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Old 17th August 2015, 21:34   #16
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Has anybody heard of the term price fixing? Isn't what is happening in the Indian car scene something similar albeit on a much larger scale.How is it that no manufacturer takes an initiative to price a product at its real value price. Won't they have customers flogging to their showrooms?

Let's take the S cross and Creta as an example:

The Creta was priced at 13.5 Lakhs ex showroom for its top variant. The S cross launch was delayed by seeing the public response to the S cross pricing. What did MSIL do? instead of pricing it about a Lakh lower than the Creta they priced it above the Creta. So now what this would lead in the future is all cars in the 10-20 Lakh segment would become costlier.

Does anyone seriously believe that M&M won't increase the price of the Scorpio or XUV 5oo looking at the response the Creta has recieved. The S cross has played a major role in the Creta's success. The situation is so bad here that you cannot book a Creta without buying a COMPULSORY accessory pack worth 30k.

What would happen in the near future is that most of the other cars would get face lifts and increase their prices again.

Look at where the Vento started at 10 Lakhs for top model diesel and where it is now for 13.5 Lakhs for top model diesel OTR Ahmedabad.

Renault is currently working on the duster face lift and I am ready to make a wager that they would first of all remove the discounts of 50-60k on the already overpriced duster and increase the prices upto 50k. Total damage? Rs. 1 Lakh. Value change maybe 10-20k more than before

Have to make an edit here, how do we even forget about the Jazz. Honda has already given an indication with the laucnch that we should expect a price hike within 2 years. Why do you think they have left the empty slot for Push button start and the DRL?

Many manufacturers have done this. Under equip a car at launch and when it reaches its mid life upgrade it with the features which it already should have had and increase the prices by a huge margin.

Some manufacturers that have done this:

1) Volkswagen: Do I need to say more? How many times have they updated the vento, the polo and the Jetta? I have seriously lost track of which model had what.

2) MSIL: These guys have started this trend recently. The Swift was under specced at launch no passive entry or bluetooth or parking sensors. We have those features now and what is the price increase? anywhere between 30-40k. There is no way in hell that it would cost them that much when they purchase in bulk.

3) Hyundai: These guys are drunk. They were doing the right thing by launching cars with superb specifications earlier but now they realised they were doing soomething right even though they had horrible dynamics. So what did these buffons do? remove features from existing cars, improve the handling a bit and increase the prices. Live samples? The new verna, The elantra, The Elite I20.

Only manufacturer that I haven't spotted following this trend is Tata, but the poor guys are themselves battling to sell anything at all.

My personal opinion if overpriced needs another name it can be Toyota. Evidence?


1. Innova: Tell me a one reason other than the engine and reliability that I should spend close to 17 Lakhs on an Innova.

2. Fortuner: 30 Lakhs and how many airbags? The fortuner is way too overpriced and is bare bone in features.

My aim is not bash to toyota but I am just wanting to show that people are ready to pay any amount without looking at the true value that the product would offer them. Not saying that the product is bad, no doubt the product might be good but is it worth the price?

Last edited by rockporiom : 17th August 2015 at 21:53.
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Old 17th August 2015, 21:42   #17
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But why blame car manufacturers alone? A decent jeans now costs close to 5K, a meal at a restaurant for 2 would set you back by 3-4K, a movie with family will cost 2K. Everything is & will keep on getting more expensive :(
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Old 17th August 2015, 21:49   #18
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Default A segment shift in the Indian car scene

The situation is only going to get worse according to me.
Next year with the launch of the new Innova, Fortuner and Endeavour the price of the this segment is bound to go high. These SUVs which were once available for as much as 25 lakhs will be costing around 35lakhs on road. One major reason is the increase in equipment levels. Add to it, if the Government decides to raise duty on these SUV's, it will only get worse.

The Innova Gx in 2010 costed me ₹10,96,000 but today Gx with airbag and ABS cost roughly around 16 lakhs on road Mumbai.
The Fortuner costed 26.xx in 2012 today it has surpassed the 30 lakh mark.
However I wouldn't say that it is just the manufacturers getting greedy. The duty on these cars have gone up and so have the manufacturing cost. (If you take into account labour factor.)Also the Indian rupee also has weakened in the past 5 years.

