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Old 16th December 2011, 09:37   #16
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Default Re: The downside of price cuts (for an existing owner)

I see comments from BHPians who have bought cars before price cut saying they were cheated /Looted. Like electronic items price cuts in cars are here to stay. This is not a blip or a short term phenomenon. If one buys a newly introduced laptop, TV or a mobile phone one would pay a premium for exclusivity. The same is happening in cars now here in India. Choices of Car models have increased, Spending power of Indians have increased and lot of global car manufacturers are making their way into India. Under such macro economic scenario such a price cuts will be more frequent in the future. Does that mean we all will stop buying car or we need to feel cheated. No. We will continue to buy cars. We will continue to enjoy the exclusivity of newly introduced car. My two cents.

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Old 16th December 2011, 12:00   #17
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Default Re: The downside of price cuts (for an existing owner)

I think that the whole feeling of being "cheated" boils down to our mentality of seeing capital goods as investment, rather than as a life style expenditure.

We treat expensive phones, laptops and high end electronics as a life style purchase and rarely think of them as an investment with a great resale value, so why cars?

Time was when you bought a car for say 20K and sold it for 30K after a few years of use (the new car had gone up to 40k!), and that is what is always at the back of our mind. Take the case of a Luxury vehicle. You buy it and then within a couple of years its value is half and by the time you get a new one, it is barely 25% of its original value.

Let us face it, the market is maturing, and price corrections are there to stay. Buy a car for the pleasure of owning and driving it, rather than as an investment. Once the mind set changes, cars with great features and performance will start selling, rather than cars with "great resale value".
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Old 16th December 2011, 12:17   #18
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Default Re: The downside of price cuts (for an existing owner)

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I think that the whole feeling of being "cheated" boils down to our mentality of seeing capital goods as investment, rather than as a life style expenditure.

We treat expensive phones, laptops and high end electronics as a life style purchase and rarely think of them as an investment with a great resale value, so why cars?

Time was when you bought a car for say 20K and sold it for 30K after a few years of use (the new car had gone up to 40k!), and that is what is always at the back of our mind. Take the case of a Luxury vehicle. You buy it and then within a couple of years its value is half and by the time you get a new one, it is barely 25% of its original value.

Let us face it, the market is maturing, and price corrections are there to stay. Buy a car for the pleasure of owning and driving it, rather than as an investment. Once the mind set changes, cars with great features and performance will start selling, rather than cars with "great resale value".
I completely agree with you on what you just said.

However, there are many of us who can't afford to spend a great deal on a car without expecting some of it back once you've enjoyed it. And we would like to enjoy the pleasures as well. I mean, it's a subjective thing. Preference has a lot to do with purchase, even if there is an enthusiast in there, somewhere.

There are many who consider capital-goods as a luxury. Only they belong to the rich and wealthy class.
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Old 16th December 2011, 14:01   #19
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Default Re: The downside of price cuts (for an existing owner)

@Aroy and Suhaas, I agree with you guys partly but on the whole there is a point that I want to make. Electronic gadgets are far cheaper at say 30 or 40k and that is why we dont consider them as an investment. So if you bought a mobile phone for 30k you wouldnt buy it considering what would be the re-sale value. Technology in gadgets made them cheaper, but not so in cars. Cars have actually become expensive over the years, yes with added features ofcourse. So when you buy a car you actually think about the re-sale value. Or why would scores of people still buy marutis / hyundais? Coz they know at some point when they decide to sell it, they would be assured of a decent re-sale value. And I dont mean to say that you should not buy a car that is very enjoyable to drive, but it has to have a fair amount of re-sale value kicking in. And how else would you buy a new car then the second time around? If I bought a sedan for 6 lakhs and later sell it for say 4 lakhs, then I would probably buy a 8-10lakh car pitching in the difference. but if i sold it only for 2lakhs, then can I really afford the 8-10 lakh car? This example is keeping in mind the aspirational mindset of any normal consumer.
Coming back to the topic, like a lot of you said, I think if you went out and bought a Honda city or the jazz before the price cuts, you had enough options, but still went ahead and paid a premium for the hondas, may be because you wanted to buy a premium product Or may be you banked on the Honda brand, which is alright actually. People may feel let down, but the upside as some one said, the price cut will improve the visibility of the product and may help you sell faster or even keep servicing / spares afloat for a while. And lastly it will make certain customers who may have been honda loyalists sit up and think the next time they decide to buy a honda. It will lead them to believe that may be honda is not a premium car say when compared to hyundai or ford and will open up their options.
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Old 16th December 2011, 14:25   #20
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Default Re: The downside of price cuts (for an existing owner)

A car, like most other white goods and electronics is an expensive depreciating asset.
The downside of price cuts on existing models is that later on, resale values will get affected to some extent. But this is something we have to live with - we have seen over the last 7-10 years the way the used car market values have changed, with many offerings across the board and some really excellent prices.
The bottom-line as others have said, we have to consider a car as a depreciating asset and hence, try and extract the maximum value from it during our period of ownership. We cannot consider it a "lifetime purchase asset" any more, like it used to be in the pre- liberalization era!

