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Old 14th June 2013, 10:28   #1
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Default Renault-Nissan-Datsun: Negative brand re-engineering in India?

Whenever we have a launch with prices slightly above expectation, we get into debates on how the manufacturers are overpricing their products in the Indian market. The case gets stronger if the car in question is small and does not fit into the size-to-price factor in the VFM calculations. For example, an 8 lakh Polo GT TSI is considered expensive because itís a hatchback. A 20 lakhs Skoda Yeti gets a similar (or even more negative) reaction because itís not big for an SUV.

Contrary to the above examples, the Renault Duster was one of the hot products launched in 2012. In a few months, this product single-handedly has made brand Renault a house-hold name in India, probably even more popular than the Japanese sibling Nissan. The Duster is almost everything what an Indian buyer is looking from an SUV Ė a no-nonsense car with good road presence, reasonably powerful and frugal, and considerably cheaper than some of the big SUVs like the Toyota Fortuner. So popular that recently Nissan announced a Duster spin-off called Terrano. This news, along with the possibility of Dacia Lodgy coming to India as Renault Lodgy made me think Ė What exactly is Renault doing here?

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After the takeover by Renault, the humble Romanian brand Dacia is quietly finding a foothold in the European market. The brand offer cheap motoring without compromising much on safety and comfort. And thatís the key Ė itís so cheap that a competitor (with similar size and equipment level) cost more than 50% of a corresponding Dacia. Check out the UK reviews of Dacia Duster, and all of them rave the car for what it offers for the modest price tag. Infact itís actually way cheaper than some of the entry level European hatchbacks. Some examples** below:

**I have used the examples relevant for Indian market, with UK models slightly better on safety features (across all models)

UK
VW Polo 75ps 1.2 TDI: £13,745
VW Polo 70ps 1.2: £12,145
Dacia Duster 110ps 1.5 dCi 4x2: £11,495
Skoda Yeti 110ps 2.0 TDI 4x2: £17,075

India (ex-showroom Mumbai)
VW Polo 75ps 1.2 TDI: Rs. 7,27,769
VW Polo 75ps 1.2: Rs. 6,14,733
Renualt Duster 110ps dCi 4x2: Rs. 12,17,263
Skoda Yeti 110ps 2.0 4x2: Rs. 15,11,327

If you look at the above prices, in the UK a Duster with slightly better features than Indiaís top variant is actually cheaper than entry-level 3 cyl Polo petrol, and almost 50% cheaper than the base variant of Skoda Yeti. Thatís the way brand Dacia is positioned in Europe. The picture is drastically different in the Indian context. The Renault branded Duster cost almost double of a highline 1.2 Polo and is only around 20% cheaper than the base Yeti. In other words, the buyers in India are actually paying a huge premium for the lozenge logo.

Brand re-engineering is a common practice, and it makes sense when it happens with brands with similar profile and standards (e.g.; Vento/Rapid, Sunny/Scala etc.). But in this case what we are getting is a much cheaper Dacia, rechristened as a Nissan/Renualt at a premium price-range. In other words, a Duster/Terrano sold at a price point of better engineered Nissan Qashqai. And in future, instead of a Renault Grand Scenic MPV, we will get a Renault Lodgy. And in the coming years we may see a flurry of launches like Renualt Sandero (and its corresponding Nissan variant). I wonít be surprised if India soon becomes the second largest market for Dacia (after Romania). Just some food for thought!

Note: Price references are from Carbuyer UK and Carwale (for UK and India respectively)
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Old 14th June 2013, 11:03   #2
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

A very pertinent point - but Renault has the first mover advantage here in the mini-SUV space. The pricing will remain high till competition comes in with similar products. But to be frank, there is no similar products expected in the market.

Ecosport and the like are smaller at the same time much more modern vehicles. What the competition does to Duster's price remains to be seen - competition can either pull the price down opening up the market, or push price up thus maintaining status quo in terms of market share. It all depends on the car makers ambition vis-a-vis this segment
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Old 14th June 2013, 11:22   #3
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

When the Duster was introduced first up it was still kind off reasonably priced, but multiple revisions since then does not allow for it to be great value. Infact the Ford EcoSport could hurt it in a big way though there are reasons to select the Duster over the EcoSport for certain types of requirements. They just may find the rug pulled under their feet.

Nissans reported plans to price their Duster variant even higher are risky for it, they need to get in closer to the EcoSport.

Of course we hope that Ford does not repeat the New Fiesta or Honda Jazz error with the EcoSport. It probably won't.
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Old 14th June 2013, 11:30   #4
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

Very good points vb-san. Unless we have some competition this is how it will be. We also have very less choice in the any given segment which is probably due to the market size.

