Ambassador – Riches to Rags…..Is Competition the Culprit?

Code : ECC0057

Year :
1897 - 2016

Industry :Automobile

Region : India

Teaching Note: Available

Structured Assignment : Not Available

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Abstract: The case describes the transformation of market structure of Indian Automobile industry during the period from the first motor car ran on Indian roads i.e. from 1897 to 2016. Through the 1920s, passenger cars were only imported in small numbers. Completely knocked down (CKD) vehicles were assembled and supplied in India in early 1930’s. After independence and colonial rule in 1947, a plan for the indigenization of the Indian automobile started. This paved the way for the removal of manufacturers who were dealing with only imports as well as the ones with no Indian partner. The Industrial Policy Resolution of 1948 and the Industries Development and Regulation Act, 1951, included the licensing system. By fulfilling all the rules of the licensing system, the production of the Ambassador car began in 1957, enjoying monopoly power with over 70% market share in spite of the competition from Fiat till 1980’s. From the mid 80s onwards, with the more modern, cheaper and fuel efficient cars from Maruti Suzuki, the popularity of Ambassador and Padmini began to wane. With the economic liberalization in India and easing of licensing system during 1990’s, Automobile market opened up to new players. Ultimately, the Ambassador, the monopolist till 70’s that had a major market share till 90’s was forced to close down in 2014, while failing to compete with the new entrants.


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Pedagogical Objectives:

  • Evaluate the reasons for success and failure of Ambassador Car in the Indian Automobile history and the role of market structure.
  • Understand and distinguish the features of perfect and imperfect competitive markets.
  • Understand the factors responsible for Ambassador’s monopoly position in the market.
  • Understand the role of economic liberalization to create a competitive market.
  • Understand the influence of competition, on price - out put determination and on freedom of consumer’s choice.


    Keywords : Automobile market,Ambassador,Imperfect competitive markets ,Monopoly,Barriers to entry,Market power,Price maker,Economies of scale,Dead weight loss,Duopoly,Product differentiation,Oligopoly,Economic liberalization,Monopolistic competition,Perfect competition

    Contents :
    » PRE-INDEPENDENCE PERIOD (1890-1947)
    » POST-INDEPENDENCE TO PRE-LIBERALIZATION PERIOD (1947 TO 1990)
    » POST LIBERALIZATION – 1991 ONWARD
    » AUTOMOBILE MARKET STRUCTURE – REIGN OF AMBASSADOR
    » THE REIGN OF PREMIER PADMINI
    » THE BIG BANG ENTRY OF MARUTI AND THE GROWTH OF THE MIDDLE CLASS SEGMENT
    » LATER ENTRANTS WITH DIFFERENT STRATEGIES
    » EXHIBITS


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