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Old 18th March 2015, 15:53   #1
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Default The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi-ca7p8011-1.jpg

German luxury cars offer unparalleled safety, quality & driving pleasure, although the gap from cars a segment lower (e.g. Skoda Superb) has grown slimmer in recent times. They are among the ultimate expressions of prestige, but no longer enjoy the exclusivity they once did. Today, put together, Mercedes-Benz, Audi and BMW account for ~28,000 dispatches per annum! Safe to say they are fairly commonplace now.

It's been a hare vs tortoise race between German luxury car prices and inflation - in this case, the hare wins.
Consider this, the C-Class used to cost 25 lakhs on the road a decade ago. Today, it's more like 50 lakhs. Just 4 years back, you could buy a Bimmer 520D for 40 lakhs. Now, it's close to 60!

The A4, C-Class & 3 Series were once the entry point into their respective brands and cost 30 lakhs (or less). In pursuit of volumes, the luxury brands brought in smaller cars like the A3, CLA-Class etc. One naturally thought that the smaller models would be cheaper, some even predicting 20 lakh prices! Well, that's not the way German manufacturers would have it. As if in collusion, all 3 luxury marques took their entry-level sedans (A4, C-Class, 3 Series), executive sedans (A6, E-Class, 5 Series) and luxury barges (A8, S-Class, 7 Series) a full segment above.

The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi-audia309-1.jpg

The primary cause of this price inflation is the arrival of lower offerings from the German titan three (A-Class, B-Class, CLA-Class, A3, 1-Series). The assumption was that these cars would make the luxo brands more attainable. However, instead of pricing the small cars below Rs 20 Lakh, they uprated the price tags of the higher segment models, and maintained / increased their minimum margin! Translated, you pay the same money today for an A3 / CLA that you did for an A4 / C earlier .

Here, we take a year-by-year look at the best-selling sedans sold by the Germans in India and get an idea of just how much dearer they've become over the past decade (by analyzing the average on-road Delhi price). Prices below are in Lakhs:

The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi-gcp20052009.jpg

The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi-gcp20112015.jpg
Price Source - Old ACI Magazines

Observations (please contribute with more in your reply):
  • There isn’t a doubt that nearly all cars from the 3 German manufacturers are ridiculously overpriced.
  • To provide a little perspective, back in 2005, the C-Class petrol used to cost around Rs 24.84 Lakh, while the diesel was yours for Rs 27 lakh. Today, you can't buy a new C-Class for less than Rs 45-46 lakh!
  • Mercedes brought in the current (W205) C-Class as a CBU at Rs 40.9 Lakh (ex-Delhi) in November 2014. The same car was launched in its locally assembled avatar in February 2015. Price? Still Rs 40.9 Lakh!
  • In 2010-11, you could buy a Mercedes E-Class or BMW 5-Series for around Rs 40-44 Lakh (on the road). Less than what the segment lower C-Class costs today!
  • Effectively, what they've done is: CLA = early C-class, C-Class = early E-Class, while the E-Class sits dangerously close to where the earlier S-Class was.
  • Similarly, the 1-Series, A3 etc. now occupy a space that earlier belonged to the 3-series and A4.
  • 10 years back, you could buy an S-Class or 7-Series for around Rs 64 lakh. Today, both cost close to Rs 1.5 Crore. That's a 250% increase in 10 years, or an average of 25% per year.
  • The B180 Sport was launched in 2012 at Rs 24.87 lakh. At the time, the price of the C-Class hovered around Rs 30 Lakh. Come 2015, the B180 Sport costs Rs 28 Lakh, while the C-Class is priced at Rs 41 Lakh. What came in between? Apart from the generation change in the C-Class, Mercedes launched the CLA-Class, with prices starting at around Rs 32 Lakh (all prices, ex-Mumbai).
  • The best example of overpricing is perhaps the A3 (price up to 39 lakhs on the road). You could buy its mechanically identical sibling with more cabin space (the Octavia) for half the money. In terms of size, the A3 is more like a Rapid than an Octavia.
  • This audacious price increase hasn't had any negative impact on net sales (but it's not led to growth either). Annually, Audi and Mercedes both sold more than 10,000 cars. Goes to show that this pricing strategy has worked well for their business….but been awful for customers. Equally, these inflated prices aren't sustainable and the Germans know it. If Audi & Mercedes sales have increased, it's because of the smaller cars. No real growth in the E-Class or A6 segment. Take a look at BMW; it doesn't have any popular small cars, thus its sales have shrunk to 6,000 odd! Another indication is the whopping discount (of up to 10 lakhs) available on the bigger cars.