Indian companies should step up and give us something similar with good quality at lesser prices. Only this will force the foreign automakers to price their products better for us.
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Old 14th June 2013, 11:32   #5
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

Quote:
Originally Posted by vb-san View Post
The Renault branded Duster cost almost double of a highline 1.2 Polo and is only around 20% cheaper than the base Yeti. In other words, the buyers in India are actually paying a huge premium for the lozenge logo.
The only point in favour of Renault is that it's not getting the excise benefit that the Polo is. Plus VW cars abroad are a bit more on the higher side than their competing category. I guess the Polo is more competitively priced in India by reducing a few features.
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Old 14th June 2013, 11:40   #6
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

Very good find vb-san. I am shocked to see the price difference. Considering the fact that Renault Nissan uses their Indian plant as a major export base, they should be enjoying better economies of scale than VW. For the quality we get, we are definitely being ripped off.
Things should look up when VFM players like M&M enter with a proper mini SUV but that is sometime away.
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Old 14th June 2013, 11:42   #7
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

vb-san
your data is correct and presented well. however i think this has been deliberated at length in various Duster threads. its all a function of what every market has on offer in terms of competition, buyer behaviour, brand perceptions and finally and more importantly GOVT POLICIES ( which include fuel + other taxation norms ).

hence no point in holding any hard feelings against Renault for "overpricing" the Duster.
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Old 14th June 2013, 11:55   #8
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

Very pertinent post Vb-San.

Hate to say this, but in a way this also reflects on the indian car market. We should be more demanding in general, more so when plonking a million rupees on a vehicle. If you look at vehicles at similar price point (City, Vento, Verna), the quality of interiors, and depth of engineering in general, is glaringly ahead of the Duster.

And very few people have a specific requirement for purchasing a compact (or not) SUV. This is another case of good looks and road presence trumping other factors.

Last edited by avisidhu : 14th June 2013 at 11:58.
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Old 14th June 2013, 12:05   #9
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

While I agree to your point on re-modelling a low cost Dacia product as a Renault one, I beg to differ on price comparisons made.

Localisation and feature cutting have helped VW to price Polo < 9lacs in India. But, a similar level of price reduction may not be possible in the case of Dacia Duster since its a product engineered for emerging markets and targeted at customers preferring VFM over luxury/premiumness. So, what I feel is that, Renault India should have definitely priced Duster on par or slightly less than Dacia Duster. The current price is no doubt an inflated one, but I don't think we can expect a price reduction as much as we see in a VW Polo or other premium brands.

I hope I have made my point clear.

Last edited by BigBrad : 14th June 2013 at 12:06.
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Old 14th June 2013, 12:08   #10
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

Any manufacturer will sell a vehicle at a max price. where it can get enough volumes and make tidy profit.
So market research is done and the following factors are considered
1. Base price - What is the minimum price I can sell without making a loss after dealer margins etc.,
2. Market price - How much is market willing to give for this vehicle
3. If competition comes, how much is market willing to give for this vehicle
4. If I decide price X how much volumes can I move.

This was told to me by a very senior executive of an Automobile company. He told me there are some exceptions. Sometimes, manufacturer will sell at a price which does not generate minimal acceptable profit, just to break the segment ceiling. For example, if Maruti had sold Kizashi at current discounted price at launch, it would have established itself as a viable alternative to Toyota Corolla. Maruti would have made a loss, but people would have accepted Maruti as a D segment mfr
Similarly, if Hyundai had "NOT" priced Elantra as it did now, they wouldn't have been able to break their glass ceiling, i.e. a C segment sedan maker.

Mahindra understands this concept. So instead of selling a 18L Mahindra, they brought in a "new brand". This brand Ssangyong has allowed M&M to break the glass ceiling, and now a 20L SUV from Mahindra stable is acceptable.
Tata has floundered. They can make a car as good as M class from mercedes, and still people won't buy it at half the price.


Another classic example is Fortuner. It costs as much as an innova for Toyota. In Thailand Toyota sells Innova and Fortuner at similar price. Yet in India price goes to 2X

Same with Renault. they want to sell around 5000 units /month. At what price will they sell 5000 units a month.

The answer is simple.

With the Ecosport, their sales will go down, no doubt. But a price correction will hurt the brand quite a bit, so do not expect drastic price division.

Remember, companies exist to maximize profits. If they can sell a 4L car for 8L they will do so. Surely, the cost of production of a simple entry level 3 series cannot be 4X that of a normal sedan, right? Its the brand.

