CK Birla group firm Hindustan Motors Ltd has signed a pact to sell its iconic Ambassador brand to French carmaker Peugeot SA for Rs 80 crore ($12 million), the Indian company said on Friday.
The deal comes barely a fortnight after the CK Birla Group and Peugeot parent PSA Group agreed to jointly make and sell cars in what marked the European automaker’s return to the country after nearly two decades.
Hindustan Motors once sold three of every four cars in the country. The Ambassador was seen a heavy-duty city vehicle and was most commonly associated with political corridors as the official car of choice for bureaucrats and ministers alike.
The car, however, didn’t manage to withstand competition from Maruti Suzuki in the 1980s. The entry of several other automakers in the 1990s made matters worse for the Ambassador. Hindustan Motors also failed to innovate and finally stopped production of the car in 2014.
The company did float what was initially a successful sedan, the Contessa, but did not have any other success. The Ambassador was modelled on British car Morris Oxford while the Contessa mimicked Vauxhall Victor.
PSA Group will invest €100 million ($107 million or Rs 700 crore) to make cars in India with the CK Birla Group, as per the agreements signed in January.
PSA Group will hold a majority stake in a joint venture being set up to assemble and distribute PSA cars in India. As per the second agreement, PSA and AVTEC Ltd will form an equal joint venture to make powertrains. The factories will be based in Tamil Nadu and will have an initial manufacturing capacity of 100,000 vehicles a year.
Peugeot is looking to tap into a market that is estimated to expand to 8 million to 10 million cars by 2025, according to market research firm IHS Markit. That compares with the almost 3 million cars sold in 2016, according to the industry group Society of Indian Automobile Manufacturers.
But the Indian market has proved to be a tough nut to crack for European and American carmakers. The market is dominated by Maruti Suzuki India Ltd, the local unit of Japan’s Suzuki Motor Corp, which sells one in two cars in the country.
South Korea’s Hyundai, local carmakers Tata Motors and Mahindra & Mahindra and Japan’s Toyota Motor are the other major players. American carmakers Ford and General Motors and Europe’s Volkswagen are much smaller players in comparison.
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