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Old 16th December 2011, 14:53   #21
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Default Re: The downside of price cuts (for an existing owner)

Buy it, Drive it, Accept it !
This philospohy is true for everything you buy of high value, be it cars, bikes, electronics, TVs, mobile phones, etc. However, much we want we won't be able to capitalize on these price cuts. However, maximum time I have heard of price cuts there have also been some reduction in features or accessories like in the i20 we had 6 gears before the price dropped by 10K. The Nokia e71 was launched in a cheap but effective version called the e63. The comparison may not always be apples to apples but, one needs to accept that there is no right or wrong time to buy anything. Only exception for this is real estate, commodities & stocks people, don't always rush in when on rise, don't always cash out when on fall.
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Old 16th December 2011, 15:08   #22
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Default Re: The downside of price cuts (for an existing owner)

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However, maximum time I have heard of price cuts there have also been some reduction in features or accessories like in the i20 we had 6 gears before the price dropped by 10K.
+1
Price cuts are usually accompanied by a reduction in quality and features. Take the case of Fiesta Classic or the 'new fabia'. That is something the old buyers(people who bought at higher prices) should feel good about.
Any idea whether Honda too followed the same route for price reduction in Jazz and City?

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Old 16th December 2011, 15:22   #23
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Default Re: The downside of price cuts (for an existing owner)

As an Aria owner I could be consider "An effected party"

Yet
I do favour a price revision if it gets the vehicle to sell better. Yes it is best if the manufacturer gets it right upfront but if it doesn't then better late then never.

The Jazz too is a phenominal vehicle affected only due to pricing that makes the I20 seem well priced though it too is clearly overpriced as well.

A later revision with more vehicles of the afffected type on the road will invariably result in better support over the period. The manufacturer needs to support the earlier buyers well and they would not be too disgruntled at the loss of exclusivity in the long run - it is never intended/expected to be for too long after the car launch anyways.

The addtional problem is that now a days there is such a large difference in the price of base spec and top end varients that if one is picking up a top spec vehicle for among other things snob value then that person could feel short changed even more after a price revision. But that happens even with the luxo badges and they to end up offering phenominal discounts on vehicles after the first year.

In anycase all fresh / early buyers of a new vehicle do know that they are missing out on 5-10 off lower pricing that may prevail a year down the line in terms of year end discounts.
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Old 16th December 2011, 15:34   #24
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Default Re: The downside of price cuts (for an existing owner)

With all due respect to the subject of the thread, i think we cannot get very serious about resale proportion of the car. This is not the first time neither will be the last. The humiliating price cuts( from the owner's perspective) dates back to the days of Cielo. But, i'd like to add, one can stay away from such price cuts effects by identifying the fake premium one is putting in a car during the purchase. Right from Forrester, UVA, Getz crdi ....to the latest City, Jazz , i20 crdi, one can figure out the pricing is inflated. calculate the VFM of the car and the price cuts will not happen unless the vehicle is to be phased out.
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Old 16th December 2011, 16:38   #25
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Default Re: The downside of price cuts (for an existing owner)

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one can stay away from such price cuts effects by identifying the fake premium one is putting in a car during the purchase.
I agree with blackbeast.

I'd like to take the case of Honda City and Honda Jazz .... An incredible number of Honda City owners (esp. in North India - no offence meant!) have bought the car over the years because it is a 'Honda' - that signified exclusivity and 'class' in social circles for the very reason that is was a non-VFM offering.

The non-prestige conscious buyers of the Honda City and Jazz will also agree that they bought it because it is a bloody good car (great engine, mileage, decent interiors, honda reliability) DESPITE knowing that is not VFM.

So, in effect, most folks are feeling cheated that the manufacturer is now offering more 'value' for less, thereby taking away from its 'prestige'/'exclusitivity' tag. A little bit like someone buying a Rolex watch for the great product it is but also for the exclusivity ... and then Rolex cutting its prices to become a 'mass' brand

No sympathies offered for existing owners of overpriced products ! ... and no offence meant too - everyone's priorities while buying any product are different !

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Old 16th December 2011, 18:57   #26
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Default Re: The downside of price cuts (for an existing owner)

Most of the luxury brands that have become well known to a larger section of people over the years are slowly getting commoditized. This is a phenomenon happening world wide. Where once owning a Rolex or Panerai was the preserve of the extremely well heeled and well travelled, the re- distribution of the wealth and creation of new wealth has seen to it that a lot more people than ever before, have access to these products. As I have mentioned somewhere else on another thread, even the exclusive Armani brand created Emporio Armani to hit the streets with affordable semi luxury from a brand whose DNA stands for and breathes luxury!
The fact is that while many luxury products and brands are getting commoditized, so are the standards of true luxury going higher and higher. The case of hand-built cars, yachts and what have you. The same goes for the truly exclusive, individually numbered, limited edition watches and so on. Even the Holland & Holland Overfinch Special Edition Range Rover is a case in point.
Ultimately, it is what drives the individual. Does one buy something so that one can show it off to the world around one? Or does one buy something to derive private enjoyment from owning and using a truly superbly finished, well engineered and desirable product? That's a question that only each individual can answer!

