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Old 1st November 2011, 01:08   #31
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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Originally Posted by plimsollmark View Post
India is still way cheaper than a lot of other countries. In Brazil for example the cheapest variant of the Logan is going at an equivalent of over 8 lakhs !
Brazil is currently investigating automakers for profiteering - see here Brazil Investigating High Car Prices | The Truth About Cars

Even Singapore has high prices but that's due to the need to buy a number plate, I think here we are taking about car prices from the manufacturers, not the costs of any environmental or congestion policy from the government.

The strange part is in the US with very high labour, manufacturing and generally high western business costs, car makers are able to price cars reasonably. No one ever says cars like CRV, Tiguan or RAV4 at $22-30k are cheap in the US yet when Mahindra launches XUV at $28k plus the focus is on how cheap the car is, either we are too rich or have no value for the Indian rupee!

Some might be tempted to come up with the high tax or high volume argument but cmon if you prices cars high how will you get volumes? As for taxes these exist in the west too and with a much higher cost of business.
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Old 1st November 2011, 01:15   #32
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Going back in time a bit - the Baleno was also probably overpriced, given that it had to compete with the much higher brand names of Honda and Mitsu. Sales picked up a bit only after the price cut/discounts and the introduction of the LXi.
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Old 1st November 2011, 01:41   #33
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

I think that the people making the pricing decisions are disconnected from reality or rather choose to be for various reasons. They may have all the market data but may also be under pressure to deliver greater profit margins.

Some of them might even be delusional i.e. it's also possible that due to the nature of their job, they have to often speak so highly of their brand, they delude themselves into thinking that they are above the rest. Nothing like mass market rejection month on month to make them realize how their brand is perceived.

Also, every manufacturer is trying to fit into a so called "premium" space by simply overpricing their car without giving a thought as to what is on offer. I often wonder about the accountability of such decisions for eg: how can Ford not re-examine the situation with the new Fiesta even after they priced the Figo sensibly? Are they not already trying to fight off the perception that their spares are expensive? Does the new Fiesta pricing help in this regard? Is there no one in management who will be fired for not taking action after seeing the monthly sales data?

It's time the manufacturers too stock of their monthly or at least, quarterly sales charts and made early price corrections to remain competitive. How about reading Team-BHP and at least making a note of what's being discussed w.r.t their product? I think it would be in their best interest to keep a ear to the ground and in today's times, the internet has made it much more easier than earlier days viz-a-vis online automotive forums.

Last edited by sydras : 1st November 2011 at 01:52.
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Old 1st November 2011, 08:28   #34
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Interesting thread - Can I add the Nano to the list? Fantastic product, poorly positioned, marketed and priced not to sell.

As everyone recalls, the Nano was to be be 1 lakh car - ok, with inflation and everything else, one is willing to accept a 1.5 lakh on road price. But 2.47 for the top end in Bangalore is simply over priced! even the bare bones Nano retails for 1.87 in Bangalore - a price at which one can get a decent used Alto (base).

IMHO, the Nano at these prices is simply not VFM.
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Old 1st November 2011, 08:56   #35
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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Originally Posted by prashanthyr View Post
Interesting thread - Can I add the Nano to the list? Fantastic product, poorly positioned, marketed and priced not to sell.

As everyone recalls, the Nano was to be be 1 lakh car - ok, with inflation and everything else, one is willing to accept a 1.5 lakh on road price. But 2.47 for the top end in Bangalore is simply over priced! even the bare bones Nano retails for 1.87 in Bangalore - a price at which one can get a decent used Alto (base).
But bangalore prices are crazy. And if you will see then the Top end Alto will easily cross over and compete with the cars of a segment above. These days with various models and variants its inevitable to have a car compete with both a segment below it and the one above it. This gives the car maker greater flexibility too. When you want you can advertise your car with slogans like most VFM and affordable car ( rem those adds screaming starts from x.xx L) and at the same time claim that your product is at par with the cars in the higher segment.

Nano's pricing is decent given our current market dynamics. Ofcourse you can't expect them to be selling the car at 1L OTR. It does cost a lot less then the Alto even today. Its not very fair to compare it with a used Alto. That ways you might get a used sedan in the price of a top end Alto right?
Nano was let down more by the cheap tag that got associated with it. In our society where people are very conscious about there perceived status, this was always headed for a failure. The fire incidents didn't help it either and the car just did pick up. Even today the general consensus is that its a good car but just not for me!