What about taxes? Haven't they increased?

Yes, but certainly not to the extent at which the German luxo brands have raised their prices! Let's look at some other models that have a high import content or are CBUs.
  • The Skoda Superb - a German luxury car in its own right - was launched at Rs. 18.80 lakhs (ex-Delhi). 6 years down, the Superb has a starting price of 21.50 lakhs.
  • Proof that import costs & duties take limited blame: In 2006, the CBU Honda CR-V was launched at Rs 18.4 Lakh ex-Delhi. Today, the same car (locally built) starts at Rs 21 Lakh. An increase of around 14% only.
  • Similarly, you could buy a Toyota Camry AT in 2006 @ Rs 21.40 lakh ex-Delhi. In 2015, the latest Camry costs Rs 26.60 lakh. An increase of around 24% in 9 years.
  • The above-mentioned 3 cars are either fully imported or have high import content, and face the same taxes as the German luxury cars. It's extremely unnerving that, while their cars have seen a price increase of 15-25% over a decade, German luxury cars have become more expensive by 50-250% in a similar time frame.

The Upside?
  • Massive discounts are always available. Dealers will offer you lakhs off before you even ask. The Germans themselves know these prices aren't sustainable. As an example, Audi was offering Rs. 7 Lakh off certain trims of the A4. BMW was offering up to 10 Lakh off on the 5-Series.
  • Enthusiasts, don't sweat. The higher they go, the harder they fall!! Good news is that you can get some killer used car deals. 3 year old examples of the E-class, 5-series and A6 can be yours for Rs 30 Lakh (or less). Half the price of what they cost brand new.

List of locally assembled models:
  • Mercedes: S-Class, E-Class, C-Class, GL-Class & M-Class. The CLA-Class may be locally assembled in the near future.
  • Audi: A3, A4, A6, Q3, Q5 & Q7.
  • BMW: 1-Series, 3-Series, 3-Series GT, 5-Series, 7-Series, X1, X3 & X5.

Last edited by GTO : 24th March 2015 at 12:48.
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Old 18th March 2015, 15:56   #2
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Default re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Thread moved from the Assembly Line (The "Assembly Line" Forum section) to the Indian Car Scene. Thanks for sharing!
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Old 18th March 2015, 16:01   #3
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Very interesting points. But also the size of the cars keep increasing. They usually move up towards the next model line. Its one of the reasons they introduce newer model line below.
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Old 18th March 2015, 16:14   #4
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Default The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Back in 2005, you could get a top of line Honda City CVT for 8.4L ex showroom. Costs 11.42 now.

Back in 2005- You could get a diesel Innova for 7.4L. Costs 11.03L now.

Prices have gone up everywhere. If prices remained same over generations - then quality has probably gone down IMO.

Last edited by CrAzY dRiVeR : 18th March 2015 at 16:21.
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Old 18th March 2015, 16:18   #5
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

An innova V which was at about 10L is now at 19L.
The Safari VX which was at about 10L OTR in 2005 is at 16L+
The first Octavia was at about 13L for top model the next one Laura at about 19L and the current one which does not even have a L&K model is at 24+ top model.
The same is the story with the Honda city and the Toyota Corolla or for that matter the Royal Enfield Bullet.
In the last 10 years prices are up 80% for some vehicles.

This is not particular to the Germans but just in line with Inflation in India.
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Old 18th March 2015, 16:19   #6
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Bang on observation Tushar.

Its more like a cartel these manufacturers have formed to price their products at their whims and fancy.

Further, the way these manufacturers are offering the poorest after sales services shows their arrogance. There are so many threads of premium car owners on teambhp itself showing their apathy with these big brands.

But these Germans cannot be blamed alone, if a company like Toyota can sell its Fortuner at 30 lac+ price, it is bound to encourage the other manufacturers to sell their products at illogical pricing just in the name of(notorious) German engineering!
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Old 18th March 2015, 16:26   #7
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Euro's appreciation against Rupee might have something to do with the steady increase in prices, considering that Big Three have 80 to 100% European content. This is a chart of EURO against INR - you can see that Euro has gone up from 56 to 94 peak (Sept 2013). This is an appreciation of 67%.