Last edited by dean5545 : 17th August 2015 at 21:53.
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Old 17th August 2015, 21:56   #19
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Inflation is a serious influence and IMO, a majority of costs come through that route.

Let's take the example of the Vento

Original cost in 2011? - 10L

Put a 10% inflation on top of this for each year as that's what India has been experiencing till this year - at a compounded rate, in 2015, the darn thing should be 15L (rough math, please excuse). Does that 13L look like a bargain now? j/k

Other things like steel, labor and just plain government taxes keep going up. So, what can the manufacturer do? Increase prices to keep their margins. In a country like India, where there's very little protection for either party, it's make hay when the sun shines. Think insurance companies. Think hospitals. Think your local government! all of them act the same way. When they can make money, they will.

Another factor is also the increasing gap between the rich and poor in India. The wealthier are getting increasingly wealthier and the poorer are getting increasingly poor. The narrower the gap, the better the chance of a level cost structure. But the wealthy are acting without any consequence i.e. their money seems to be increasing always and so the value of money over time is decreasing for them. Think about salary increases in the IT sector. Anything below a 10% hike is considered an insult.

What a wealthy man would think of paying in terms of his earnings (let's say 10%) back then isn't something big for someone today. They'd drop that money without thinking that they just spent 10% of their earnings.

While all the above is fine (and of course, debatable), I do agree that there is a semblance of price-fixing going on here. More than that, what worries me is the government taxes? If we have an RTI on how the government taxes are spent, we'd get a clearer way of understanding pricing models from these manufacturers. Unfortunately, we are in the middle of an industrialization boom where anyone who questions prudence in spending is looked at as a deterrent to growth and hence shunned.
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Old 17th August 2015, 22:38   #20
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Nice thread. Let me put forward my views frankly. I'm not supporting any manufacturers here. Just my thought as I read this thread. These points are not directed towards anybody and certainly not towards the thread starter.

What would we have wanted otherwise?

1. Prices remain as is?
Well then after 20 years a fresh graduate would be able to afford a Mercedes straight away from his first job. Where will be the social hierarchy then? Capitalism rules over socialism -not intending to start a debate here. But if you want the prices to remain same, would you also want your salary to also remain same? No, right? If car prices grow at a rate faster than your salary/wealth then think of ways to beat this trend, legally and own your dream car.

2. You want the rate of increase in price to be lower?
This is a market determined economy, not controlled by government as auto sector is not dire necessity sector unlike medicines, oil, agri and other regulated sectors. In fact even with these increased prices, there is expansion in auto volumes!!! So there is enough demand. I would say pent up demand as we are coming out of slow growth economy, relatively speaking.

3. Decrease in prices: Deflation? Ask Mr. Rajan, he would say inflation is better than deflation. Yes, this does not apply to every commodity. The toffee one ate in ones kiddie age would have seen drop in prices as there is productivity improvement, automation involved disproportionately as the innovation in the product is almost zilch - it's just a sugar toffee after all.

Again, my opinion, I could be completely wrong and am not looking for who is right or who is wrong, just opinions!!!

Last edited by petrolveins : 17th August 2015 at 22:41. Reason: Typo
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Old 17th August 2015, 23:11   #21
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Quote:
Originally Posted by petrolveins View Post
Nice thread. Let me put forward my views frankly. I'm not supporting any manufacturers here. Just my thought as I read this thread. These points are not directed towards anybody and certainly not towards the thread starter.

What would we have wanted otherwise?

1. Prices remain as is?
Well then after 20 years a fresh graduate would be able to afford a Mercedes straight away from his first job. Where will be the social hierarchy then? Capitalism rules over socialism -not intending to start a debate here. But if you want the prices to remain same, would you also want your salary to also remain same? No, right? If car prices grow at a rate faster than your salary/wealth then think of ways to beat this trend, legally and own your dream car.

