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Old 17th February 2008, 23:23   #1
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Default Are 2 wheeler manufacturers taking us for a ride?

Tatas have launched a 1 lakh car. Xenitis has launched a 100cc bike for 19,900 made from Chinese/ Taiwanese kits. As against this, most bikes in the market cost Rs. 30000 upwards. Are 2 wheeler manufacturers fleecing us? Is this the reason why Bajaj is sitting with such a big cash pile on its balance sheet and Hero Honda makes record profits?
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Old 17th February 2008, 23:40   #2
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All companies exist to make maximum profit. They are not in the business to benefit the common man and to sell a bike with minimal sustainable profits.

In my opinion the pricing is competitive within the players. I would rather buy a 35-40k bike from a reputed and tested manufacturer than from a Chinese player.
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Old 18th February 2008, 00:01   #3
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Lets see how reliable this bike is! Going by the Chinese products reputation in our country, I'm not sure how much it would sell. But it might sell well in rural areas.

Quote from the above link
Global Auto’s Rock 100cc is featured with 4-stroke engine, electronic self start and kick start facility, tachometer, gear indicator, aerodynamic headlight with halogen bulbs
Mr. Ghosh felt that the low price point and the 115-km per km mileage were the two factors that would enable the bike to penetrate mass markets.
See the list of features! And the mileage!
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Old 18th February 2008, 00:26   #4
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Originally Posted by IronWolf View Post
All companies exist to make maximum profit.
Companies exist to make profit not super normal profit. When they are manking super normal profit, competition in the market place is imperfect and there might even be cartelisation. In such cases, regulation is required (e.g duty structure on imports of products as well as spares, free trade agreements etc.). Also tax incentives to manufacturers also need to be pruned in such cases.
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Old 18th February 2008, 00:30   #5
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Originally Posted by srh View Post
Tatas have launched a 1 lakh car. Xenitis has launched a 100cc bike for 19,900 made from Chinese/ Taiwanese kits. As against this, most bikes in the market cost Rs. 30000 upwards. Are 2 wheeler manufacturers fleecing us? Is this the reason why Bajaj is sitting with such a big cash pile on its balance sheet and Hero Honda makes record profits?

Could be to an extent.
Like as for cell phone call rates......until TRAI stepped in all providers charged exactly same rates and similar plans.....after TRAI stepped in they had to stop charging for incomming......to beat competition call rates have come down from 7.2 a minute to 50p a minute over the years, with more players coming in they are likely to drop even more soon. So, if A, B & C decide have a monopoly, is in, being the reputed players and they decide to sell something worth 40K at 55K...it definetly will happen or has been happening but then Every one out there wants to make as much profit as they can u cant at all blame them for over pricing. bikes/cars are already overpriced here coz of taxes..

IMO, we can't compare the Xentis with the the base level bike here. its different technology, manufactured in china where taxes ect are different...and a lot of other things have to be taken into account.

Last edited by gendarmee : 18th February 2008 at 00:40.
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Old 18th February 2008, 00:36   #6
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Default What?!

New Honda City ( NHC ) did not offer ABS and Airbags for a considerable amount of time.
SX4 offered the features at a lower price point.
Then by your standards, Honda took Indians for a ride.

Same is the case with Corolla. Corolla was not avaliable for ABS for sometime, then it does it mean that Toyota took us for a ride?

Some features like climate control were not avaliable in Hyundai Verna, but came in SX4, then does it mean that Hyundai took us for a ride?

Audi is cheaper ( in some cases) than Mercedez, but offers some more features, so does it mean that Mercedez-Benz took us for a ride?

Coming to two wheelers, in reality Hero HOnda took us for a ride becuase for more than 20 years, the basic engine is the same. they have just made changes to comply with emmession norms( India is regarded as the country with toughest 2 wheerler emession norms, but in fact Taiwan has the toughest emession norms, but the Indian market is very big i.e. 2nd largest so our emession norms are considered to be the toughest in the world) and the engine's effeciency just got bad with that along with increased vibrations. Still the 100cc Hero HOnda bikes can sell at a huge premium.

Cant they bring better technologies from HOnda. We all know that Honda is not short in technological resources. Still are we not cheated? I believe yes, we are cheated. The chasis is still the same.
35K CD Delux and 45K Splendour NXG have the same engine, gearbox, chasis, but why the huge price difference?

But in general terms, I can just say that we are not being taken for a ride.
Just think of the engineering efforts they have to put in to create a bike that will be horribly overloaded, used with very bad quality of fuel, tortured, abused and still give effeciency along with complying with very tough emession laws.

I think that we must appreciate the huge amount of efforts required to engineer a bike for indian conditions.

And about profit, well, Prosche makes a very big profit, but does it mean that they are taking the people for a ride?
In similar terms, VW, Honda, Suzuki, Hyundai all make excellent profits and much much more than what Bajaj and Hero Honda does, but does it mean that we are taken for a ride?

My point is that a company puts up the products by doing its own survey, etc. and then puts up a price as per their standards and requirements. But then Customer is the king and it is upto us to express dislike or like towards a specific product.

Its us that make 2/4 wheeler manufacturers eek out profit at our will. Eech and every company in this world is just there to make profit as it is their bread and butter to survive. No one is great Ideal company that just goes on looking for the betterment of Common Man.

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Old 18th February 2008, 13:50   #7
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a look at tvs's P&L shows that there is no extraordinary margin on the bikes per say.

So my inference is that the volumes(which tvs doesn't have) make hero honda/bajaj more profitable.

One argument coud be that after selling xx number of bikes, they can reduce the price, as their costs come down. (like computer processors)

I think this would be unhealthy in the long run. Smaller companies like TVS could never compete, and you would have only 1 or 2 very large players.
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Old 18th February 2008, 20:46   #8
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Wow!! Highly debatable question.
With all due respect to manufacturer's responsibilty to shareholders/investors, blah, blah, none of these 2Wheeler manufacturers have in the past showed initiative in their product strategy/ offering, to stand above the rest of the pack. Ok, there have been launches like the CBZ,etc, but in terms of a product that sends a message for the brand in terms of safety, emission,. Somehow, ESCORTS with its Yamaha range and LML were refreshing product lines in comparison. My opinion.

I guess, this is ground reality in a lot many other industries too.

IMO,there could be two possible things
One, the product development function is not capable enough of producing breadwinning platforms,say , at least once in a decade. So they depend on successful platforms of bygone era to survive/keep their assembly lines humming. as in TVS XL, Bajaj Chetak, HH100.
Two, the market derives the product. Which seems compellingly true since BAL,HHIL,TVS are better off today than YAMAHA, LML in revenues and /or profitability. But isnt this a dangerous reasoning approach for a business to make, 'cause youre dead sure gonna end up complacent. seems the case with TVS at least right now.

Every time I see an overloaded TVS XL lumbering /speeding along, I find it too difficult to justify the company that makes it. I mean you could give it better brakes, at the least.

I guess, such product/marketing strategies are more prevalent in niche firms than the volume ones.

And yes, on profit, no body is unhappy about so-and-so manufacturer making profits. It would be nice if some part of the profit went in to deciding how the product should evolve, wouldnt it?

Again, it is a highly debatable question. But i guess, if some of the companies named here and their employees are asking themselves this question once in a while, we,as customers, would move a bit closer to feeling like royalty.
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