The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi-eurinr.jpg

Yeah, the Euro fell after that - but the boffins at the German companies decided not to reduce the prices of their cars. Having new models below C/3 Series/A4 developed & ready to launch made it an easy decision not to cut prices.
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Old 18th March 2015, 16:30   #8
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

For once, a luxury automobile became an appreciating asset. I remember reading a newspaper article which stated owners are selling their old Cayenne's at a price close to what they bought it for . There has been an almost 100% price jump for CBU's, partly blamed on the increased duty.

But I do share the curiosity for the CKD price jump, which remains unexplained even by the combined effect of the duties and volatile exchange rates. In fact, it is the dollar index which is increasing, so unless a car model has major input costs attached to US, the car companies should be quoting the EUR-INR or JPY-INR rates:

EUR-INR: 63.44 (Apr '10) versus 66.64 (Mar '15)

JPY-INR: 0.49 (Apr '10) versus 0.51 (Mar '15)

Last edited by ricky_speed : 18th March 2015 at 16:32. Reason: grammar :)
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Old 18th March 2015, 16:40   #9
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Quote:
Originally Posted by CrAzY dRiVeR View Post
Back in 2005, you could get a top of line Honda City CVT for 8.4L ex showroom. Costs 11.42 now.
Quote:
Originally Posted by ACM View Post
An innova V which was at about 10L is now at 19L.
What you guys are talking about is more the exception than the rule.

@ Crazy Driver: You've mentioned the 2nd-gen City which was cheaper than the 1st gen.

In the late nineties, the 1st-gen Honda City Automatic cost 8.16 lakhs ex-showroom Delhi. The Honda City Automatic starts at 9.81 lakh today. How much is the inflation in this case over a 17 year period?

In the same time (as the 1st to 4th gen Honda City), the E-Class has gone from 25 lakhs to 60 lakhs! If the Honda City had to keep up the E-Class, it would cost about 20 lakhs today.

@ ACM: The Innova has seen unusual price hikes and gotten a lot of flak for it (including in our official review). Have all MPVs in its segment doubled their prices in the same period? Not the Tavera or Xylo I know.

Don't forget that cars at the lower end (e.g. Swift, WagonR) and many at the higher end (e.g. Superb, Camry) have seen far lesser hikes than the Germans. Heck, compare the price of the Esteem in 1996 & the Dzire in 2015 and you won't see much difference.

Last edited by GTO : 18th March 2015 at 17:01.
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Old 18th March 2015, 17:11   #10
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Do we have a sense whether this increase in prices is in sync with Euro prices for these cars? Most of these cars have indeed moved upscale, so it could be just that as well.
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Old 18th March 2015, 17:16   #11
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

My take is that inflation adjusted pricing has actually been far lower, over the 2005-2015 period the inflation is pegged at 124% according to the INCPI(available online). Prices have gone up, but the actual culprit is our currency that has steadily lost value, simple proof, check the coins in 2005 versus what we get today. There was a time when prices were affordable, when a 520d was about 45 lakhs or so, I would put that down to a massive marketing budget from HQ to get the numbers up and take a hit on the margins, once the volumes are in place the prices would be hiked to a sustainable level.
An E270 cost 45 lakhs OTR in 2007-8(TN prices), today an equivalent E350 will be roughly 70 odd, so prices haven't really kept pace with our devalued currency.
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Old 18th March 2015, 17:17   #12
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

To add on, in Europe the big-3 Germans are very often seen on the same playing field with other European or Asian brands, especially in the small car/entry segments, e.g.; a Mazda 3 or VW Golf going against the likes of a BMW 1-series or an Audi A3. With this kind of pricing, such a comparison will be quite impossible in India, atleast in the near future.
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Old 18th March 2015, 17:52   #13
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Quote:
Originally Posted by CrAzY dRiVeR View Post
Back in 2005, you could get a top of line Honda City CVT for 8.4L ex showroom. Costs 11.42 now.

Back in 2005- You could get a diesel Innova for 7.4L. Costs 11.03L now.

Prices have gone up everywhere. If prices remained same over generations - then quality has probably gone down IMO.
Its not just a question of the prices going up. Audacious price increases are not limited to German car brands, but they are best pronounced in the segment. The fact is that manufacturers across the board often increase the prices of their best selling models because they know people will buy them.

