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Old 31st October 2011, 12:34   #1
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Default Big Money + Big Talent = The overpriced market dud. How?

It's obvious that most, if not all, of the following manufacturers have a deep understanding of the Indian car market. After all, they have had the blockbuster product or two. 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. Plus, their research, marketing & advertising budgets run into several crores of rupees.

Yet, the following much-hyped products have ended up as duds in the Indian market. At the time of launch, a layman like me pronounced the Aria, Jazz, Kizashi, Fiesta etc. as being severely over-priced. Most of you also agree on the overpriced nature of the cars listed below. How come it wasn't as obvious to the geniuses at corporate headquarters? Fact is, the automotive landscape is extremely competitive today, and it's clearly a buyers market now. Overpriced cars will simply NOT sell....value is the new king.

My question is simple : How did the respective auto brands, with all the money, talent & research in the world, think they'd get away with it? What kind of research have they been really conducting? 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. 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"?

Tata Aria
Monthly sales average (2011) = 263. Competitors like the XUV500 sell out 4 months of production in a little over a week of launch, while the Fortuner maintains its stellar 1000 units / month performance.

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A giant leap ahead for Tata, the Aria is engineered like no other car from the brand. Excellent quality, equipment and overall product. But 18 lakhs on the road in Mumbai (over 20 in Bangalore)? Whoever signed off on the Aria's pricing was seriously out of touch with reality. A short while later, the Mahindra XUV500 comes along and makes the Aria look even more over-priced than we initially thought. Sorry Tata, even the 4x2 isn't going anywhere too soon.

Honda Jazz
Monthly sales average (2011) = 361. Meanwhile, the other premium hatchback - Hyundai i20 - touches 8,000 sales in some months!

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Sure, Honda recently corrected the Jazz pricing with a whopping 1.5+ lakh discount, but that doesn't take away from the fact that the premium hatchback was a market failure for 2 years (and still hasn't really recovered). 8 lakh rupees on the road for a car without alloy wheels or even a parcel tray!! Heck, the Hyundai i20 suddenly looked like value-for-money. In fact, it was after the Jazz' introduction that i20 sales shot through the roof. What was Honda thinking? Right then & there, they lost an opportunity on a potential 6,000 unit a month seller.

Ford Fiesta (new)
Monthly sales average (2011) = 610. The Honda City & 2011 Hyundai Verna clock anywhere between 4,000 - 5,000 cars a month. The Volkswagen Vento manages an average tally of 3,000. Sales of the previous-generation Fiesta actually increased after the 2011 Fiesta's launch.

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You'd think Ford learned of India's obsession with value-for-money after the Figo's success. Evidently not. Ford's attempt at pricing the Fiesta above the City, Verna and Vento was disastrous. If a car fails to gain traction in the initial months from launch, you can bet that price cuts are inevitable along the way. I can't think of a single car that was overpriced at launch, and managed to gain volumes without a price cut in the long run. Expect special editions, discounts and even a price correction soon.

Renault Fluence
Monthly sales average (2011) = 193. In only it's 4th month on sale, the Fluence managed a mere 100 sales.

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A 15 lakh rupee diesel car without USB audio input, climate control or leather seats . On the other hand, a fully loaded petrol automatic, at a time when the market detests petrol ATs (high petrol prices + poor fuel efficiency). Only one variant with either engine. You'd think that Renault lost a bet. What else can explain the woefully poor launch strategy of the Fluence? Did Renault honestly expect to put up a fight to the mighty Toyota Altis, Chevrolet Cruze, Skoda Laura, VW Jetta & Honda Civic with this weird positioning? Marketing failure 101 (or "How NOT to launch a premium sedan").

Skoda Yeti
Monthly sales average (2011) = 186. Sits at the bottom of the pile in the premium SUV segment. Every other 10 - 20 lakh SUV, even the old antique Pajero, outsells the Yeti.

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Actually, one of the best engineered soft-roaders in the market today. The engine, ride, handling & overall quality are unmatched. However, it looks too small for the price. Indians usually like their SUVs big & butch. Skoda completely missed the mark with the Yeti's pricing.

