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Old 8th March 2012, 10:17   #1
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Default Reaction to Price Cuts: Is the Indian car market too brand biased?

Case study 1:

Honda city launched in 2008 priced between 7.7 to 8.90 lakhs. V models added next year and price kept on going high. Later ongoing reaction to lac of diesel engined vehicles on their stable and waning demand of petrol vehicles, the car sees a massive price drop and more discounts before the facelifted version is launched below 7 lakhs (CE edition.). Natural calamitis aside, demand shoots up and as of last month, 6000 plus vehicles shipped. Similar situation with the jazz. The day the car is repriced and repositioned, bookings shoot up and the car now commands a waiting period of 6 months due to honda not able to produce vehicles citing parts and components shortage. The difference still remans to be seen. Existing buyers get frustrated due to falling resale values of both the cars but new car buyers take the reaction positively.

Case study 2:

The new Ford fiesta. Launched in july 2011 with both petrol and diesel engines in 4 variants each. Car is well rounded and gets good reviews from media and press alike. Ford prices the car very high. Production-demand mix confuses dealers and today, even after 1 lakh discount, the car simply has no demand. Many dealers still have DIESEL fiestas lying in their yards struggling to sell even after a big discount. Ford advertises the car's price now from 7.5 lakhs (petrol) but last month only 77 cars dispatched.

A/T launched at competitive price and in the near future, model rejig is on the cards. But still, why isn't the car in demand?
What could be the possible root causes for so much brand bias in general in the Indian automobile market?
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Old 8th March 2012, 10:42   #2
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

I guess Ford is not advertising the discount well enough - I didn't know they chopped off Rs. 1 Lac off the price tag! There is no mention of the discount in auto mags too. I haven't seen advertisements in national newspapers yet.

Anyway, its not a brand bias or anything of that sort. If a popular car model's (City) price is cut, it becomes more popular. If an unpopular model's (new Fiesta) price is cut and it doesn't sell well, then it would mean that the high price is not the sole reason for its poor sales. Something else is putting the customers off.
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Old 8th March 2012, 10:46   #3
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

I am sorry but I didn't really get the gist of your thread. How is the Indian buyer biased? Infact both your case studies only tell the same thing that the Indian buyer is no longer a sucker for brands and rather goes for a product that shouts VFM.

We loved Honda since they came into the market when there were not much options. They gave us a good car and charged a premium for it too. But then they started taking things for granted and ended up pricing there car way too high even in face of stiff competition from equally good brands like VW and Hyundai and this coupled with the fuel pricing fiasco led to there downfall. In the end they woke up and re-priced the car and the sales have now picked up.

On similar lines Ford took the buyers for granted after the success of Figo and the older Fiesta. They went all wrong with the pricing of the new Fiesta and ended up with Zero sales. Now they are in a soup. They really need to cut down on the price and hope that the stigma of being a costly car is forgotten soon. Only then they will be able to sell the fiesta.

Our market is becoming competitive now with new cars launching every week. So any automaker needs to really think about its launch before going ahead with it. Take a look at Nissan. They had average success with the Micra. They launched Sunny but only in Petrol and hence the car only sold around 500 units a month even though it was capable of doing much higher numbers. Finally they saw that and launched the diesel variant, maintained the specifications of both the variants excellently unlike the Micra and the sales have just gone north from there. Its doing 3000 units/month now which is phenomenal given that they still have got a narrow dealer base.

Last edited by drmohitg : 8th March 2012 at 10:47.
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Old 8th March 2012, 11:02   #4
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

Please do NOT use acronyms like NFS. Refer to cars ONLY via their full names. Thanks.

The New Ford Fiesta is a good car if you are looking for gadgets+handling, at a reasonable(not cheap) price. The market does not exist for customers to plonk dough on a Ford because they really haven't proved themselves in the reliability/cheap to own space. It may be a wrong perception, but then, so is brand value. Honda still has its fans and other than fuel costs, no owner has a complaint about it always-on (GTO's line) capability.
The Vento had people clamouring for it because it ticked all the demands for an affordable European car with diesel economy, I doubt people were lining up for VW, Rapid sales show that same formula works just as well with a different badge. If anything, Indians seek value and low running costs, and this applies across all price bands, from the hatches to the S-7-A8 class(majority diesel sales).