The Innova for example, gained its crazy price after Toyota knew what kind of demand it was getting. The MUV is often the example of unreasonable price hikes. Similarly, buyers are willing to overlook the price of the City because of its name.

I wouldn't hold the price increase against Merc, BMW or Audi. At the end of the day, customers are still willingly paying up for the cars. However, it is daunting to see just how much more expensive they have become.

Quote:
Originally Posted by Grr7 View Post
Bang on observation Tushar.

Its more like a cartel these manufacturers have formed to price their products at their whims and fancy.

Further, the way these manufacturers are offering the poorest after sales services shows their arrogance. There are so many threads of premium car owners on teambhp itself showing their apathy with these big brands.

But these Germans cannot be blamed alone, if a company like Toyota can sell its Fortuner at 30 lac+ price, it is bound to encourage the other manufacturers to sell their products at illogical pricing just in the name of(notorious) German engineering!
Again, Toyota is a brand known for charging more because their audience is willing to pay more for less equipment. More often than not, a Toyota buyer's priority is reliability and comfort as many Toyotas see 6 figure odos. Even after paying that high price, Toyota owners make a good share back in resale. Not the case with the Germans as seen on used car lots.

Quote:
Originally Posted by ACM View Post
An innova V which was at about 10L is now at 19L.
The Safari VX which was at about 10L OTR in 2005 is at 16L+
The first Octavia was at about 13L for top model the next one Laura at about 19L and the current one which does not even have a L&K model is at 24+ top model.
The same is the story with the Honda city and the Toyota Corolla or for that matter the Royal Enfield Bullet.
In the last 10 years prices are up 80% for some vehicles.

This is not particular to the Germans but just in line with Inflation in India.
Wouldn't inflation blanket every car sold in the market? Consider the models below and their current price vs price in or around 2005:

- Swift: Up from 4.30 lakh to around Rs 5 Lakh.

- Esteem to Dzire: Up from 4.85 lakh to around 5.40 Lakh.

- Wagon R: Up from 3.65 lakh to around 3.95 Lakh.

- Indica: Up from 3.62 lakh to around 4.50 lakh

- Fiesta to Classic: Down from 6.36 Lakh to around 5.60 (new diesel only Fiesta costs around Rs 3 lakh more)

- Palio to Punto: Up from 4.10 lakh to around 5.24 lakh.

- Scorpio: Up from 8 lakh to 9.62 lakh

- Bolero: Up from 6 to around 7 lakh

In all cases the price has indeed gone up, but push comes to shove it still falls short of 30% (You will find a few exceptions, but very few who can match even the bare minimum increase with luxury cars.)

Also note how buyers respond. How well is the Safari selling these days? (Safari + Storme = 700-850 units a month vs the Scorpio's 4-6k)

Same with the Octavia (Octavia's 150-200 units a month vs the Altis's 800-1000)

Again this isn't to blame the German car makers. It's people who choose to buy them at the end of the day. However, your brand/rivals/segment play a big role in what your pricing should be. Merc, Audi and BMW are smart and their strategy has clearly worked as a win-win for them - but, the fact is they have increased their prices by upsetting percentages, when compared to the rest of the market.

Last edited by Tushar : 18th March 2015 at 18:01.
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Old 18th March 2015, 17:56   #14
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

What i don't understand is that when Dealers are ready to offer such discounts without even trying, why are the companies not ready to mark down the price accordingly. Agreed, the discounts will vanish, but will probably lead to more footfalls and better sales.

In a different context a 2 L bottle of coke used to cost 35 rupees around 8 years back, it is up to 80 rupees now. If a product whose raw material would probably be running in paise or couple of rupees, is putting such a huge markup, why won't a luxury brand. They are just riding the wave of popularity and willingness of people to spend more on luxury today.
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Old 18th March 2015, 17:56   #15
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Default Re: The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi

Great thread and something that has been discussed elsewhere too. The worst thing that they could do was to promise or atleast hint at launching the newer entry level cars at a more affordable price point but later rather hiked everything else on the menu to make space for these so called affordable cars. Just a year and a half back the 320d costed me 31L ex-showroom. Now cars like the A3 and GLA are priced much higher than that. I am just hoping that the same hike is also reflected in the used car prices and I can get a higher resale value for the 3, 5 years down the line .

Last edited by drmohitg : 18th March 2015 at 17:59.
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