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Old 10th May 2006, 12:17   #1
Ram
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Default Newer cars: Value for money or loss thereof?

When an Indian car vendor changes the design of their offering, be it body shape, powertrain or other component, the extra cost of R&D and retooling is quite unfortunately augmented by Government taxation and definitely, commercial greed beyond reason.

The result: net price of the new offering tends to be unreasonably higher than the older one.

Is it our lot, to only pay more and more and more, as time goes on?

In the last two and a half decades,
while the new American car went from $11,000 to $23,000,
why did we in India go from Rs. 1.1 lakh to Rs. 6.5 lakh in the same time?

And the consumer ends up more money for value (reciprocal of value for money) than with the older offering.

Cases in Point:

All the changes below involve a lot more price for barely more value.
  • Contessa-to-Lancer,
  • Lancer-to-Cedia,
  • Old Sonata-to-Embera,
  • Octavia-to-Laura,
  • Old-to-New Honda City,
  • Ford Ikon-to-Fiesta,
  • Opel Corsa-to-Chevrolet Aveo (Daewoo Gentra/Kalos),
  • Toyota Qualis-to-Innova,
  • yada yada yada ...
Why do we let a small improvement (even a questionable one) lead to a big rise in price?

Can we think of alternatives?

One thought:

Mods done by a smaller speciality garage can yield more reasonable value for money.
  • higher lift cam,
  • better ECU software,
  • engine blueprinting,
  • better designed alloy wheels and tires,
  • better air-filtration,
  • better in-car entertainment,
  • better quality paint for higher value for money, etc.
All these end up no better yet way costlier if we let the original manufacturer do them.

Maybe we should see the rise of specialty shops like smaller engineering design companies, high-performance aftermarket tuning companies, customizing companies -- Companies like: AMG, Brabus, Lorinser, Carlsson, Kleemann, and RENNtech, Saleen, Shelby-American, KarKraft (that built Ford's Boss 429 Mustang), Hamann, Zakspeed, Rinspeed, etc..

Isn't there lots of talent in India that can add value to this industry with sensible pricing?

Last edited by Ram : 10th May 2006 at 12:19.
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Old 10th May 2006, 12:34   #2
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Quote:
Originally Posted by ram
When an Indian car vendor changes the design of their offering, be it body shape, powertrain or other component, the extra cost of R&D and retooling is quite unfortunately augmented by Government taxation and definitely, commercial greed beyond reason.
Ram, when M&M launched the revamped scorpio, they dint revise the price (though for the time being), how is it possible, i am sure the new one would have also included R&D, retooling et al. Are they operating on wafer thin margins or what???? how is it possible.
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Old 10th May 2006, 13:58   #3
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That's true not only for cars but for all gadgets as well - like mobile phones (we still mainly talk & send SMS in phone), TVs (still watch pictures and hear sounds), music systems (still enjoy the sound - with MP3 though).
So, it is the basic market economy. Somehow you need to convince the public the latest model is greatest and what you used so far, is rubbish.
Now it is upto the individual what he wants to do.
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Old 10th May 2006, 14:06   #4
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Quote:
Originally Posted by ram
In the last two and a half decades, while the new American car went from $11,000 to $23,000, why did we in India go from Rs. 1.1 lakh to Rs. 6.5 lakh in the same time?
I don't understand inflation and purchase power etc much .. but .. I wonder ...

Given that a M800 costs barely 5 times more than what it did 20 years ago ... hasn't purchase power increased much more than that ? Do we crib about the higher incomes that we get ?

The NHC, I believe costs less than the OHC ..
The cedia costs as much as the Lancer SFXi used to cost when it was launched .. given that I would say we are getting more value for similar amount of money than what we got a few years back ...
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Old 10th May 2006, 14:24   #5
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another thing, import content is higher so import duty takes its toll
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Old 10th May 2006, 16:32   #6
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Quote:
Originally Posted by shuvc

Given that a M800 costs barely 5 times more than what it did 20 years ago ... hasn't purchase power increased much more than that ? Do we crib about the higher incomes that we get ?


the standard indian salary has not increased by 5 times in the last 20 years.
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Old 10th May 2006, 17:48   #7
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Quote:
Originally Posted by shuvc
Given that a M800 costs barely 5 times more than what it did 20 years ago ... hasn't purchase power increased much more than that ? Do we crib about the higher incomes that we get ?
The M800 should not have gone up in price by more than double
what its price was 20 years ago. Why are you content to condone a 5-fold increase?

shuvc, let me address your discomfort about my "purchase power"

My purchasing power went up because my education and my work output exceeds what is available in the developed world. So I'm proud that my annual income is approaching developed world standards. The quality of our food, housing and clothing already exceeds most developed world standards.
Then why should I accept to pay a higher price for my family car than they pay for theirs?
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Old 10th May 2006, 18:05   #8
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Quote:
Originally Posted by BuRnT RuBbEr
the standard indian salary has not increased by 5 times in the last 20 years.
I suggest that it is not right to compare rising prices of cars with salaries.

I started my career as a fresh electronics engineer from college in 1981 at a salary of Rs. 1,000 per month.
Today 25 years later, a fresh electronics engineer out of college is paid Rs. 15,000 per month. That is a fifteen-fold increase. It represents a dearness hike of 11.44% per annum.

In 1983 you could buy a new Maruti 800 for Rs. 48,000.
Will you pay Rs. 5,80,000 for a Maruti 800, today?
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Old 10th May 2006, 18:37   #9
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Ram, about that M800 thing, although we won't be willing to pay 5,80,000 today as compared to 48000 then, the fact remains that M800 costs less mainly because of progressive depreciation in Maruti's plant in all these years. Also, the basic design for the car was done then at that times cost. Today any global manufacturer won't be able to make a Maruti800 at that cost. Probably even Suzuki won't be. The reason M800 has no competitor.