2. You want the rate of increase in price to be lower?
This is a market determined economy, not controlled by government as auto sector is not dire necessity sector unlike medicines, oil, agri and other regulated sectors. In fact even with these increased prices, there is expansion in auto volumes!!! So there is enough demand. I would say pent up demand as we are coming out of slow growth economy, relatively speaking.

3. Decrease in prices: Deflation? Ask Mr. Rajan, he would say inflation is better than deflation. Yes, this does not apply to every commodity. The toffee one ate in ones kiddie age would have seen drop in prices as there is productivity improvement, automation involved disproportionately as the innovation in the product is almost zilch - it's just a sugar toffee after all.

Again, my opinion, I could be completely wrong and am not looking for who is right or who is wrong, just opinions!!!
Firstly, a fresh graduate with a job would never be able to own a Mercedes at least not in India. The perfect car for someone of that stature would have been something like the old Dzire/Manza/ETIOS which would have been perfect but what does the person now get by spending 80k more than a hatch? simple extra 100L boot space. That's it! what is the product differentiation now? except for the boot the dzire and swift look too similar. Agreed, that even in the past the swift and Dzire looked similar but I would get about 200L excess boot space for a similar premium compared to what I am getting now. Plus, the car looked like a sedan. Currently it looks like a car that was designed when the designer was breathing his last. Call me stupid but I felt the previous one felt better when it comes to the overall space provided. In short, it felt like something worth 7 Lakhs, the current one simply doesn't.

I am not complaining about the increase in prices but I am complaining about the reduction in value the customer is getting.

Take the Jetta for example. From 2011 to 2015 the car has increased in price by 6 Lakhs. What has changed?

1. Dual zone climate control
2. Audio system upgrades
3. HID's and LED's
4. Changed tail lamps

There isn't anyway on any place on earth that these changes can cause a price increase of 6 Lakhs. The engine and transmission is the same.
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Old 18th August 2015, 11:09   #22
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Slightly.

But isn't it the main reason why a pre-loved car makes more sense today.

Just think of it. Civic V-AT was @ Rs 15L OTR in 2012. Same car would have been @ Rs19L OTR today. But Rs 9L can bring you home a 2011-12 Civic. One will get a proper D1 segment sedan at what price?

The more I think over it, the more I want to buy a Civic.
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Old 18th August 2015, 11:28   #23
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

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Originally Posted by RoadSurfer View Post
Slightly.

But isn't it the main reason why a pre-loved car makes more sense today.

Just think of it. Civic V-AT was @ Rs 15L OTR in 2012. Same car would have been @ Rs19L OTR today. But Rs 9L can bring you home a 2011-12 Civic. One will get a proper D1 segment sedan at what price?

The more I think over it, the more I want to buy a Civic.
Even pre worshipped cars have suffered from increasing prices. Let me give you my own example.

When i went to sell my 2014 Honda city I was surprised to see that I was getting my cars invoice value back (ever heard of such a thing?)

Reason: the new car has become way costlier than before.

Year 2014

Price 10 Lakhs OTR

Year 2015

Price 11.5 Lakhs OTR

Difference: 1.5 Lakhs

The logic is a person who would want to go for a new car would gave to spend 1.5 Lakhs more but he can rather settle for a barely used same car same variant for about 1.5-2 Lakhs less than the new car.

Someone else also reported that when he went to see a pre owned audi he was quoted only 2 lakhs less than the invoice amount for a 3 year old car.
Reason? The new one is costlier.

Last edited by rockporiom : 18th August 2015 at 11:30.
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Old 18th August 2015, 11:51   #24
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Quote:
Originally Posted by rockporiom View Post
Has anybody heard of the term price fixing? Isn't what is happening in the Indian car scene something similar albeit on a much larger scale.How is it that no manufacturer takes an initiative to price a product at its real value price. Won't they have customers flogging to their showrooms?
So what is your definition of "CORRECT PRICE" or "REAL VALUE PRICE"?
All that you have written in this entire thread hinges on your understanding of the correct price.

