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Old 19th August 2015, 19:36   #61
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

https://en.wikipedia.org/wiki/Supply_and_demand

The price of a product in a "free" or capitalist market has absolutely nothing to do with the cost it took to make the product. It has to do with the demand. If I sell pieces of paper for INR 1000 each which cost me INR 1 to make and I find enough buyers that are willing to pay the price, then that is the price of my piece of paper.

There are enough buyers' in the Indian market that find "value" in the cars mentioned at the current prices, whether or not it suits our individual definition of value. As long as the car makers can charge the prices they are charging and don't end up with tonnes of unsold inventory they will continue this. They must be doing market research to understand demand for their products, they control the supply, hence they can price "correctly".
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Old 19th August 2015, 20:13   #62
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

This is the scenario of every trade / business in India, where there are more demand prices goes high.

Might sound off topic,

My father is a Micro manufacturer in automobile industry and in spite of price rise in Labor, electricity, rent, raw materials, oil & Freight we have been asked to reduce price every year,

The product which we manufactured on 1999 was paid 128 rupees and when the raw material cost was just 17 rupees per kg. Now we are getting only 100 rupees paid for the same component,

They call this as a continuous improvement in production. However, neither the actual manufacturers (the sub contractors) nor the end user get the benefit out of it.

Its the Parent company enjoys all the benefits just because there is a demand.

I totally agree that only in India, we are paying high price for less features.
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Old 19th August 2015, 20:41   #63
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

I think it is the kit, plus the inflation.

Now even hatchbacks come with kit which was not available even in Corolla/Civic/Octavia a few years ago. The esteem used to cost 5L ex even without power steering and power windows.

So I think, current prices are just fine.
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Old 19th August 2015, 20:58   #64
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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
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?I am not complaining about the increase in prices but I am complaining about the reduction in value the customer is getting.
@rockporium, thank you for starting this thread and it is most informative to see the varying perspectives of the members. Perspectives would differ on what a fresh graduate should own as a mode of transport. When I started working a long time ago my newly acquired third-hand Lambretta was the envy of my flat mates.

Quote:
Originally Posted by Hayek View Post
In fact, car prices have risen considerably slower than general inflation, despite most state governments raising registration charges very substantially

Well said Hayak. Cannot agree more with you.

Cars today offer a lot for the price we pay. It is a testimony to the engineering and lean manufacturing ingenuity of the OEMs who design and build cars. Given below are the prices my family or I bought cars at with the year of purchase and what those figures mean in today's rupees after adjusting for inflation (as provided by RBI/GoI rounded off.

1985 Maruti 800, Rs 56,000 -- Today = ~Rs 500,000
[no power windows, no air con, no music system or radio, no seat height adjustment, no steering wheel adjustment, no fog lamps, no hub caps, no leather seats, no central locking, no rear camera, no ABS, no airbags and what not]

1990 Premier Padmini Rs 200,000 -- Today = ~ Rs 700,000
[no power windows, no air con, no music system or radio, no seat height adjustment, no steering wheel adjustment, no fog lamps, no hub caps, no leather seats, no central locking, no seat belts, and of course the poor poor build quality Premier was known for - this was the first car bought from my savings and wifey & I literally emptied the bank to pay for it - this was before car loans and EMIs]

Compare this with all the features and much superior finish we get in cars today at these price points. The automobile industry deserves a pat in my opinion. Of course some of this lowering of price in effective terms is a function of lower excise duties today compared with 25 years ago but even after that we get a lot more for each lakh of rupees invested in a car.

Car prices have risen slower than inflation and this despite the loss of value of the INR from Rs 25 to the USD in 1992 to Rs 64 today.

Prices are set by demand and supply much like the prices of apartments. If you cannot afford the apartment you like you learn to like the one you can afford. The car manufacturers don't owe us a price point.
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Old 19th August 2015, 21:23   #65
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

Let me start with a disclaimer: I am a simple 'IT guy' without any formal training in marketing or management. I believe that companies fix the price at a point where people will be willing to buy. Given the purchasing power of people, they can afford to price it high.

