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Old 15th September 2016, 13:30   #16
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Default Re: Car pricing and the importance of getting it right at launch!

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Originally Posted by mijnoirhammer67 View Post

As for the Fabled German trios? Grossly overpriced down the years. 40 Lakhs ex showroom for the X1? I remember it retailing at 20 once. 65 lakhs for the E class and 5 series, makes me laugh. The M5 in the UK goes for 75,000 pounds. With an almost 100 exchange rate, that is 75 lakhs. Though after the Brexit the rate has dropped to 89. Even after local production they almost mock us with their prices. And if you go into super car territory, it gets funnier. AMG GT is retailed at 1 cr in the UK, whereas in india its at 2.4 cr. Bentleys go for 1.4 to 2.5 cr in UK and in india? Best not to mention that.
These cars are imported as CBUs instead of being locally manufactured and hence attract upto 150-200% import duty. As an extreme example, the Ford Mustang was launched recently at the hilarious price of 80 lakhs or so, when muscle cars are typically just priced at mid-range - because they're separately manufactured in and imported all the way from Detroit. (Add to their having to be right-hand drive for the Indian market when the Mustang is mainly sold in left-hand drive markets). In the US, they're priced around the same as a Civic or Accord, I'm told.
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Old 15th September 2016, 14:37   #17
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Default Re: Car pricing and the importance of getting it right at launch!

The product managers must always be studying the market and trying to come out with formulas to price their cars correctly but when something like Creta happens, wouldn't it just shock them? The Creta would be a good case study of how a company can succeed even with an overpriced product. It was quite brave of Hyundai to price the Creta so high given it was a new product unlike the Innova which in itself had become a brand over the years and the Crysta was a sure shot success at the inflated pricing.

One thing that seems common among all successful over-priced cars is after sales and service experience. Creta, Crysta, City all are backed by brands known for good after sales experience. So a brand like Skoda might crack the formula for coming up with the best pricing for a good car but will never see as good a success as a car from Hyundai, Toyota or Honda can.

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These cars are imported as CBUs instead of being locally manufactured and hence attract upto 150-200% import duty.
Not all of them. X1, 5 series, E class are not sold as CBUs. They are brought in as CKDs and assembled in India.
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Old 15th September 2016, 14:43   #18
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Default Re: Car pricing and the importance of getting it right at launch!

There is also the hedging technique called introductory pricing

Price the car at an definite "bite point". Assess demand and price elasticity and increase prices accordingly

Mercedes use a similar variation and call them launch editions and chop equipment rather than price
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Old 15th September 2016, 14:43   #19
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Default Re: Car pricing and the importance of getting it right at launch!

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Not all of them. X1, 5 series, E class are not sold as CBUs. They are brought in as CKDs and assembled in India.
Yeah, but either way, they do attract heavy import duties so it distorts the price beyond what it would usually be elsewhere. As in the Mustang example I gave, what would be a mid to upper mid level sedan outside India becomes a big luxury item here. BMWs and Merc E class are used as taxis in Berlin.
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Old 15th September 2016, 15:06   #20
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Default Re: Car pricing and the importance of getting it right at launch!

Interesting thread. So it looks like everyone has been guilty of over pricing their cars at some point, but only Hyundai and Toyota seem to get away with it

Regarding cars that seem over priced yet do well such as the City, Innova etc, one has to bear in mind that the resale is usually quite high for these as well. Most people buying one have the same in their mind so rationalize the overall ownership cost.
I'm dead certain this has been a big factor in driving sales of the Crysta.

Also, regarding the Jazz, it's case study in itself. Reintroducing it with correct prices from day one has done the trick, it's been managing decent sales since then.

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Originally Posted by anshumandun View Post
The product managers must always be studying the market and trying to come out with formulas to price their cars correctly but when something like Creta happens, wouldn't it just shock them? The Creta would be a good case study of how a company can succeed even with an overpriced product. It was quite brave of Hyundai to price the Creta so high given it was a new product unlike the Innova which in itself had become a brand over the years and the Crysta was a sure shot success at the inflated pricing.
...
Yes the Creta does stand out in the entire saga. For whatever reasons, Hyundai got away with the pricing on this one. What is even more appreciable is that till date no worthy competitor is there.

Last edited by avisidhu : 15th September 2016 at 15:17.
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Old 15th September 2016, 15:14   #21
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Default Car pricing and the importance of getting it right at launch!

I have made few observations :

1. Creta is overpriced but the starting price is definitely VFM and that's what creates the first impression.

2. As we have read numerous times Hyundai themselves predicted the sales of i20 as 1500 max they themselves got the pleasant shock first and rest is history. i20 kind of enhanced the image of Hyundai as premium which I don't think any model from Maruti can still claim. Creta is reaping the benefits of all the hard work done by Hyundai in establishing the i20. Even the base model of i20 is priced VFM. Nobody buys them doesn't matter.