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I agree with blackbeast.

A little bit like someone buying a Rolex watch for the great product it is but also for the exclusivity ... and then Rolex cutting its prices to become a 'mass' brand

No sympathies offered for existing owners of overpriced products ! ... and no offence meant too - everyone's priorities while buying any product are different !
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Old 16th December 2011, 19:13   #27
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Default Re: The downside of price cuts (for an existing owner)

I dont think it is fair to say honda is an exclusive brand. They do make good cars, but they are far from being a "luxury" brand.Also, just because something is overpriced, it doesnt become a luxury item.

Many people overlooked Jazz when buying a car because of its price and clearly, they had to cut the prices to remain in the market.

Even in the case of new fiesta, people felt it was overpriced. Now, does that make Ford a luxury brand. It was a given they had to cut prices sooner or later. In Ford's case it was sooner but Honda held up for 2 years.
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Old 16th December 2011, 19:47   #28
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Default Re: The downside of price cuts (for an existing owner)

I will put it this way. Honda, Suzuki and Toyota are pretty much considered on par anywhere else in the world. Renault is a VFM car anywhere else in the world, as are Skoda and VW. It is only a matter of time before all these brands get real, here in our market and it is happening sooner than anyone thinks! This is why they've all gone the route of Top down strategy and went all out to make money while the sun shines. So far the sun hasn't yet set on them, but the shadows certainly are lengthening!


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I dont think it is fair to say honda is an exclusive brand. They do make good cars, but they are far from being a "luxury" brand.Also, just because something is overpriced, it doesnt become a luxury item.

Many people overlooked Jazz when buying a car because of its price and clearly, they had to cut the prices to remain in the market.

Even in the case of new fiesta, people felt it was overpriced. Now, does that make Ford a luxury brand. It was a given they had to cut prices sooner or later. In Ford's case it was sooner but Honda held up for 2 years.

Last edited by Rudra Sen : 19th December 2011 at 16:29.
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Old 16th December 2011, 20:22   #29
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Default Re: The downside of price cuts (for an existing owner)

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I will put it this way. Honda, Suzuki and Toyota are pretty much considered on par anywhere else in the world. Renault is a VFM car anywhere else in the world, as are Skoda and VW. It is only a matter of time before all these brands get real, here in our market and it is happening sooner than anyone thinks! This is why they've all gone the route of Top down strategy and went all out to make money while the sun shines. So far the sun hasn't yet set on them, but the shadows certainly are lengthening!


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I dont think it is fair to say honda is an exclusive brand. They do make good cars, but they are far from being a "luxury" brand.Also, just because something is overpriced, it doesnt become a luxury item.

Many people overlooked Jazz when buying a car because of its price and clearly, they had to cut the prices to remain in the market.

Even in the case of new fiesta, people felt it was overpriced. Now, does that make Ford a luxury brand. It was a given they had to cut prices sooner or later. In Ford's case it was sooner but Honda held up for 2 years.

If someone is buying a car (or anything else) because they think it is luxury - well good for you buddy but when that product becomes cheaper don't show your own cheapness by cribbing about it.

And why overlook another fact- for things like cars, when they become cheaper more people buy. That has its own advantages for existing buyer - bigger second hand market and better after-market services (because service providers have a bigger market)
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Old 17th December 2011, 17:03   #30
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I fully support price-cuts as they inevitably lead to a value-for-money proposition. Who's the end beneficiary? I, the customer.

However, I might add, it's best for the manufacturer to price the car correctly from day one. That greatly helps in:

- Strong sales performance from day one. There are several cars (Jazz included) that haven't taken off even after a price cut. Now, imagine what volume Honda would have enjoyed if it had to price the car perfectly from day one itself. The Jazz was so poorly priced that it made the i20 suddenly look like a VFM car (consider how its sales shot up after the Jazz was launched). People on the street still don't know of the Jazz' new price. Honda basically killed the car with a lousy strategy.

- The brand value takes a huge hit in case of drastic price cuts. Sentiment from existing owners becomes negative, while resale values plummet too.

Still, correcting the price of a good car is far preferred over continuing to sell it at an inflated price.
As a marketing strategy, I think it makes sense to price a new/superior product higher than expected for a bunch of reasons. To begin with, the early adopters will be willing to pay a premium to get their hands on it first. Secondly, the aspiration and exclusivity of having it would make up for the additional cost.

For cars, though, it probably doesn't work that way, especially when there are other cars in the same segment with which it can be compared. Besides, especially in India, the average consumer is more concerned about features, fuel efficiency and value for money rather than reliability of the brand or engine or, to some extent, even the performance.
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