Hindustan Ambassador future uncertain as Uttarpara factory shuts down

Production of an automotive icon of India, the Hindustan Ambassador, has come to a grinding halt at Hindustan Motors’ Uttarpara factory in West Bengal. Hindustan Motors has shut down the Uttarpara factory temporarily citing “very low productivity, growing indiscipline, critical shortage of funds, lack of demand for its core product … and large accumulation of liabilities”. The factory directly employs 3,000 people.

With that, the future of the Ambassador sedan now hangs in balance. Many fear that the Uttarpara factory shutdown is the end of the road for the Hindustan Ambassador, a legend of the Indian automotive world. The Ambassador has been India’s oldest continuous production car, what with production commencing from 1958, until the latest production stoppage.

Just last year, Hindustan Motors introduced the BS4 emission norms compliant version of the Ambassador. Known as the Encore variant, the BS4 Ambassador featured the ancient 1.5 liter over head valve diesel engine equipped with a turbocharger to meet emission norms. The sedan is also sold with a 1.8 liter petrol engine. The car is aimed mainly at cab operators, in its home market of Kolkata.

Coming to why many are predicting the demise of the Ambassador to coincide the latest production stoppage, these predictions largely have to do with mounting losses that Hindustan Motors, the Ambassador’s parent, has been saddled with. The C.K. Birla promoted automaker, one of India’s oldest, saw its net worth erode to negative levels last year.

With the factory in shutdown mode, Hindustan Motors is likely to approach the Board for Industrial and Financial Reconstruction (BIFR), to declare itself sick. Notably, the BIFR is a governmental organization that assesses financially sick companies in India, and assists them for recapitalization. In the past, automakers in India, such as Fiat and Premier, have reported sick to the BIFR. These automakers were recapitalized to resume regular operations by the BIFR.

In Hindustan Motors’ case though, the problem seems more challenging given the fact that the automaker is virtually finding no takers for its only real mass-market product, the Ambassador sedan. Way past its sell-by date, the Ambassador has been stagnating for years, only to be overtaken by technologically advanced competition. Faced with a virtual dead end, the Ambassador needs a total revamp to stage a comeback, an affair that would cost Hindustan Motors many hundred crores at the least.

Rumours swirling around suggest that Hindustan Motors is more interested in redeveloping the land bank on which the Uttarpara factory stands on. This land bank is said to be worth many hundred crores given its proximity to the metropolis of Kolkata, and redeveloping this land as prime real estate could prove to be more profitable for Hindustan Motors.

With Hindustan Motors displaying little interest to resurrect the Ambassador save for the occasional announcement about new, if somewhat uninteresting variants, the going doesn’t seem positive for the grand old car of India. For the record, Hindustan Motors has announced a sub-4 meter compact sedan variant of the Ambassador for the Indian market, for a launch later this year, with the automaker also claiming to be working on a completely revamped version of the Ambassador.