3. S-Cross's1.3 engine, 1.6 price and Duster's interiors make feel customer as short changed while Creta's stunning looks, plush interiors, complete bouquet of variants incl A/T, engine, etc make it tough for the customer to look other way. S-Cross wheel caps, the grill design in facelift, Duster's pink interiors all add to Creta's advantage. Same applies for funky design of XUV plus its niggles, not so premium interiors, lack of boot, etc. In totality it can be understood when the Creta buyers claim that to them the Creta appears to be complete car and hence they bought it.

4. The case of Innova is really unique as while trying to dent the Innova sales almost all the competitors by launching half-baked products have unintentionally helped in making Innova as bullet-proof brand.

5. The concept of pricing doesn't take into account the status or bragging rights the customers of few brands command. Right now Innova, Creta & i20 seem to be enjoying that. Honda City, Duster, Skoda (manufacturer) and Swift have lost it very recently.

Last edited by GTO : 16th September 2016 at 11:25. Reason: Please use SPACING between your paragraphs :). Thanks
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Old 15th September 2016, 17:32   #22
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Default Re: Car pricing and the importance of getting it right at launch!

Nice thread RavenAvi. Keeping the manufacturers pricing strategy apart, personally I've been benefited by such price reductions not once but twice in the span of last 4-5 years. Fellow Bhpian abhinav.s keeps teasing me about getting my face-lifted 2012 Jazz at a reduced price of ~1.7 lakhs and S-Cross 1.6 at a reduced price of ~2.05 lakhs this year.
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Old 15th September 2016, 18:24   #23
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Default Re: Car pricing and the importance of getting it right at launch!

Excellent thread RavenAvi!!!

There are a lot of buyers who happen to feel ripped off for being early buyers of the overpriced models. Fortunately, I am someone who benefited from a pricing fiasco I ended up buying the S-Cross 1.6 ONLY because of the initial overpricing by Maruti. In fact, all my initial shortlists were considered overpriced

1. Honda Jazz VX
2. Hyundai Elite i20 Asta
3. Hyundai i20 Active SX
4. Maruti Suzuki S-Cross 1.3 Alpha / Zeta

Now, I am a top variant person and S-Cross 1.6 Alpha at 17.8 lakhs was WAY outside my initial budget of 10 L. I was willing to take it up to 12 L max, only if the car impresses me that much.

Jazz VX was way overpriced for what it offers at 10+ L.
i20 Asta was slightly below 10 and i20 Active SX was more expensive than Jazz - but either did not appeal to my heart
S-Cross 1.3 Zeta was ~12 L and Alpha was ~14 L. Alpha was overpriced for what it offered and Zeta was just okay from VFM perspective especially compared to Duster and Creta - but the missing features will hurt knowing I spent 12L.

That is when there were dealer discounts and Maruti price cuts and all of a sudden I was offered 1.6 Alpha for 14.7 L - for just a little extra I could get the REAL S-Cross. I jumped at it and the rest as they say is...

The fact remains, if Maruti had initially priced the S-Cross realistically, I would have most probably gone for the S-Cross 1.3 Zeta or Alpha based on what I found VFM. Thank you Maruti for overpricing and then correcting the S-Cross prices - It worked for me!!!

Last edited by Vigkey : 15th September 2016 at 18:44.
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Old 15th September 2016, 21:12   #24
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Default Re: Car pricing and the importance of getting it right at launch!

Great thread,
However the Ecosport story is not only about the price.

When it was launched it was priced perfectly for what it offered and Ford slowly in due course of time jacked up the prices. Then the duster was launched at a very similar price level which brought about the downfall of Ecosport sales IMO.

When the Brezza was about to be launched ford had to reduce the prices to remain even slightly competitive.
But the prices were not reduced to launch prices as far as I know.


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Originally Posted by Detritus View Post
These cars are imported as CBUs instead of being locally manufactured and hence attract upto 150-200% import duty.
There is no way one would pay 150% duty for a CBU even for a private import.
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Old 15th September 2016, 21:26   #25
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Default Re: Car pricing and the importance of getting it right at launch!

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There is no way one would pay 150% duty for a CBU even for a private import.
Just checked the numbers, using the Mustang as an example. The top variant is around $30k. For comparison, a Honda Accord is around the same, topping out at $34k. In India, the Accord sells for around 22 lakhs. The Mustang on the other hand, is priced nearly 4 times that, at 80 lakhs, and there's a detailed review here, which repeatedly points out how crazily overpriced it is compared to the luxury cars in that price segment in India.
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Old 15th September 2016, 21:33   #26
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Default Re: Car pricing and the importance of getting it right at launch!

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Originally Posted by Detritus View Post
Just checked the numbers, using the Mustang as an example. The top variant is around $30k. For comparison, a Honda Accord is around the same, topping out at $34k. In India, the Accord sells for around 22 lakhs. The Mustang on the other hand, is priced nearly 4 times that, at 80 lakhs, and there's a detailed review here, which repeatedly points out how crazily overpriced it is compared to the luxury cars in that price segment in India.
Ford can price their car whatever they want.
But I can assure you that Ford will not be paying more than 140% duties.

