

collaboration with Mitsubishi Motors

( Japan), in India.

y 2004 Components Business (PUP-

Pithampur and PPD - Hosur) transferred

to AVTEC, a company jointly held by

HM,Actis and CK Birla Group.



Hindustan Motors a major player in Hindustan Motors a major player in India:India:

y It is a one billion turnover company

manufacturing Passenger Cars, UtilityVehicles, Power Products and

Earthmoving Equipment.

y

The manufacturing facilities of thecompany are spread across India.



Ambassador:Ambassador:

The first car to be manufactured in India, hasbeen ruling the Indian roads ever since itsinception in 1948.

It's dependability, spaciousness and comfort factor have made it the most preferred car for generations of Indians.

The Ambassador's time-tested,accommodating and practical characteristicsmake it a truly Indianised car.



y H industan Ambassador has a vast service network. The Passenger Car and Utility Vehicle market is being attended by a 115 strong dealer network, spread acrossthe country.

y In a bid to streamline the after sales service, three

divisions have been made, namely red , blue and green.

y The Red will handle the new Mitsubishi Lancer.

y Blue the Ambassador and Contessa Classic.

y The Green caters to the rural market with the Trekker and the H M RTV.



y All the cars manufactured by H industan Motors conformto Euro -1 emission norms.

y This has been achieved by upgrading the Ambassador 1800 ISZ with multi - point fuel injection.

y The Ambassador was always in conformance with thesenorms.





EvEvolution of Automobile Industry olution of Automobile Industry

Initial Years

Manufacturing was licensed License Raj

H igh Customs duty on import

Steep excise duties &

sales tax

2 Major players:

Premier Automobiles Ltd

& H industan Motors

1980 s

E ntry of MUL, better product,

with government support

Seller¶s Market

Long Waiting Periods

E arly to mid 90 s

Seller¶s market and long

waiting periods

Decrease in customs &

excise

Auto finance boom- more

players

foreign banks & non

banking companies, better

schemes.

M id 90 s ± E arly 2 000 s

Buyers market

E

asy Auto finance

Manufactures diversifying

into related activities:

finance lease, fleet

management, insurance

and used car market

But H M diversified very

lately compared to all

other companies



The Key Players«Car SegmentThe Key Players«Car Segment by year 2k by year 2k

Commercialvehicles

TATA Motors, Ashok Leyland, Swaraj Mazda,Mahindra & Mahindra,Force motors, Eicher Motors

Passengervehicle

TATA Motors, Maruti Udyog, Honda Motors, Toyata, Skoda,Mahindra & Mahindra, Daimler Chrysler, Hindustan Motors

Maruti, 50.37

Hyundai, 19.17

Tata Motors,

17.19

Honda, 5.33

Others, 5.73

Passenger vehicle

B y the year passing, HM·s market share went low and was considered as

¶others· in the segment



Trends in the automobile sector«2k Trends in the automobile sector«2k

Production of automobiles

4.85.3

6.37.2

8.5

0

2

4

6

8

10

2000-01 2001-02 2002-03 2003-04 2004-05

m i l l i o n n u m b e r s

Domestic Sales of automobiles

4.65.2

5.96.8

7.9

0

2

4

6

8

10

2000-01 2001-02 2002-03 2003-04 2004-05

m i l l i o n n u m b e r s

Exports of automobiles

0.17 0.18

0.31

0.48

0.63

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2000-01 2001-02 2002-03 2003-04 2004-05

m i l l i o n n u m

b e r s

D m c S l v b g w g gl Exp v l pl

w bl l p m kp m k g g



Comparing with competitors:Comparing with competitors:

.HM premium segment market share were being eaten up drastically by MUL.HM premium segment market share were being eaten up drastically by MUL

and Honda.and Honda.

