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Old 3rd October 2009, 23:49   #31
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IMHO this strategy of continuing with the older model has worked well only at the lower end of the market. The generations of the Alto are a case in point. Maruti and Hyundai/ Tata to an extent have been successful here.

As you move towards the more premium segments, only the latest would work and thats what Honda/ Toyota have done. That said, it does require courage to pull the plug on a segment leader.
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Old 4th October 2009, 00:43   #32
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IMHO this strategy of continuing with the older model has worked well only at the lower end of the market. The generations of the Alto are a case in point. Maruti and Hyundai/ Tata to an extent have been successful here.

As you move towards the more premium segments, only the latest would work and thats what Honda/ Toyota have done. That said, it does require courage to pull the plug on a segment leader.
I'm sure you are referring to the Old Honda City and the qualis when you say honda/toyota.
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Old 4th October 2009, 07:03   #33
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this isnt a feature of indian markets alone. This used to be done in europe/us when they were not as affluent as they are now
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Old 4th October 2009, 07:46   #34
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The budget constraint at lower levels is not really a complete explanation - based on latest ads in DH, WagonR starts @ 2.66 and A-Star @ 3.14, this is even without considering instalment differences would be even more minor.

The difference between 800 and Alto is even less, about Rs27k.

I would attribute it to short term mindset by MM/Tata which will seiously hamper their long term global plans. This thinking, once internalised, also affects their global marketing efforts. Good example being launching the 'good enough for India' INDICA in the sophisticated UK market without improving it.

When it comes to overseas companies, they probably internally think these are cheap Indians, let them get cheap stuff, we can sell any crap for high price and blame taxes. At extremes this leads to Skoda like behaviour, at moderation this leads to what we are seeing with models, engines and variants.

I think this will only wash out once the current newly rich generation for whom car is a novelty (and hence would grab anything) retires and a new generation that grew up with cars takes it place..

Last edited by Traxter : 4th October 2009 at 07:50.
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Old 4th October 2009, 11:23   #35
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The small/mini car is evolving at a fantastic rate in Europe,much much faster for India to keep up,both in tems of budget constraints and market maturity.
The Indian small car market doesn't respond much to price hikes.And a price hike is an obvious thing if a bigger,faster replacement model is launched.
So in India,subtle mid-life facelifts are done to keep an ageing model soldiering on.Alto,Ikon,Accent..cases in point.
Also if a manufactures replaces a model with a pricey,new one,it sometimes also ends up losindg a sizeable chunk of market share.
And as pointed out by other BHPians,this is only present in the lower segments,the main segments,where the auto cos play safe.
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Old 4th October 2009, 12:02   #36
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The budget constraint at lower levels is not really a complete explanation - based on latest ads in DH, WagonR starts @ 2.66 and A-Star @ 3.14, this is even without considering instalment differences would be even more minor.

The difference between 800 and Alto is even less, about Rs27k.

I would attribute it to short term mindset by MM/Tata which will seiously hamper their long term global plans. This thinking, once internalised, also affects their global marketing efforts. Good example being launching the 'good enough for India' INDICA in the sophisticated UK market without improving it.

When it comes to overseas companies, they probably internally think these are cheap Indians, let them get cheap stuff, we can sell any crap for high price and blame taxes. At extremes this leads to Skoda like behaviour, at moderation this leads to what we are seeing with models, engines and variants.

I think this will only wash out once the current newly rich generation for whom car is a novelty (and hence would grab anything) retires and a new generation that grew up with cars takes it place..

27K is a LOT for someone who is shopping at entry-level car market. Most entry-level car buyers make purchase at a stretched budget bridged by a loan and in many cases the EMI is also stretched. Every 5-10K in gross price matters. What may be "minor" for a Honda buyer may be "significant" for a M-800 buyer. In any market, the low-end is always highly price sensitive and heavily fragmented. At any price point, you will always have some customers who could have paid a little more (hence you are not milking them properly) and some who couldn't afford your price (hence you are losing business). The only way to maximize your business is to offer something to everyone. Have you ever gone to a street-corner saloon ? If you look at their price-card, you will notice 3-5 price points for shaving - one basic, one with high-end cream, one with premium-end cream, one with gel and possibly one "special". The same principle is at work here - take as much as the customer is willing to pay and don't allow anyone to return without a purchase. The high-end saloons catering to rich people will not have as many price points - they will possibly have just one for shaving. Take airline tickets - for the same economy class seat in a given sector, how many price points are available with a particular airline ? And how many price points do they offer for the business-class/first-class for the same sector ?


And Indian taxes are indeed the biggest barrier for foreign car companies to offer us their latest technologies and features. When you buy a 10L+ car in India, anywhere between 30% to 70% (may be more) of your money goes to the government. You can do the math on your own to figure it out. More is the import content in the car, higher is the tax content in the final price. If you take the taxes out of the price, you will see a very competitive offering in international standards. Latest technologies always cost more (R&D costs need to be recovered in first few years). When Indian taxes are added to these costly models, the price becomes absurd and can reduce demands for these products. So, often high-end car companies wait until their R&D costs are amortized from other markets before bringing these models to India.

High-end car volumes are too low for Honda/Toyota/BMW/Skoda etc. to start their factories here which would need huge amount of investment. So they run only the assembly lines here with imported kits (attracting ridiculously high import duties).
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Old 4th October 2009, 14:34   #37
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High-end car volumes are too low for Honda/Toyota/BMW/Skoda etc. to start their factories here which would need huge amount of investment. So they run only the assembly lines here with imported kits (attracting ridiculously high import duties).
I think its a vicious cycle : lets say IF there were factories of accord in India and they would sell accord in the 11-13L price range (Like in the US), then I believe that a lot more people would buy it , and this would in effect bring down cost of all the corollas and skodas also .

if 30-70% of the price paid for an accord / CRV goes to the government, then these cars are , in fact , priced agressively.

same policy would affect all other cars too , and in fact their pricing would go down too.