The recent marketing campaign about the 15k downpayment is a very good one I believe and I am actually eagerly waiting to see Nano's sales numbers for this month.
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Old 1st November 2011, 09:04   #36
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Very interesting thread GTO. This has been running at the back of many bhpian's minds!

As you have rightly said, that this is a result of improper market evaluation. God knows what thought must have crossed their minds when they thought of shaking the market with their premium costlier products.

But only few companies takes the corrective measures. Eg: Honda. Kudos to them for lowering the prices of Jazz and City. I really wish that Maruti should lower the prices of Kizashi and Grand Vitara.
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Old 1st November 2011, 09:14   #37
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Great thread GTO, rated it 5*. Now my opinions on some of the cars (rather duds) listed:

1. Tata Aria comes from a company that made the cheapest Diesel hatch and now the Nano. Well obviously anyone will look at sensible pricing. No doubt that the Aria is a very well engineered, quality product from Tata. But hey it misses the term VFM. Looking at XUV500, it seems to be priced atleast 3 lakhs more! Need to give to Mahindras a big for understanding the Indian market better. Maybe Tatas need to recruit a few Mahindra personnel in their top levels.

2. Skoda Yeti - What a great product, seems price is not the only deterrent in this case. It is the quite unpremium level of the A.S.S. from Skoda that is still a bigger deal breaker in this case.

3. Honda Jazz - As a engineer, I have seen this car inside out (literally). Oh, what a great car, on every aspect! The fine little touches, the excellent packaging, the robust body, the brilliant paint job (at its time) and finally a disastrous pricing. Honda is known as a bike manufacturer in Japan (Yepp) and as an maker of some of the safest cars outside of Japan! But in India they are the premium car makers (now who gave them that title). Their change in perception of the market is very much evident with the recent price cuts and the Brio's pricing. Hope the sanity prevails.

4. Ford Fiesta - Come on Ford after the success of the Figo and being an proud owner of one myself, I was not expecting this from you. The Fiesta with the choice of interior materials (not the colour or design) and finish definitely rates lower to the competition. Accepted that the exteriors and handling are just leap years ahead of the competition. But the deal maker is the price. The fiesta has a large pool of variants (diesel and petrol), but honestly atleast a 1.5 Lakh price cut will make it a segment leader for sure.
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Old 1st November 2011, 09:47   #38
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

It is a simple marketing issue, IMHO.

If we talk about the 4 P's of Marketing, maybe add a 5th (Packaging), the winner /killer offering comes out when there is a balance..or maybe perfect harmony between these 4 or 5 P's.

Marketeers make mistakes, even the most seasoned ones make mistakes. There is always a 'poor cousin' in any company's product portfolio.

Then there is 'hype', often created by the inventor themselves and as they go higher and higher the minds are clouded. It happens to all of us, in our daily grind we are so focussed on getting the job done that many a times we miss the basics..or we fail to 'spot the gorilla'.

If companies stick to basics, and create an offering balancing between

Product Price Place Promotion and maybe Packaging

there will be a winner.

In each of the cases cited by GTO, one of these factors was amiss, mostly price one could argue as the Indian market is highly price sensitive. People are willing to pay a premium but only if the product is super (Honda City types)

For a manufacturer, research is very important and we have examples of how realistic research gets us good products e.g. Toyota Etios.
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Old 1st November 2011, 09:51   #39
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Guys, please note that this is not a thread to discuss why the cars failed. I want to stress on how top management seemed to lack common sense in their final decision. If it was so obvious to us laymen, how come it wasn't to them?

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Originally Posted by oxyzen View Post
Fiesta for example is underpowered & the fit & finish can embarrass a Fiat.
The diesel has more power than the outgoing Fiesta. And while the petrol isn't a scorcher, it does the job (say, like a Vento petrol).

Quote:
Kizashi. Where is the oil-burner? In this segment oil-burners rule.
The Accord still fetches in some good numbers.

Quote:
@ GTO: I am surprised you have not included Micra in this list.
Neither is the Micra over-priced, nor is it a market failure. At a time, with only 15 functional dealers, the Micra did over 1,000 units!

Quote:
Originally Posted by Durango Dude View Post
One more car to be added is the present Sonata Transform which sells some 10 units a month
But the Transform is very well priced. It's about 5 lakhs cheaper than the Accord!