Last edited by GTO : 9th March 2012 at 12:50. Reason: Please do not use acronyms like NFS. Thanks.
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Old 8th March 2012, 11:08   #5
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

One reason is Honda is aspirational and Ford isn't. People wait for the Honda's price cut and they aren't bothered about Ford. Honda has a better *** record than Ford. Ford basically has 4 products Old Fiesta, New Fiesta, Figo and Endeavor to Honda's 6 product lineup. There is a major goof up where the New Ford Fiesta has less power than the old Fiesta's 1.6. New Fiesta isn't that attractive as the spruced up City.
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Old 8th March 2012, 11:12   #6
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

I guess people feel that the new fiesta is still not worth the price. Ford might need to slash 50k on the Classic and 1L on the new Fiesta. And witness the cars fly off the shelves. OTOH, ford need to aggressively market its new fiesta and the new price cuts. Never saw a '1 Lac off' ad from Ford yet.

And we are not exactly 'biased'. Its just that owning a Honda sedan is a little more aspirational to people. Owning a Honda City has been aspirational since OHC (Gen 1 Honda city) days. And so it continues.

Similar case with the Swift. The new Swift has got away with being overpriced. IMO, the new Swift should have really been priced similar to older Swift. But owning a Swift is aspirational to people who want a B+ hatchback. Swift is the first successful B+ hatchback.

Last edited by blue_pulsar : 8th March 2012 at 11:17.
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Old 8th March 2012, 11:17   #7
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

Note from Mod : Please do NOT use acronyms when referring to cars. Use FULL NAMES only

The Honda brand name is associated with quality. The Honda City - all three generations - were quality vehicles and least problematic comparatively .

On the other hand, ford has got a reputation of being high on maintenance and also the ikon was known to be problematic. My relative owned an ikon briefly and sold it because he didnt have time to visit the workshop every month.

They are making amends but Indians like to do a bit of research before putting their hard earned money on a vehicle and so ford will have to do quite some convincing.

It is not without a reason some brands enjoy their success. They do not dump cars into owners hands and leave them astray.

I believe Skoda is on the path of self destructing their brand name and Fiat is already there.

Last edited by GTO : 8th March 2012 at 17:29. Reason: Note from Mod : Please do NOT use acronyms when referring to cars. Use FULL NAMES only
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Old 8th March 2012, 11:18   #8
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

In my view there is a slight preference to Japanese manufacturers as people know that they build reliable cars. Case in point Honda, the only problem with the lineup was (1) Petrol only, (2) Price. Now once they reduced the price it makes sense for folks who drive less to plonk their money with Honda.

It will be interesting to see if similar step was taken by other Japs and how the market responded. If i remember correctly, Baleno was once sold at a much higher price, once Maruti decided to throw in some discount it did decent numbers (This is way back in 2005/2006).
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Old 8th March 2012, 11:40   #9
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

It is the 'VFM' factor that is crucial for the success of the a launch. While the service and aftermarket factor would be an added factor for the success!

Cheers!
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Old 8th March 2012, 12:49   #10
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

I am for the motion!

I think what Siddy is trying to suggest is that a 'similar' action taken by two manufacturers is met with different responses from junta. Thus, it clearly shows an Indian bias towards certain brands compared to others. And I agree...

I think Indians generally have a strong brand perception and at times stick to it, sometimes bypassing the product qualities/deficiencies in the process. To me, the general Indian brand preference is (I am not taking into account 'Holy Trinity', Jag, Volvo or any other luxury brand):

German(VW) > Jap(Honda, Toyota) > Korean(Hyundai) = Other European(Renault,Fiat) = American (Ford/GM)> Indian(Tata, Mahindra).

However, it will be an over generalization to make a category based on origin. How else would you explain that Indians like Honda/Toyota but do0n't have any real affinity towards Nissan/Mitsu (also Jap).

Most importantly though (despite the brand bias), Indians love a deal. Cruze, Figo, XUV etc. and the list goes on an on.