Renault has used the vaccum in SUV space(Tata Mahindra are perceived as low quality truck and tractor makers respectively) to use to its advantage. Due to European brand association, they can command a premium(like VW etc.,)

When there are only 1-2 players in this space, this pricing will continue. However when you have 3-4 players.
Lets say Nissan(which is Renault), Ford, Suzuki(Maruti),Mitsubishi,Toyota enter this space with 8-10L small SUVs, this segment will get crowded, like the hatch segment, where cars are sold with minimal profit.

Last edited by tsk1979 : 14th June 2013 at 12:12.
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Old 14th June 2013, 12:11   #11
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Default re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

As mentioned lower brands of other continents may be sold off as premium offerings here which cannot be an outright issue, however if a corporate is maintaining a brand hierarchy in the market it would be best to continue that.

A case in point is the probable situation of Nissan Terrano (Duster's twin) launching at a higher price point when all other Nissans are cheaper than their Renault twin. This is confusing strategy to say the least.

At least there was an expectation that it would be launched at a budget pricing flanking its twin to cover a much larger marketshare of the mini SUV market and effectively beat the Ecosport (especially if it was priced at a premium).
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Old 14th June 2013, 14:07   #12
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Default Re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

Added Datsun to the title as well. Hope we can discuss products other than the Duster too.

I think they're biting off more than they can chew. Nissan is hardly a well-established brand in India while Renault is still a one-hit wonder. All of Nissan's cars are under-performing currently, their dealers are an extremely unhappy lot and Renault-Nissan share cars so identical that it leads to customer confusion.

Renault-Nissan should be working on strengthening their respective brands. In the midst of this, some genius came up with the idea of introducing a 3rd brand . I thought Nissan was supposed to be cheap, and Renault (allegedly) premium. Where the heck does Datsun come in?

What's worse is that, all 3 brands share essentially the same car. I believe Datsun's first car for India is basically a cheaper Micra.
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Old 14th June 2013, 14:18   #13
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Default Re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

thanks to vb-san for the revelation. India probably is just an underdeveloped auto market, where such operators feel they can make some additional margins just by luck of their product being without real competition in the market. Both Fortuner & Duster are horribly overpriced for what they offer.

Also perhaps, they have to take in the cost of operating in the market. India is full of all kinds of hurdles which are set themselves up to heighten the cost of operation of a manufacturer. Right from labour unions, local politicians, tax men, local panchayats, state govts, electricity companies etc extract a percentage of the manufacturers revenue thereby increasing his cost. It is believable if a manufacturer gives a reason that India is a low-cost country for services, but a high-cost country for manufacturing.
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Old 14th June 2013, 14:20   #14
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Default Re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

Recipe for disaster is the only way I can describe the current Renault-Nissan-Datsun setup. without adequate differentiators, launching the same car in 3 avatars does not make any sense to me. I saw a thread couple of weeks back where the person posting was arguing in favor of Renault launching the scala in a lower trim (RxE variant). He backed it up with a lot of economic mumbo-jumbo and quoted 'behavioral economics' as explained by Dan Ariely and the research of Tversky and Kahnman.
I guess one of these economists may have bitten the Renault board very hard - to ensure that they just don't seem to back off.
Rather than doing the badge re-engineering, Renault would be better served tying to launch their classic portfolio and backing them up with a solid A$$.
Badge engineering their dealerships may be a better option and will buy them a lot more goodwill than doing the same for their cars.
No offence meant to Renault-Nissan customers, I am a happy Scala owner myself
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Old 14th June 2013, 14:24   #15
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Default Re: Renault-Nissan-Datsun: Negative brand re-engineering in India?

Normally an agile and alert Tata seems to have been napping. Irrespective how the market receives their products they have been the pioneers in the recent times in opening new niches, understanding the market better.

Look at their ACE, Magic Iris, Nano, Indica (long ago), Indigo (long ago) and so on.

Off late either they seem to be caught napping or missing the bus often. Mahindra's seem to have taken their role. The success of XUV, Scorpio stand witness. But again the Quanto seems to be a reactive response rather than pioneering.

Maruti was able to create a new space with their Ertiga.

While I agree that companies try to maximize their returns and exploit the open spaces offered by changing aspirations and evolving market it will be good if many companies vie and offer products which should be good for blokes like us.

I would have bought the Duster if it were about 75-100K more than a large hatch. I personally think it is a rip off. If I weren't bothered about size a Safari would have catered to my needs.

Breaking ceiling is what Tata's seem to have tried with their Aria.

Folks like Toyota and Honda seem to have created new brands like the Lexus, Acura to move away from the bread-and-butter image and products.

I do hope Maruti, Tata and Mahindra will come up with a good alternative.
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