Why is Corolla pricier than Innova?

[sedanese]

It is not clear to me in which forum I should post this question. If this is not the appropriate forum, please let me know which one is.

The base trim of Corolla is more expensive than the higest-end Innova. In Bangalore, the entry-level 1.8J model of Corolla sells at Rs 977650 ex-showroom, while the fully-loaded 2.0V VVTi Innova costs 944250. The latter is even slightly better than the former in terms of features: fog lamps, driver seat height adjustment etc. Corolla delivers 125PS whereas Innova gives 136. Of course, the power-to-weight ratio must be in favor of the sedan as it is lighter.

Features of the two cars are more less the same. I suspect that the between them, Innova takes more raw material and labor to produce than the other car. Hence, it doesn't make sense to me that Corolla is more expensive than Innova. The sales person at the showroom told me that Innova is mostly indigenously manufactured, whereas the Corolla is mostly imported in component form and locally assembled, and that this explains the price differential. Is this correct?

The only thing justifyijng Corolla's higher price, in my opinion, is the better build quality of the car compared to Innova but then again the difference is not so glaringly noticeable after all.

The differential pricing of similar cars by other manufacturers is not a very intriguing thing. Tavera, for instance, is nowhere near the Optra in terms of quality, performance and features. But Innova and Corolla are not that far apart on these parameters.

Answers and views appreciated.

[rranjith_kum]

corolla is a sedan.... try visualising the top level executive driving an innova to office....
of course your logic is correct but i guess innova replaced the qualis ....
do you know for the same price people in other market like in united states get corolla fitted with GPS and alll.... we don't get some technological goodies....

[theMAG]

Thats a very interesting question that you ask - why should an older product be significantly pricier than a visibly modern similar car?

The reason for the Innova's pricing:

The Innova is part of Toyota's IMV(Internationakl Multipurpose Vehicle) program, the main drivers for this program being utilization of low-cost countries towards producing parts for vehicles on this platform. Found this on http://www.toyota.co.jp/en/strategy/imv/index.html

CountryMain Production ItemThailandDiesel EngineIndonesiaGasoline EnginePhilippinesManual TransmissionIndiaManual Transmission

The result is a very cost competitive vehicle.


The Corolla on the other hand, has always been developed in Japan/North America/Europe specifically for advanced markets. Therein lies the elevated cost of the Corolla, owing to higher development costs, higher sourcing costs etc. And companies dont just sell their products at just above the cost price; they price it towards a specific market strategy and branding. And in India, Toyota deemed the Corolla to be seen as a luxury car, probably after an intensive market survey.

Ultimately, its all about branding and image, more so than merit oriented pricing. Else why would Mercedes-Benz, BMW etc charge their entry-level cars that high over a normal mass production sedan?

[ess_a]

Well one can think it in this way.... Had the Innova been costlier than the Corolla, would there be any market for it... after all it is here as an MUV and not a luxury car to command a price >10lac.. That the Innova has comparable features of the corolla, it actually makes it a stealer...
Plus the corolla is a luxury sedan... Its branding cannot be complete unless it is put in a proper price bracket....

[GTO]

Sedanese

Have a look at this topic. (Corolla? Nope...Innova!)

[sedanese]

Friends, thanks for your responses. GTO, thanks for that interesting thread from more than a year ago.

I'm skeptical that an automaker has great leeway in terms of pricing a car in such a way that the product of margins and volumes (margins*volumes_sold) yields the same result at different price points. More concretely, I am skeptical that Toyota believes that pricing the Corolla higher in tune with a certian brand image yields it the same or higher profitability than pricing it lower and gaining a greater market share. (Of course, a reasonable assumption here is that a lower price results in greater number of cars sold). Deliberately pricing a car high so as to appeal to snob-value seekers is definitely a profitable strategy at the highest end of the market -- the Beemers and Audis etc -- but Corolla is targetted at the (upper) middle class, not the rich.

In fact, Totoya is trying hard to corner a bigger market for Corolla. If you recall, the lower-end 1.8J is a latter addition to the portfolio. And an even lower-end trim is on the anvil, minus the airbags, ABS, stereo etc, configured to cost less than ten lakhs on the road -- the "sweet spot" price that could lure those shopping for a car in the 8-9 lakhs bracket.