Quote:
Originally Posted by ritedhawan View Post
In Suzuki Kizashi case, one would opine: Had they brought in the AWD variant[like in other markets outside India] or atleast RWD varaint of Kizashi[If there is any!]
I don't think the market cares about FWD, RWD or AWD.

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Originally Posted by greenhorn View Post
I think the aria, like the xenon is just a halo vehicle for tata. I dont think they are really interested in selling it.
An MUV serving as a halo vehicle? I doubt man. Tata is way too young in the car market to start thinking about halo vehicles. Especially when the entry-level cars suffer from a quality (lack of) perception. I can understand the Mini being a halo car, or even the Beetle. But not the Aria.

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Originally Posted by Sutripta View Post
There was an interesting speech by Rajiv Bajaj the other day which might throw some light on this.
Got a youtube link to share?

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Originally Posted by radek View Post
price point compared to competition is not the only way to price a product.
True. But in most cases, it's the relevant approach. When a customer is out looking for a car, he is going to gauge the value of your offering, relative to other options.

Quote:
Probably, these companies are using cost+ reasonable margin formula to come up with the pricing.
The cost+ pricing approach has been abandoned by nearly all manufacturers a long time ago. The pricing strategy is dictated by what they think is the maximum that the market will pay, keeping intended volumes in mind.

Also, if a manufacturer only has a production capacity of 1,000 units, what's the point of aggressive pricing? They might as well price it higher and rake in the profits. On the other hand, someone like Maruti / Hyundai / Tata who chase volumes like no other will usually go for extremely aggressive prices.

Quote:
We will however never know their real costs or margins.
Not that difficult. Nearly all manufacturers are limited liability companies. You can access their financial reports easily.

Quote:
Originally Posted by prashanthyr View Post
Interesting thread - Can I add the Nano to the list? Fantastic product, poorly positioned, marketed and priced not to sell.
Nano is definitely borderline on the VFM quotient. The market doesn't agree with its value proposition at all.

Last edited by GTO : 1st November 2011 at 09:54.
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Old 1st November 2011, 09:56   #40
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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The Accord still fetches in some good numbers.
Isn't the Accord in India priced very competitively even when compared to western markets. What I mean is that the price differential between Indian and Euro/US markets is negligible where the Accord is concerned and that would mean that customers perceive it to be VFM entry in the luxury space.
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Old 1st November 2011, 10:18   #41
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Great thread GTO!

I can digest TATA making a pricing mistake on the Aria as they are not in this segment already, but Honda is plain arrogant in their pricing, as they seem to think the brandname is enough to see good numbers.

Casepoint 1: Overpriced Jazz

Casepoint 2: The Honda Civic Hybrid

In both these cases, they were forced to make big price cuts.

People who bought the Jazz at 8.5 lacs, have to now contend with very poor resale price after price reduction. You get a new one for the price they wish to sell.

People who bought the Civic hybrid at 20 lacs, were given a shock treatment when the price was slashed eventually to 14 lacs. The difference was enough to buy a small hatch as a second car!

In both cases, people who bought the car with the initial pricing are let down.

I feel the companies should protect the interest of their customers and this can happen only when they price their cars honestly.

Hope the lessons are learnt, not only by the manufacturers, but also by customers. Never go by brand alone - see what you get for the money.
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Old 1st November 2011, 10:34   #42
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Post Re: Big Money + Big Talent = The overpriced market dud. How?

Nice thread GTO, let me add my experience here.

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Originally Posted by GTO View Post
There is no denying the talent either; large auto manufacturers have some truly bright brains at the top, and usually hire the smartest out there.
Yes it is true there is good talent at the top, but after a level the top bosses responsible for taking "executive decisions" are more involved in things which add less value to the product. Most of them act as figureheads only.

Quote:
How come it wasn't as obvious to the geniuses at corporate headquarters?
One prime reason for this is lack of profession knowledge (pertaining to the field). Many big honchos are MBA dudes, picked up from various domains (non-auto). I remember a pot bellied Vice President who did not know how to sit properly in his office chair, being invited to clear the final design of a driver seat for one of the "premium" products. What else do you expect from such actions?

Quote:
Did common sense ever figure in the brainstorming sessions? It's sad because each of the following cars brings a competent offering to its respective segment.
As someone rightly said, "the biggest shortage of all is the shortage of common sense."

Quote:
Wasn't there one person of authority who put his hand up and said "Waitaminnut guys, I think we are completely missing the mark here"?
There will be such people around. Usually, they are either not given power / avoided / shunned by people having authority.