Maruti Kizashi
Monthly sales average (2011) = 37. The Honda Accord & Skoda Superb sell 7 - 9 times as much.

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Previous generation Vitara? Flop. Current gen Grand Vitara? Flop. Maruti still knows absolutely nothing about the premium segment & the Kizashi is proof. Why else would they price the Kizashi - a car with the interior space of an Altis & Civic - at 20 lakhs on the road? The Kizashi can't match the Superb or Accord on comfort, space or perceived value. Plus, the Maruti brand simply doesn't meet the aspirational needs of the 20 lakh customer. The only way to overcome the brand disadvantage would be to price the Kizashi well...something Maruti miserably failed at. Chevrolet realised the brand deficit they had, and priced the quick Cruze incredibly well. Result? The Cruze even outsells the Altis from time to time.

Mitsubishi Montero
Monthly sales average (2011) = 6. The Audi Q7 does 10X that in most months. while the pricey Porsche Cayenne does 25 units (averaged). Clearly, there are a certain number of 50 lakh SUV customers who turn away from the Montero.

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I have a grudge against Mitsubishi for this one, primarily because I LOVE the Montero. In my books, its one of the best SUVs ever sold....and right up with the Landcruiser. The pre-facelift Montero debuted at 35 lakhs, but didn't find any takers at that price. HM-Mitsubishi's reaction? Shockingly, to raise the price even more. In the last 3 years, the Montero's MRP has done a yo-yo between 40 - 51 lakhs. It didn't sell then, and it won't sell now. Hindustan Motors has sealed the Montero's fate in India.

Renault / Mahindra Logan
Sales before the price cut = About 500 units a month. This at a time that the Dzire frequently managed 7,000 - 9,000 sales, and the Indigo / Manza sisters about 5,000.

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Now known as the Verito, the erstwhile Logan is a cheap sedan that is built to strict costs. It feels cheap inside out and doesn't even get proper door handles. Yet, when Mahindra-Renault introduced this sedan, it was priced at about a lakh more than the Tata Indigo (the other cheap workhorse). Result? A universal thumbs down from the masses. The Logan performed so poorly that it led to a divorce between Mahindra & Renault. The rebadged Verito is seeing better times now (1,500 sales / month), but that still isn't a patch on what other entry-level sedans do.

Last edited by GTO : 1st November 2011 at 09:26.
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Old 31st October 2011, 18:22   #2
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Default Re: Big Money + Big Talent = The overpriced market duds. How?

Thread moved from the Assembly Line to the Indian car scene forum.
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Old 31st October 2011, 18:35   #3
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Very Nice thread GTO!!
Even that is my question as to what R&D or Market Research these guys do?

One of my colleagues is looking to buy the new Ford Fiesta Petrol. He told me that they have already started offering discounts on the car. 2 months into the launch and already discounts are pouring in.

Its like Koutons business model. Price a 100 RS thing at 500 Rs. Then show 50% + 40% discount and sell it for 150Rs.

Why cant they just price it at 150.
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Old 31st October 2011, 18:44   #4
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Nice thread GTO and very well summarized, I hope someone from these auto giants are reading these.

Of all the products mentioned the biggest disappointment for me is Tata Aria as Tata is known to be the quintessential VFM brand, wish they wake up because the Aria IMO is a great product.
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Old 31st October 2011, 18:48   #5
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Your post precisely justifies how we Indians, beneath all the lust for pomp and show still want VALUE.

Be it in a 4 lakh i10 or a 15 lakh Laura, each car just *has* to have the features and specs to deserve the price tag. For us, "kitna deti hai" still is an important part of the car buying process.

This being said, it is really surprising how the marketing team at the manufacturers' doesn't take this seriously when history has pointed it out umpteen no. of times.

If you look at it, Honda did not price either the Jazz or the new City appropriately. Funnily, the market was lapping up the new City before it was petrol that halted it's run.