All of which seems to me to argue that given a set of features for Corolla, Toyota doesn't have a great deal of choice in pricing it. Hence the follow up question: why does it cost less to manufacture Innova as opposed to Corolla? Manufacturing Innova's parts in developing countries does definitely drive the cost of the assembled product lower, but -- correct me if Iam wrong -- even Corolla is mostly made in South East Asia. Hence, Innova can be cheaper only if it has a bigger percentage of indigenous content than Corolla. This is the thesis I'm seeking confirmation for.

This may seem like an academic argument (involving amateur economics that is offtopic for team-bhp, but my intent to raise this question: if Innova is made mostly locally, is its quality considerably inferior to Corolla's? Since Innova has been out for only less than two years now, will it take time to get to know the answer to this question? Thanks.

[GTO]

If only car prices were always related to how much they cost to make. Do you think that the Zen cost more to make than the Alto? Did you know that the Qualis actually cost more to make than the Innova? That some models of the Honda and Acura have almost everything in common. But the price?

If anything, the Innova probably costs as much (if not more) to manufacture than the Corolla. But their pricing is relevant to market positioning.

WRT the build quality, I'd give the card to the Innova over the Corolla

[rahul_intlad]

Originally Posted by GTO

Did you know that the Qualis actually cost more to make than the Innova?

.........

If anything, the Innova probably costs as much (if not more) to manufacture than the Corolla. But their pricing is relevant to market positioning.

Does it mean the Qualis cost Toyota as much as or more than the corolla. That may be one of the possible reasons why the qualis was stopped in India.I mean how much would toyota india earn from a qualis.

Also if you compare the US prices of the corolla and the indian prices the corolla is nearly double the cost in India.We have to pay so much tax and what infrastructure are we given compared to USA.

[mithun]

try visualising the top level executive driving an innova to office....

I've seen thousands of top-level executives driving Innova to their office.

[btirthankar]

This is 2008 now, seems like a inactive thread.

Innova has a larger target Volume and due to manufacturing and sales spread across geographies, so the development costs are recouped over its say 5 year lifecycle and the cost per unit remains low.

Corolla was never envisioned to be sold in such Volume. We are talking about a Global Car Company here - TOYOTA. They would seldom go wrong in their thinking and strategy. Something to learn.

Take the case of the much said about Maruti Gearbox. The Gearbox was always imported and never localized and formed a substantial part of the cost. Also the Zen could always be as expensive as a M800 if Suzuki Japan let go of recouping its development costs from Indian market.

[tsk1979]

Its surprising but true, the corolla costs less to make than the innova. Ditto for qualis(economies of scale at work here).
But Toyota(and most other car companies) have a policy.
They will sell a car at whatever price it can sell, as long as it is not significantly lower than the production cost.
Corolla can sell at current price and make money, so they sell it.
They are about to bring in the replacement, therefore they hare offering insane discounts in Delhi.

[vasudeva]

Originally Posted by tsk1979

Its surprising but true, the corolla costs less to make than the innova. Ditto for qualis(economies of scale at work here).
But Toyota(and most other car companies) have a policy.
They will sell a car at whatever price it can sell, as long as it is not significantly lower than the production cost.
Corolla can sell at current price and make money, so they sell it.
They are about to bring in the replacement, therefore they hare offering insane discounts in Delhi.

Of course, not only Toyota or other companies or any other business for that matter, sells at a price which the market can bear. Keep that in mind. In simple terms, they are in the business of making cars fine, but with the objective of optimum profits and costs. This is taught in the first lesson of economics.

[vasudeva]

Originally Posted by GTO

WRT the build quality, I'd give the card to the Innova over the Corolla

I do not know much about the build quality of Innova, but regarding Corolla at 21K of driving, I can say that:
1. Build quality is good and acceptable (in terms of exterior sheet) but not great.
2. Rear boot is light but not like the Octavia which requires the Great Khali to close the boot.
3. Pretty silent on most roads, but minor squeaks and door rattles need to be managed and corrected at every 5-10 K of service. Perhaps very few cars are immune from the torture of driving through Indian roads (and I drive in Delhi).

Others may have a different experience at higher mileage, but so far so good for me.