The remaining amount that is unaccounted for from the 80L sticker price, a small part of it would be logistics and insurance.
Major part of it would be profit I guess.

But we are going completely off topic here, suggest we stick to the main topic on hand.

Last edited by cooldude1988765 : 15th September 2016 at 21:34.
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Old 15th September 2016, 22:05   #27
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Default Re: Car pricing and the importance of getting it right at launch!

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Originally Posted by Detritus View Post
Just checked the numbers, using the Mustang as an example. The top variant is around $30k. For comparison, a Honda Accord is around the same, topping out at $34k. In India, the Accord sells for around 22 lakhs.
Accord would be 28-30 lakh or north when launched in India. Honda would no way launch it at 22 lakh if previous instances are anything to go by.
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Old 15th September 2016, 23:00   #28
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Default Re: Car pricing and the importance of getting it right at launch!

Nice thread. Will bring out all the complaints that we had against the manufacturers without exception.

Creta's success inspite of being way overpriced was a direct result of the Duster being overpriced in the first instance.

The Duster was priced such since there was no competition and buyers had to reluctantly overlook the horrid interior quality.

Hyundai took advantage of that and could overprice the Creta (considering the beautiful interior) which in comparison to the Duster was way more premium=> higher price

Regards,

Siddhartha.
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Old 15th September 2016, 23:58   #29
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Default Re: Car pricing and the importance of getting it right at launch!

Maybe I've read one too many marketing books, maybe I don't want to conform to traditionalist views which are nation-specific, but I've an altogether different take on this.

The problem is car sales have become like Bollywood movies, opening bookings, first month collection, lifetime collection, basically if people are forking money out the wazoo it speaks for the "hit"ability and popularity of the product, yet in the end its perceived value.. some may consider it of great value, the product even if its overpriced to the hilt, and then there are some who'll call the product overpriced even if its reasonably priced, lets momentarily leave the factors like brand value, resale, ownership costs/experience, I'll bring those in later.

Earlier people used to buy a car because they needed a car, and they first used to outline their requirements based on space, mileage, price, brand in that order, approximately and then they bought the product. Today people are considering snob value, looks, style, safety, superfluous gadgets etc, there really is no all-in-one product otherwise one brand will be outselling others by massive margins. The way products are being priced today are because of such buyer needs, he/she needs to buy a Creta, or an Innova and thus they have to shell out around 18 & 25 lakhs respectively for them. Some products will not find love amongst the buyers to start off with, examples can be the earliest versions of Jazz and a barebones Polo TSi.. the public gave the companies no leverage hence the companies had to go back to the drawing board and offer their products at more a competitive/value proposition, the Jazz was made cheaper and the Polo was made more high-tech.

Its because of this that companies are struggling to find newer ways to sell, the only way that works here is to treat their car launches like Bollywood movies.. give it some style and glamour, action (bhp), song & dance (entertainment console) and an illusion of it being a better story than it is (value deception) and hope the public queues up. The value when it comes to the smaller details is hard to perceive and people will not give them the money for it.. that's why cars like the Getz, Punto, Linea, 1st Gen Verna, 1st Gen Fiesta hardly had sales and pricing was the least of their problems.

Its time that manufacturers made no-compromise products.. give cars that feel like cars, a solid core with an emotional driving experience, I wouldn't mind if they overprice it in that case and most wouldn't either. I understand that sales are important, companies need to make up for the hundreds of crores spent on research and infrastructure hence they also have to come up with a product that'll please the masses 100%. This dilemma will always be going in circles > whether to focus on real quality or perceived quality.

Bottom-line is, if you are brand-specific, or requirement-specific (styling/ features/safety/snob appeal etc) you need to pay what it costs.. otherwise the best way to respond to "perceived" high-pricing is to not buy the product at all and if everyone else shares your views and do not buy the product then the company will realize its mistake automatically. Personally, I'll never equate high-sales, great value, or popularity as a sign of a great product.. it'll all come down to what I feel when I first shut the car door as I sit inside, the first turn of the steering and the first pedal response.. if the feeling is great then for that any price is worth it.

In metro cities self-driving is the cheapest option of transport (as far as cars go), and when we include resale, depreciation benefits and the freedom to use whenever needed.. even slightly more expensive pricing should not be too bad at all. That brings me to the earlier part.. can a brand which has better service-network, better resale (due to popularity) and a proven track-record of reliability truly justify a more premium pricing than competition? I leave that for each one of you to answer, mine is yes.

Last edited by dark.knight : 16th September 2016 at 00:01.
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Old 16th September 2016, 09:11   #30
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Default Re: Car pricing and the importance of getting it right at launch!

There are reams and reams of research on pricing (Skimming pricing, Penetration pricing, Competition pricing... ) and there are hefty MBA books on pricing, but nothing works in practice! All I can say is whether a car becomes a hit or dud is still a mystery -just like no one knows why a movie becomes a hit!
If the manufacturers knew the right formula of price , value and profit, all cars would be a hit.
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