.Mostly due to advertising and effective marketing strategies of the .Mostly due to advertising and effective marketing strategies of the

competitorscompetitors

Premium Segment Comparison

PERIOD SALES

LANCER(HM) ESTEEM (MUL)HONDA CITY

(HONDA)

1998-99 2,866 16,744 9,631

1999-00 8,300 16,031 9,772

2000-01 7,635 12,000 10,011



y

Porters Model Analysisy H M was unable to create barrier for potential

new entrants, many foreign collaborated

entrants like Maruti Suzuki, GM, Toyota

launched and H M was unable to compete withtheir existing strategies

y Bargaining Power of Suppliers: Even suppliers

were not looked into deep, company was in a snail pace and couldn¶t take up the challenge of

new potential entrants in the market, including

the suppliers of its different parts





Turnaround EffortsTurnaround Effortsy Indian economy opened up for foreign players, many

multinational automobile companies entered the country.Companies including Daewoo, GM, Daimler Benz, H yundai, H onda««entered India through joint ventures (JV) and partnerships with Indian firms.

y H M was the worst affected due to its inflow of competitors. Forced to react due to its poor performance of its vehicles.

y H M launched Nova (1990) with better interiors

y H M launched 1800 ISZ(1993), better engine performance

y Company also appointed consultants McKinsey & Co. for arestructuring plan to turn around its business



y Confident Boosters For H M Year 2K

The company¶s moves seemed to be finally bearing fruits as it was ableto narrow down the losses in the first quarter of 2001-02 by around 30%.

H M was banking on the Ambassador¶s niche markets (government and taxi) and hoped to retain the segment by launching new variants.

The Trekker was also poised to do well after the relaunch and H M hoped to sell 3,200 vehicles in 2001-02.

y Analysts however remained skeptical about H M¶s future prospects and its ability to make a turnaround as a passenger carmaker.

y They felt that the only way out of H M was to turn itself into auto-component supplier to multi-nationals producing passenger cars in thecountry.

y H M seemed confident that with Pajero¶s launch in early 2002, it would regain its position in the Indian car market.





Bargaining power of

suppliers

Bargaining power of Customers

Threat

of new

Entrants

Threats of

substitutes

Competitive

Rivalry within the industry



SWOT Analysis

y Strengths

y H industan Motors was the first Indian Car Company to start production In India in 1942. H M has become a vast company, manufacturing cars like the sturdy

Ambassador, the elegant Contessa, and in collaboration with Mitsubishi of Japan now manufactures the new Mitsubishi Lancer.

y H M started production of the Landmaster in 1954, and in 1957

began the production of the Ambassador. Later tie-ups withGeneral Motors Corporation of USA, Vauxhall Motors, UK, Marion Power Shovel Co, USA led to new products being launched. In 1963 commenced the production of the Ambassador Mark2 Later

versions and more forays in related vehicle segments followed.

y Export has been steadily increasing, mainly in the British and Japanese markets. Trucks are being exported to Bangladesh, Egypt, New Zealand, Sri Lanka and Mauritius. The Earth moving Equipments are being exported to Oman, Jordan, Iraq, Bangladesh, Mauritius and Libya.



y H M has a vast service network. The Passenger Car and UtilityVehicle market is being attended by a 115 strong dealer network, 50Service and Parts dealers and additional 60 exclusive Parts dealers. 4

Regional Offices and Nation-wide Territory Offices support it.

y Two dealers serve the Earthmoving Equipment and Power Productsmarket from 25 locations spread across the country.

y 2006, H M has invested a "significant" amount for three years to build up production capacity for auto components

y H industan Motors also has an auto components subsidiary whichmakes automotive castings , forgings and stamping.

y Over a period of time, sales from auto components could be as highas 30-40%

y First mover advantage in several areas like Internet selling, sturdy

car



y Weakness

y Before 90¶s (The License Raj)

y This lack of product activity in the Indian market was mainly

due to the Indian government's complex regulatory system that effectively banned foreign-owned operations.

y Within this system (referred to informally as the "license raj"),any Indian firm that wanted to import technology or productsneeded a license/permit from the government. The difficulty of

getting these licenses stifled automobile and component imports, creating a low volume high cost car industry that wasinefficient, unprofitable, and technologically obsolete.

y The dominant product Ambassador, although customized to the poor road conditions in India, were based on a stale designconcept (with outdated features), and were also fuel inefficient.

y Inefficiency of Employees, Output of each employee was lessdue to Union interference

y Inefficient management principles



Less presence in premium segment.

Lacks global tie-ups and thus finding it hard to tap export markets.

Opportunities

y Efficiency through management principles

y Exports

y Acquisitions for strengthening its distribution tie-ups.

y Entry into other related diversification categories like Truck partsmanufacture, and other parts automotives.

y Can bring out more sophisticated cars with high technology standards

Threatsy Emergence of strong players in the market mainly overseas competitors

y Lack of employee motivation

y Lack of design for cars (mainly new age look for cars)



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HINDUSTAN MOTORS1