Because otherwise, what you are suggesting is fast approaching the centrally planned communist philosophy.
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Old 18th August 2015, 12:08   #25
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Quote:
Originally Posted by alpha1 View Post
So what is your definition of "CORRECT PRICE" or "REAL VALUE PRICE"?
All that you have written in this entire thread hinges on your understanding of the correct price.

Because otherwise, what you are suggesting is fast approaching the centrally planned communist philosophy.
Regarding real value or real price. Taking a few cars as examples:

1) jetta

launch price: 18 Lakhs for top variant

Current price: 24 Lakhs OTR

Price difference: 6 lakhs and increasing

Difference in value:

1) changes in ICE
2) HID'S with DRL
3) dual zone climate control
4) a few cosmetic changes

2) Fortuner

launch price: 22- 23 Lakhs OTR

Current price: Above 30 Lakhs

Price difference: 7-8 Lakhs

Difference in value:

1) cosmetic changes
2) HID's
3) electric seats

4) Swift Dzire

Price at initial launch( 07-08) 7-8 Lakhs OTR

Current price: 8-9 Lakhs OTR

Price difference 1 Lakh

Difference in value:

1) reduced length
2) reduced space
3) push button start
4) bluetooth
5) park assist
6) cosmetic changes

5) Honda City

Price at launch 12 Lakhs tops

Current price (within 1 year) 14 Lakhs OTR

Price difference 2 Lakhs

Difference in value:

1) AVN system
2) alarm system


I can give many such examples. Looking at the above don't you feel that the value offered even at the inflated price is not even close to the value offered at the launch price. I agree that things get costlier with time but shouldn't we get at least equal value at the inflated price? Looking above you would see customers pay lakhs of rupees just for minor differences.

I apologise if I am not able to explain my yhoughts properly. But this is what I am seeing in the market, prices increasing and the value offered even at the the inflated price decreasing.
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Old 18th August 2015, 12:09   #26
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

With prices of most new vehicles creeping upwards, it is becoming a tad worrisome for middle class families automotive aspirations to own a decent set of wheels with a full range of safety features. It is not that they cannot afford it , but definitely the value seeking Indian consumer will prioritize his families other important necessities before putting serious money down on a depreciating asset.
Even some hatchback models, fully loaded variants that is, are touching the million rupee mark on road.

Which opens an interesting point for debate.

Is this an opportunity for leasing companies such as AVIS, LeasePlan etc to seriously offer competitive leasing plans for individuals?

Till now, the vehicle leasing business in India, has mainly restricted itself to the corporate domain. With vehicle models, segments and variants multiplying, the time for long term personal leases, with buy back options at 3years, 5years etc, looks attractive.

A well devised lease plan for individuals, with OEM support, can push retail, lock the customer in to that particular OEM's brand, where the customer is given an option to upgrade after "xxx" nos of years and will generally expand the scope of vehicle purchase for individuals.

Hope someone steps in soon. This, i feel, is an opportunity still unutilised and awaiting its full market potential.
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Old 18th August 2015, 12:35   #27
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Quote:
Originally Posted by rockporiom View Post
Regarding real value or real price. Taking a few cars as examples:

1) jetta
launch price: 18 Lakhs for top variant
Current price: 24 Lakhs OTR
Difference in value:
1) changes in ICE
2) HID'S with DRL
3) dual zone climate control
4) a few cosmetic changes
I am just taking one example here.
When Jetta was launched at 18 lakhs, Skoda had some expectation of sales.
Every business wants more profits. Skoda raised the price. The sales didn't drop.
Or perhaps it did, but not to the extent that would lead to loss of profits.

Therefore Skoda is at a better position that it was earlier.
It has got very little to do with whether it is offering HIDs or climate control now, which it wasn't earlier.

The whole point is that in any market, it is not only the sellers who are competing among each others, but also the buyers. And this is something that you are not liking.

You are not liking the fact that inspite of Jetta becoming significantly more expensive, its sales, and consequently profits, are not dwindling. You are not liking the fact that more and more people now have more and more disposable income with which they can afford to buy more and more expensive items. You are not liking the fact that just like Skoda has to compete with Toyota and Honda etc in order to sell, you also have to compete with other "well to do" buyers in order to get a chance to own a swanky car!