I think each manufacturer has taken a generous liberty in over-pricing its products; probably in the hope that their "image" will see them through.
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Old 31st October 2011, 18:49   #6
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Nice topic GTO.
i think the top guys do have the data and predictions with them but are compelled to go with the current pricing due to various reasons. IMO

Like Aria, they might not want it to be in Taxi segment and keeping under 10L will eat into Safari sales too. Also they had to consider the pricing of Merlin.

Jazz , i think they tried the premium strategy like city and civic. Which they were taken on wrong foot.

Rest 4 i even cant think of a reason for such pricing. As for Verito may be the split effected them.

Last edited by v&v : 31st October 2011 at 18:51.
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Old 31st October 2011, 18:52   #7
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

I was waiting for someone to start a thread on these lines. Thanks GTO for finally putting up one. I have always wondered why is it so tough for those big corporate houses with millions at there disposal to judge something as basic as pricing. Even if they are somehow unable to gauge that then what stops them from conducting a simple survey of people belonging to different backgrounds across some of the major cities and then analyse the results. The survey can have questions ranging from what the customer feels about the brand, do they own a product from that brand, how do they see the brand's future, how do they rate it in comparison to its rivals and then finally how much do they think should be the price of a particular product. Just like what Mahindra did with the XUV. Everyone had labelled the XUV a flop on the day of its launch and out came Mr. Mahindra with a shockingly low price tag and the rest is history.

Business houses specially like Tata and MSIL are the leaders of the Indian auto industry. Leaders because they survive and rather pass out with flying colours in a segment where the most important thing is VFM. Most buyers in the A and B segment are with a limited budget. They don't even learn from mistakes.

And then there are foreign companies like Renault who have already ensured that there existence in the Indian market is not a long one. First they give us the Fluence. A car from a new company which had managed to create decent interest among buyers before its launch. But renault decided to price it like crazy with the most shocking move being the launch of only 2 variants and not realising that Indians are moving towards the diesel engines more. First mistakes can still be overlooked and one would think that a reputed car maker would realise from its failure and do better the next time. But they then end up getting the Koleos at 25L which is even more ridiculous. With the launch of the Q3 and Fortuner AT, I feel Koleos will not even maintain the already dismal numbers its doing now. As if its not enough now they decide to give us pulse knowing very well that Micra in itself hasn't really been a blockbuster hit.
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Old 31st October 2011, 19:05   #8
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Overpricing is no doubt the Achilles heel in each of these cars but some of the products are not properly designed.
Fiesta for example is underpowered & the fit & finish can embarrass a Fiat.
Yeti looks yeti (which means ugly) and sure it is short in space.
Kizashi. Where is the oil-burner? In this segment oil-burners rule.

Aria & Jazz are perfect. A proper pricing could have led them somewhere else.

I believe no matter how bad a product is, (not as bad as Nano) a value for money pricing can buy it a ticket in the number's game. Take Dzire for example. It looks hideous. Space is like any ordinary hatch. Interiors are spartan. Ride & Handling is not in Swift segment. But it still sells and sells like hotcakes.

@ GTO: I am surprised you have not included Micra in this list. Or may be some others like Captiva, Santa Fe, Cedia.

Last edited by oxyzen : 31st October 2011 at 19:08.
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Old 31st October 2011, 19:28   #9
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Very interesting thread.

The manufacturer will also need to retrain dealership to handle a different customer segments. For example for Jazz, Honda will have to ensure that the Dealer get the pulse of the new and different Jazz customer. If he remains elitist the numbers will never pick up.


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Old 31st October 2011, 19:37   #10
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Thank you GTO. It gives a very good idea of Dud car sales, irrespective of brand / features. The VFM factor is brilliantly portrayed here.

Some vehicles that i could think of

Honda CRV
Mitsubishi Lancer EVO X
Lancer Cedia
TATA Winger Platinum (Targetted at Private buyer Segment)
Maruti Vitara / Grand Vitara
Chevy SRV
Premier Rio
Force One

@GTO - If you could add the approx monthly figures for these models, would be great.

