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HM rejuvenates product line up - Views on News from Equitymaster
 
 
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  • Sep 9, 1999

    HM rejuvenates product line up

    Hindustan Motors (HM) will assemble Proton (Malaysia) cars in the country. It is also likely to enter into a strategic alliance with Japanese auto giant Mitsubishi for marketing its Pajero, utility vehicle (UV), in the country. This was reported by leading Indian business dailies.

    Hindustan Motors, along with Premier Automobile Ltd. (PAL) was the pioneer in the Indian auto segment, before Maruti came on the scene. The company's flagship products include the 'Ambassador' and 'Contessa'.

    Over the years, HM's brands have had to face increasing competition from newer entrants, with greater access to technology. The competition was too much for HM's brands, which could not cope up with the demands on quality as well as price. This was reflected in the company's financial performance, which showed a net loss of Rs 283 m in FY99.

    In FY99, the company had entered into a technical tie-up with Mitsubishi, Japan, to launch the 'Lancer' in the premium, mid-size car segment. The company expects the Lancer to turn profitable at 50-55% indigenisation level (currently at 40%).

    The marketing tie-up for the Pajero is an extension of its relationship with Mitsubishi. If it is successful, there could be more tie-ups to launch other models.

    The Pajero, a utility vehicle, will be positioned in the premium category, which as yet is a niche segment. The price will be important to invoke consumer interest, as the UV segment has been afflicted by lower demand for quite some time now. UV sales were down 8% in April-August 1999.

    As far as the Proton cars are concerned it is not clear, which passenger car segment will be targeted by the company. Regardless of the segment, the company will have to keep the price reasonable, which will not be an easy task given the fact that car parts will be imported.

    For a company that has been written off by most analysts, this seems like a last-ditch attempt to get out of the red, which may even be possible given its impressive product line-up.

     

     

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