In my 4 years, I saw quite dirty side of professionalism in Auto field (may be because it was .. ), I held on as it never affected me or my learnings. I always did what I loved to.

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Old 1st November 2011, 10:47   #43
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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Originally Posted by GTO View Post
Yet, the following much-hyped products have ended up as duds in the Indian market.
Would you include the Thar also in this list? I am not privy to the expected and actual sales numbers, hence this question. If so, a few forum members who were instrumental in it's development can surely give us some inside "gyaan" as to why it was positioned as a niche product instead of a replacement for the Major, why it was priced the way it was etc etc.

Cheers,
Vikram

Last edited by comfortablynumb : 1st November 2011 at 10:57.
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Old 1st November 2011, 11:11   #44
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Default Big Money + Big Talent does not matter

you can hire an IIM topper, and put him in charge, but that will not mean he will give results. Any industry which involves product development and marketing also requires, that the people who are involved are chosen not just because of their college and education, but also for their aptitude.
Services industry is very different. Everything is a process with clear outlays, and clear expectations defined by customer.
But when it comes to things like consumer goods, domestic goods and automobiles, all that talent does not matter.
The electronics(eg mobile handsets) industry realized that, and as a result, the they are able to get the pulse of the market.
In the Automobile industry you have drones, who would have worked similarly if they had been employed by a shampoo maker or a detergent maker.
They are so disconnected from reality that they get totally delusional.

They see a case study in Romania about some type of vehicle succeeding, and then they see the population demographic, and publish some powerpoint charts and then decide. We should make this.

Sadly it never works. You have to get down and dirty, and understand your customers needs and aspirations. A car is not a washing machine. Its a big purchase in Indian families, and an event which is broadcast in the entire family.

You cannot just create a product based on what a presentation generated for you.

Case in Point
1. Aria
forget the price. Forget the niggles. Forget everything. anybody with even a vague sense of connect to the Indian market will realize that a minivan can never be an "aspirational" vehicle.

People with large families wanting to carry a lot of people have the Innova. They are looking for a people carrier, not an aspirational vehicle. Mahindra realized this and introduced the Xylo.

14L is spent by people on a car who want to wow and impress. Its a lot of money.

To put things in perspective, an IT professional earning 1400000 a year would be earning around 90K USD in USA.

If you sell a minivan worth 90K USD will it sell? Never. However a sports car will.

2. Mitsubishi
If there was no BMW, no mercedes, no Toyota in this country, the montero may have sold. But as a brand Mitsubishi is no more aspirational than a Toyota. So why would anybody buy the Montero? Esp since they can get a X5 which has significantly more "show off value".


I will also do some prediction.

BMW is going to bring in the Mini at 25 lakhs. World over its priced as much as a top end Polo, or slightly higher.
So a realistic price, stretching to the limits, would have been 12-15L. At 25 lakhs it will be a dud. Just like the beetle was a dud.

This is the problem which plagues many companies. They have their own whims, and make their decisions based on case studies and analysis reports made by drones who would have done the same thing even with a washing powder.

companies which listen to what the customer actually wants... they do much better.

Eg Mahindra. They failed with the Logan debacle, but in SUV space they know exactly what majority want. XUV, Scorpio, Xylo, and Bolero are proof. They create vehicles which look straight out of a horror movie, yet they sell so well.

So all the big money and big talent does not matter. All it does is eat into profit margins, which are then squeezed from other vehicles, leading to shoddy quality.

If tata had never developed the Aria at all, but plonked all that money into making its manufacturing bullet proof, they would have come out with the most reliable cars in the country. That would have made sales.
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Old 1st November 2011, 11:12   #45
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

The strategists have blundered more often than not. Recent case in point is Renault, which has just lost it with the Koleos. Who gives them advice to price the products so irrationally clearly evident to even a 13 year old (my son in question). Same is with Honda, which seem to have totally lost it with a great product like CRV and Jazz (till the price cuts). Even Accord is over priced for that matter but somehow manages to garner decent numbers. Give it a 5L price cut and see its numbers quadraple.

Only some brands have been able to pull it off even after 'perceptibily' higher prices like the Fortuner and the X1 due to the badge. Case is clearly evident when the X1 outsells the Yeti.

And Tata's failure Aria - they should not have launched it at all. Instead they should have re-developed the Safari 'brand' and free it from its niggles and tried converting it into a world class product first, and then come out with a MUV second.

Last edited by dkaile : 1st November 2011 at 11:26.
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