Let me try explain with an example. I purchased my first car, a Maruti Zen Vxi in 1999, about a few years into my career. At that time on road price of the car was about 80% of my annual gross salary. I believe someone in a similar position now can easily buy a Swift or better car for 80% of current salary and car price.
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Old 19th August 2015, 22:05   #66
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

I believe that there should be a good used car market. I remember that during my visit to New Zealand almost all of the cars sold were used cars from Japan. The manufacturers themselves had showrooms of used cars instead of separate brands like Maruti True Value or Mahindra First choice.

I guess once the used car market matures in India, everyone will be able to afford good cars with decent build quality, power and safety.
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Old 19th August 2015, 23:53   #67
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

Posting again, this time a different perspective
Everything said and done, price hike hurts.
I think the fallout of this is that it affects the desirability of cars for individuals. Say for example, my brother brought a Linea for 8.60L on road in Pune in 2010. His career had started just 3 years back at that time. Today, when an average Joe is 3 years old in his corporate life (assuming he is drawing the same salary as my brother then),even if he has 9L at his disposal, he cant dream of a Linea, rather settle for a Premium hatchback or a sub 4m sedan, because being an IT guy, I know that salary hikes are not as high as car price hikes. An engineer fresher in any normal 'truck' company (Infosys, TCS, Wipro etc.) even in 2015, starts his career with 3L p.a. add 25 to 40K for better companies. It was the same when I started in 2009.

So, while I agree that it is the purchasing power of people that is causing price hike along with other facts, it is happening too fast and there is a set of people who cannot cope with it and I feel bad about it.

To answer the question : Will it ever stop ?
I think it will stabilize at a certain point, where buyers will feel that the car's value is matching its asking price and sellers will agree. Humans being the most adaptable creatures, will find a way out. Having said that, priority of us Indians must be on safer cars because whatever we drive right now, expensive (Fortuner : 30L with 2 airbags) or inexpensive (Hatchbacks with no airbags) is not safe. That was a little
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Old 20th August 2015, 07:03   #68
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

Along with so many other examples given here, I'll add one more, from Audi.

Back in 2012, my friend got an A6 for 50 lakhs (premium plus variant). But today, the highest variant of the A4 will set me back by 47 lakhs. The other Germans, ie 3 series and the C Class had a new generation, so I could at least digest the price rise.

The A4 however has been the exact same car with a sudden price increase of 10 lakhs. You would think then that the A4 would be struggling to get sales. But guess which car has been the best selling luxury car in India?

Then there's the Creta. Literally everyone is complaining about the prices and then literally seems to be buying one!

And Toyota, let's just say, 88bhp Altis and 2 airbag, 30 lakh fortuner.

It's kinda unfair that our cars are already more expensive than in, say, US. Add to that this sudden increase in prices, the future does seem rather grim.
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Old 20th August 2015, 09:37   #69
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

All this thought process about the "segment shift", has been tipped off after the recent pricing of Hyundai Creta and Suzuki S-Cross, hasn't it?
With creation of new segments (Compact SUVs, Premium SUVs, LUVs, or whatever, hatchback crossovers, SUV crossovers, Premium crossovers), the manufacturers are at their disposal to price them at their own will based on their market study, as there is no competition to set the lead.

In future, if Tata comes up with a premium crossover, out of Vista platform - a Longer, bigger Bolt, with leather seats, rain sensing wipers etc and a little big engine, what will be the price point? It will try to match it with S-Cross, and probably undercut with a few thousands right?
(I am using Tata here for a hypothetical example, because the above is highly unlikely, and not for any other reason)

Sells or not, it is a different thing, but that is how the pricing will be.
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Old 20th August 2015, 13:13   #70
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

The car prices have crossed 10 Lakh barrier quite fast but has the registration tax limit which still is stuck at Rs 10 lakhs in certain states, been revised ?