Also, I think the brand bias is more prominent as you move up the ladder (cars>14-15 lacs). I know many people who will for sure pick up a Jetta (base) over Fluence(fully loaded) simply because the former is German and the latter is French.

Just my reading of the Indian customer trends.

Last edited by Abhi_Automobile : 8th March 2012 at 12:52.
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Old 8th March 2012, 13:36   #11
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How about this?
Case 3: The VW Vento
Launched in 2010 as a well-rounded and reasonably priced sedan from a leading German manufacturer, with the then class-leading and all-important diesel engine, the car has done good numbers in all months since launch. It's mostly only average in all parameters, and VW aren't particular renowned for reliability and ease of ownership (a la Honda) or the fun to drive factor (unlike Ford). Though the price has steadily gone northward with an increase of 1 lac INR in just 18 months, and it's no longer "reasonably" priced, it still finds takers, unlike the New Fiesta and the pre-price cut City.

Now how can that be explained?
As far as I can see, it's only brand perception. VW have done well to establish themselves as a premium German brand in India and are now making full use of their pricing power.
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Old 8th March 2012, 14:01   #12
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

I think what you are trying to say is – similar reaction from two manufacturers, but different results.

Brand bias is definitely there. For many years Honda is considered as the premium brand for the mid-segment buyers and for many Honda is the brand to go with if they have 10 lakhs to spare. Ford was never in that bracket. And IMHO, the only brand which has managed to create that kind of a snob-value is VW. To an extent the love for VFM takes a backseat when it comes to these brands.

And as Abhi mentioned, VFM offers works very well in our market, irrespective of the brand or looks. Figo, Swift Dzire etc are some examples, and the most recent one is the Sunny.

On a side note, couple of years later, we very well could see folks recollecting the fond memories of a car called Fiesta (similar to how it is happening now with the Fusion or the Mondeo).
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Old 8th March 2012, 14:03   #13
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

Quote:
Originally Posted by one-77 View Post
How about this?
Case 3: The VW Vento
It's mostly only average in all parameters, Now how can that be explained?
As far as I can see, it's only brand perception. VW have done well to establish themselves as a premium German brand in India and are now making full use of their pricing power.
Vento TDI is one of the best cars currently available in the C segment. Infact, it should have been doing more numbers but maybe the 'Rapid' effect has taken its toll on the numbers!

Whereas in the case of Rapid, even with a perceived ' bad' after sales reputation the Rapid is doing great in the sales charts. This is because more so considered
'VFM'. Infact in the Feb figures indicate it doing better than Vento.

So looks like a VFM offering is the key to success and not always the bias towards a brand.


Cheers!

Last edited by volkman10 : 8th March 2012 at 14:31.
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Old 8th March 2012, 14:09   #14
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

Its all down to "bang for the buck". With the price cut, the case point of City played perfect VFM card. Not only the brand, the quality and performance that City gave especially in comparison with Fiesta naturally made it reach the top of the segment's sales charts. With what seems to be like model rejigging by deletion of DTE, fuel computer on mid-variant and audio (which especially is best-in-class) on base variant, the Fiesta is actually getting nowhere!
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Old 8th March 2012, 14:11   #15
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Default Re: Reaction to Price Cuts: Is the Indian car market too brand biased?

Case1: The Honda City we are talking about is a SUPER HIT ever since the first iteration landed in India until 2011. So when it's made affordable, more people are just going to buy it.

The Jazz, started off with the strong brand value of 'HONDA' and the 'CITY'. But you just can't sell a hatch @ sedan price in India, even if it's a Honda. Price correction, and again people are queing up.

Case2:
  1. What Honda did is a price correction. The 1L discount on the Fiesta you are talking about are dealer discounts on unsold 2011 cars. Isn't there a HUGE difference betweent a price correction and clearance sale? It's still not clear if a price cut is officialy coming.
  2. When the Fiesta Classic top end SXi petrol and diesel are sold at 8+/9+ L respectively. Product cannibalization starts at home. The sales report speak for themselves.
  3. From day1 the car is overpriced and people move away. So it's not a sales super hit that you slash prices within 6 months and expect people to queue up.

Last edited by kiku007 : 8th March 2012 at 14:13.
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