About your point of negligible value-addition costing the earth, well, M&M decided to sell the face-lifted and even suspension tweaked scorpio at the old price. Tata introduced their refreshing series of Indicas at the old price. Even the Hyundai Santro eRLX came out at more or less the same price point.

I think it has something to do with where the car has been developed. Anything developed in the western world tends to cost progressively costlier with each passing day. The reason why the majors are all looking at establishing base in Asia to increase their competitiveness. Which probably brings us back to what you initially said. We have no dearth of talent here and we can do these jobs so much cheaper than them. And this is something the world has started realising today. Amen to that.
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Old 2nd March 2008, 01:00   #10
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Quote:
Originally Posted by Zappo View Post
Ram, about that M800 thing, although we won't be willing to pay 5,80,000 today as compared to 48000 then, the fact remains that M800 costs less mainly because of progressive depreciation in Maruti's plant in all these years. Also, the basic design for the car was done then at that times cost. Today any global manufacturer won't be able to make a Maruti800 at that cost. Probably even Suzuki won't be. The reason M800 has no competitor.

since there is going to be a tough competition to maruti800 will this car have a price drop?i think yes and they will have to cut a huge bunch from their profits to make this car cost lesser, afaik this car still gives maruti the highest margins not the dealer the dealers get the least though.

Last edited by rider60 : 2nd March 2008 at 01:02.
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Old 2nd March 2008, 03:11   #11
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The price of the NHC was/is marginally lower than the OHC.
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Old 2nd March 2008, 03:24   #12
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To be honest all upgrades even in the western world make the existing or 'to be old' model cheaper than the newer one. Yes but this is marginal compared to what we get in India. For eg Verna, Laura which still sell as Accent and Ovtavia in more or less the same price bracket, wheras for more profit they sell side by side over here.

Last edited by Karandeep81 : 2nd March 2008 at 03:25.
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Old 2nd March 2008, 11:01   #13
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Last 20 years in India we have seen a boom in the Auto industry. Lot of Middle class people have higher disposable incomes and can afford cars more easily than before. economies of scale and low excise duties/taxes should have reduced the price of the cars further. That has not happened because lot of additional features/equipments have come in the car over last 20 years. ECUs, better battery, better tyres (Tubeless)
to name a few.
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Old 3rd March 2008, 00:15   #14
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I agree, partially, with your views Ram. I cannot understand how some manufacturers get away with charging such a whopping premium for a car that is a generation newer. Example : Laura vs Octavia. Honda seems to have well understood that it wont lose too many buyers if they get optimistic with the Accords asking price. I hear that the new Accord is going to have a hefty premium over the outgoing version.

However, I don't agree with these examples that you have posted:

Quote:
Contessa-to-Lancer,
The Lancer is 20 years newer than the Conti! Except for the HM factor, they have absolutely nothing in common.

Quote:
Old-to-New Honda City,
The NHC was priced cheaper than the OHC.

Quote:
Lancer-to-Cedia,
Ford Ikon-to-Fiesta,
The price of the Cedia / Fiesta is comparable to the price of the Lancer / Ikon at the time of their original launch. The only reason that the Lancers tag went lower with time was due to heavy localisation, stripping of features and a drastic loss in overall quality.

Quote:
while the new American car went from $11,000 to $23,000,
why did we in India go from Rs. 1.1 lakh to Rs. 6.5 lakh in the same time?
What car examples have you factored into this calculation? Can you be more specific?

Quote:
higher lift cam,
better ECU software,
engine blueprinting,
better designed alloy wheels and tires,
better air-filtration,
better in-car entertainment,
better quality paint for higher value for money, etc.
Most of the enhancements in this list offer either more power or better looks. But is this really applicable to what is the main topic of discussion here? We are discussing newer generations of cars which are (generally) an entire league ahead in packaging, safety, refinement, power etc. They aren't souped up versions of the same car.....instead, the replacement is an *all new* car.

Quote:
Why do we let a small improvement (even a questionable one) lead to a big rise in price?
Each car that you have outlined is an example of a huge improvement over its replacement (Embera vs Sonata, NHC vs OHC, Innova to Qualis, Cedia to Lancer etc.). I certainly don't think that we are talking small improvements here.
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Old 3rd March 2008, 10:25   #15
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Quote:
Originally Posted by GTO View Post
Each car that you have outlined is an example of a huge improvement over its replacement (Embera vs Sonata, NHC vs OHC, Innova to Qualis, Cedia to Lancer etc.). I certainly don't think that we are talking small improvements here.
I agree -the generation jumps in most of the above examples do justify the pricing. Given that 25 years ago, the only cars around were the 800 and some antiquated designs like the Padmini and the Ambassador, a jump in prices is pretty much justified. You can't really compare the "big" car of 25 years ago (the Ambassador) to any of the moderns sedans and complain that prices have gone up!

The one where I would disagree is the Honda City - the NHC was effectively a segment lower than the OHC (Hatch with a boot vs. a proper sedan). Also, the performance drop between the old and the new was quite noticeable. Whilst the NHC is a generation ahead on interiors and offers some more up to date features (ABS, Airbags), it does lose out in other aspects and consequently came in at a lower price.

OT, I don't think too many of the OHC Vtec owners on the forum would consider the NHC Vtec an improvement over their existing rides

Last edited by jaibir : 3rd March 2008 at 10:28.
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