For example: in a state like TN, few years ago, the cars costing below Rs10Lakhs were taxed lesser than the one which were above Rs10Lakhs. Now since the prices have gone up, the taxation limit should also be revised. Has this been done already ? If not, the new limit should now be fixed at Rs15 Lakhs instead of Rs10Lakhs.
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Old 21st August 2015, 11:48   #71
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

Very good thread. Car prices have climbed up consistently over the years but what makes me wonder is how these cars have become expensive in last three or four years just as OP mentioned. This Creta and S-cross, if launched in 2010-11, would have failed miserably just like Jazz did. But now that times have changed, they are getting good numbers and what makes me more afraid is this market response will encourage the companies to price their cars even more. Take an example of Fortuner. When it was launched, if I remember correctly, the cost was around 17 lakh OTR. Now that exact same car with some more bling will cost you more than 26 lakh OTR. A plain 10L increase for the exact same car and engine with one or two added features. With this trend can anyone guess howmuch the next gen Innova is going to cost. Looks like there is no stopping to this trend.
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Old 22nd August 2015, 12:46   #72
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

This trend surely is alarming. I feel that outside of all obvious reasons, like manufacturer greed, slight increase in raw material prices, rupee devaluation vs. USD, etc, there is a much more sinister side to the entire story. This is similar to what happened in the domestic airline industry, where a nexus has been created between different airlines who are supposed to be competitors. Today, the price of any ticket across any sector across different airlines moves up or down almost uniformly. Check any travel website or airlines websites and you will see virtually similar pricing across different airlines for the same sector - 7 days, one month and three months out. Does that mean that all airlines are seeing similar trends in bookings at any given point in time? Gone are the days of truly variable pricing (period between 2006 - 2011) where it was common to find one airline selling a seat for 3000 while another airline selling similar seat for 4000, with absolutely no difference in end value realized by the consumer. This trend post 2011 - 12 was brought about by the realization that customers will pay or be forced to pay if they see the value; whether the value is perceived or actual, it simply does not make any difference. That's the reason that during the last 5 years, while airlines have increased fares at multiple points, they have not passed any benefits to consumers even when the crude oil prices have been reduced to half. Cartelization has brought immense benefits; sadly not for consumers though.

Similar is the case with automotive industry, I feel. Of course I may be wrong, but how else do you justify an across the board rise in prices and simultaneous drop in quality. The simple thought is to add more bling and glamour, thereby increasing perceived value, while reducing the real stuff, reducing real costs and increasing real profits.

When all manufacturers tend to do this, of course the benchmark of quality itself will shift to lower standards. Similarly the benchmark of value will reduce and the customers will start accepting the new lower standards as the new and more importantly, only available standards. Hence, a consumer is now getting 'lower quality' product which perfectly conforms to 'market standards'. Obviously, manufacturers and dealers are the only ones laughing all the way to the bank.

Last edited by rattanw : 22nd August 2015 at 12:50.
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Old 23rd August 2015, 16:24   #73
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

Very good thread indeed. And manufacturers ARE getting greedy. I heard vendors are being forced to supply OEM parts / accessories at 10 year old prices and with improved features. In other words, vendors are supplying more for less. If this indeed is true then it is manufacturers who are getting fat.
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Old 23rd August 2015, 20:26   #74
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Default Re: A segment shift in the Indian car scene - So many cars now priced a level above!

Relevant thread here.
The price rise over almost a decade have been disturbing.

My dad bought a Getz GLS (below GLX which had ABS and alloys) at 5.5 lakh OTR in 2006. It has a fabulous petrol engine, with low FE. It seemed a better car at that time compared to the cramped swift.

The Innova V model in 2007 costed 12.5 lakh OTR. Today the same costs 19.6 OTR in Bangalore.

The most shocking is Fortuner. It was 23 lakh OTR in Bangalore at it's launch. As of today, even the 2.5 liter models cost above 30 lakh OTR in Bangalore.
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Old 23rd August 2015, 21:51   #75
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I think while we talk about inflation, we should also talk about purchasing power and our own salary increases.

What we or our parents earned in 2005 isn't the same that we earn today. In fact, I'd argue that our salaries have grown exponentially while good prices have followed a gradual trend in line with inflation.

I am not arguing that the price rise is justified for crappy quality cars but that is a different ball game all together.

Like the person who mentioned here about manufacturing a piece of paper for 1000 Rs and having enough buyers to buy it. Unless quality is regulated, everyone who can afford a 1 Rs paper get a dirty piece of garbage. It's our government that has given a free hand to these manufacturers to do whatever they wish.
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