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Old 31st October 2011, 19:38   #11
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

It's because of these 'still born launches' I own my car at 1L off the OTR price. These will eventually fade out or be sold with heavy discounts. One more car to be added is the present Sonata Transform which sells some 10 units a month, yet, Hyundai is holding on to the sky high price. Just before the launch of the i45 I think there will be a 'fire' sale of the present Sonata that's actually a comfy cruiser (diesel). Hyundai I'm waiting for the 'fire' sale, please, launch the i45 fast and sell Sonata Transform at 8L OTR it will be a steal at that price.
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Old 31st October 2011, 19:46   #12
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Interesting topic. 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!] , that would have been a step closer to being 'tolerably priced' with respect to thier current price.But, this FWD variant whether manual or automatic , at the current price. Its no surprise, that at the current price it has very few takers.
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Old 31st October 2011, 19:47   #13
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

I think for Ford after the Figo, the Fiesta pricing was a 'moment of madness'. A silly self goal.

I think the car makers must do more hygiene and not leave pricing to a few folks who may drive things the other way getting carried away with the 'premium brand image' which in most likelihood drives such pricing decisions.

I think the recent moves by 'head in the cloud' Honda on Jazz and City were encouraging, and clearly the market is changing and its for automakers to quickly learn their lessons.

Skoda is one brand that seems determined to positioning itself differently than everywhere else and has got away with it, but what's wrong with delivering value and getting volumes, why should everyone aspire to be BMW and Mercedes, especially when they are not.

The India car market is overpriced compared to other markets, never mind taxes, even for equal income, get in purchasing power parity and folks income levels here and it becomes hugely so.

Last edited by raul : 31st October 2011 at 19:48.
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Old 31st October 2011, 19:55   #14
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

The Yeti, IMO, will not sell much even with a radical price correction. It has absolutely no imposing road presence. I had a tough time convincing my mother-in-law it's not a WagonR.

It's the Jazz's pricing that has given the i20 a lifeline, and it is the sales of i20 that paved the way for Punto and Polo. If Honda would have priced the Jazz sensibly, (but without alloys etc), either the i20 would have been a failure or we would have been driving premium hatchbacks without premium features. Let us all congratulate Honda on this occassion

BTW, the price correction 1.5L itself speaks a single word about their initial pricing strategy: Cheating!

Last edited by sandeepmdas : 31st October 2011 at 20:02.
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Old 31st October 2011, 19:56   #15
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

That's quiet a timely thread GTO, thanks for starting this in the first place! I can't agree more with your views on all the cars listed above. Probably, very soon, we would be seeing Force One (more than 10 Lacs for a car without even ABS/Airbags) and Renault Koleos (the lesser said, the better).

For me, the biggest disappointment was the failure of Tata Aria. I had the opportunity to be driven and inspect one in close quarters and I swear that it is a bigger step forward for Tata, even bigger and better a step than the XUV500 is for Mahindra. It's a shame that Tata priced it high and the Indian customers shunned away from it.

Surprisingly, there are a few exceptions that succeeded against our expectations too. For example, when Hyundai announced the prices for the Santa Fe, how many of us expected it to become a success? For around 25 Lacs, it is way overpriced than many of its competitors. Also, we all know what happened to the Terracan and Tucson before it and how many of those sold in India. Even Hyundai didn't expect the Santa Fe to succeed and that is why they launched the model here with just around 600 units imported from Korea. Result? All the cars were lapped up and Hyundai had to close the bookings before relaunching it again a few months back.
Originally Posted by oxyzen View Post
@ GTO: I am surprised you have not included Micra in this list. Or may be some others like Captiva, Santa Fe, Cedia.
I think all the above models except one cannot be termed as failures. Micra can only sell that much with Nissan deciding to sell it only through a handful of dealerships. Captiva and Santa Fe, at the prices in which they retail are definitely success stories for GM and Hyundai, considering both the manufacturers didn't have a premium brand image. Cedia failed not because of its pricing, but because of HM & Mitsubishi's lack of proper marketing and patronage.

Last edited by arvi86 : 31st October 2011 at 19:57.
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