Quote:
I can give many such examples. Looking at the above don't you feel that the value offered even at the inflated price is not even close to the value offered at the launch price. I agree that things get costlier with time but shouldn't we get at least equal value at the inflated price? Looking above you would see customers pay lakhs of rupees just for minor differences.

You have still not provided me with the definition of real value price.

Definition 1:
real value price = summation of cost of individual items assembled together

Definition 2:
real value price = the price at which both buyer and seller mutually agree to sustain transaction

Which definition do you subscribe to?
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Old 18th August 2015, 13:09   #28
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Quote:
Originally Posted by alpha1 View Post
I am just taking one example here.
When Jetta was launched at 18 lakhs, Skoda had some expectation of sales.
Every business wants more profits. Skoda raised the price. The sales didn't drop.
Or perhaps it did, but not to the extent that would lead to loss of profits.

Therefore Skoda is at a better position that it was earlier.
It has got very little to do with whether it is offering HIDs or climate control now, which it wasn't earlier.

The whole point is that in any market, it is not only the sellers who are competing among each others, but also the buyers. And this is something that you are not liking.

You are not liking the fact that inspite of Jetta becoming significantly more expensive, its sales, and consequently profits, are not dwindling. You are not liking the fact that more and more people now have more and more disposable income with which they can afford to buy more and more expensive items. You are not liking the fact that just like Skoda has to compete with Toyota and Honda etc in order to sell, you also have to compete with other "well to do" buyers in order to get a chance to own a swanky car!




You have still not provided me with the definition of real value price.

Definition 1:
real value price = summation of cost of individual items assembled together

Definition 2:
real value price = the price at which both buyer and seller mutually agree to sustain transaction

Which definition do you subscribe to?
Firstly, I am not on the lookout of owning a swanky car anytime in the near future nor am I angry that because of other people having more disposable income than me because of which I am unable to own a swanky car. This thread was not for my personal rant or benefit

Secondly, Its not that i am angry that the jetta's price increased and the sales didn't drop. I am angry that the jetta's price increased but nothing much changed in terms of what the car offered. Seeing each other the competition is continuously increasing its prices back to back. The trend is in such a manner that the customer has got no option but to pay more for something that essentially hasn't changed much. This is what I call price fixing where the segment sets a price in such a manner that there isn't much difference between them and the customer has no other option other than paying up.

For e.g. this month Toyota increased prices by 2%, VW followed them, then Honda. What was the change in the car? NOTHING

I am not suggesting a communist government here. A price increase should not be to such a tune that it appears foolish and stupid.

I am suggesting definition 1.
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Old 18th August 2015, 13:28   #29
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

Quote:
Originally Posted by rockporiom View Post
Even pre worshipped cars have suffered from increasing prices. Let me give you my own example.
===========
Someone else also reported that when he went to see a pre owned audi he was quoted only 2 lakhs less than the invoice amount for a 3 year old car.
Reason? The new one is costlier.
I agree on this too. But examples like this will be far and few in between.
My point was only about the value a pre-owned car brings to the table when compared to a brand new car.
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Old 18th August 2015, 13:58   #30
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Default re: A segment shift in the Indian car scene - So many cars now priced a level above!

I think the problem India's car market suffers from is that its basically dominated by 2 players - Maruti and Hyundai. Even though Maruti/Hyundai have over priced cars in some cases, it still points to a market driven economy as long as people continue buying their cars. I think once sales of other companies increase, Maruti/Hyundai may not be able to simply increase their prices by such a margin without providing corresponding features. Honda/Toyota are doing well in lower-mid segments but they need to be able to sell even more to be a formidable challenger.

However, I also think due credit should be given to Maruti because it knows Indian customer psyche like no other company does. It has tried so many different models/configurations in India and has truly pushed pace of market discovery by experimenting. Some of their efforts have been unsuccessful going by their normal sales, but they tried well. And of course few other companies can claim to have such a wide network of after sales.

So in summary the only way I see price-feature ratio to become reasonable is by having good healthy competition in lower segments.
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