A country's government paves a very important way for all industries to follow . I think if the taxes were lower this could also result companies bringing in cars as CBUs instead of even manufacturing it here . As toyota's chief once pointed out : we cant have factories everywhere in the world.

And maybe old models in India would be discontinued like rest of the world.
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Old 4th October 2009, 15:30   #38
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I think Tata for one was not sure if the Vista could grab even half of the indica's market . The taxi market was another factor and hence they just couldnt risk shutting out the Indica . As it tuned out the Vista hardly sold ( as compared to the volumes of Indica ) so it turned out to be a good decession .
But they also tried to take it a segment above into swift/getz etc category .
IMHO they should launch a car repacement at near around the same price bracket as the one it replaces with a slight increment , so consumers get a better car at similar pricepoints and the brand remains alive and kicking . Look at Corolla, Accord and Golf in the international markets .
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Old 4th October 2009, 15:55   #39
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While Toyota & Honda and other Major MNC may appear to be very noble while replacing an older model with a new one in India there is a practical reason for it as well from their point of view.

It is hard to sustain an older model in just 1 or 2 markets around the world. In India price sensitivity is very important and the Indian vendors (like Tata, M&M & now even Maurti - considering that india is its biggest market) are forced to continue older models, even hyundai does it. It actually makes business sense for them considering the VFM criteria that India hold dearest to heart, also no permium is paid for safety in India or else the Palio would not have failed for fuel effeciency due to it having a heavier safer car. (yep the service too was bad yet.)

It is simply feasable for the brands that retain the older models and not for those that don't. If toyota was that keep on it's global policy then it would not have introduced its phased out Qualis in India in the first place. It was outdated even when introduced. Even the Merc E-Class that was introduced in India was a phased out model globally and that was the reason for the first generation E Class introduced in India selling only 1800 odd units in the initial year put together. Every one tires it if they can.
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Old 4th October 2009, 21:32   #40
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Sabynag, you are making good points. The issue is NOT about whether it makes financial sense to the makers, obviously it does, that is why they are doing it.

Issue is what about the health of their reputation, since they are talking and doing big, going around aquiring companies globally..also what about us buyers is that in our best interests?

I really dont see what prevents Tata from pricing Vista same as Indica was and removing India (old). Looking at both, ignoring new engines which they could very well have fit inside old Indica, there is hardly any difference. Even the so called new engines were long overdue. Which probably explains KRF point that Vista did not sell well. They want to milk a premium for nothing.

Same goes for Xylo/Bolero and Grande/Sumo. They are big improvements because you are comparing them with vehicles even worse, no decent market would touch with 100 foot pole. Take that factor out, they are just the usual bunch of low quality third world cars. How to charge a premium for them? Just keep the old crap still selling to give an illusion of premium..

I agree with you 100% taxes are high in India..
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Old 4th October 2009, 21:58   #41
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Another point with the old models were that there were very much trouble free and parts were also comparitively cheaper than the replacing model. Take the case of the Toyota Qualis. Its a no-nonsense MUV, with a simple 2.4 diesel which does not require too much of a maintenance.

When an old model is phased out - owners have 2 choice.
1. Sell the existing and buy a new model.
2. Keep the existing car since its not giving any problems.

When the Qualis was phased out and replaced by the Innova, point 1 did not even cross our mind. Simply because we had no reason to replace a car which has not given us a single problem till date (completes 9 years this month) except for a few punctures. The same logic seems to apply to many others who own old models (Honda City, Toyota Qualis, Maruti Zen etc).
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Old 5th October 2009, 05:41   #42
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Car purchase, replacement at individual level is mainly a lifestyle choice and dictated by affordability. In India though many rich are changing them every other year, as a society, we have just crossed situation where cars are 20-30 year properties handed over to next generation, to a stage where we hold them for 10-12 years. Next stage of replacing them every 5 years will come.

But at manufacturer level, it is a different story. I guess they are also transitioning from that thinking..

BSIV may make a big difference in cities. Enforcing PUC rules will create a lot of noise, but that will make a difference too but less likely to happen for existing vehicles. May be by that time corner repair wallahs will have diagnostic computers..

We are using arguments like 'it is so easy to repair old cars with hairpin / screw driver' because that option is there. With BSIV, V etc., that will vanish whenever it does..

So it is a mix of affordability, prosperity levels, govt. regulations/push factor, manufacturer long term thinking, so on...

Last edited by Traxter : 5th October 2009 at 05:42.
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Old 5th October 2009, 08:30   #43
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@burnt - The replacement of Toyota / Honda vehicles (while they're at the top of the charts, no less) with newer models which do even better and are even more successful, is what makes these two companies innovative, fresh and premium from the consumer's perspective. OTOH, companies like Maruti are successful and do good business with their numbers and revenues, no doubt, but the consumer perception is that they sell old vehicles for ages and ages, and get stagnant sometimes. That's the point I was trying to make.

Agreed. But I'm talking about why Honda and Toyota do this?

That is simply because launching the ANHC with City Zx still in the market and launching the Altis with the old Corolla still in the market and launching Innova with the old qualis still in the market would simply prevent the ANHC, the Altis and the Innova from being the runaway successes that they are. Both the new and old models target the same segment and the same set of buyers. And in all cases it would not have made any financial sense to continue the old model and new model together.


But the same is not the case with Astar/Alto and Getz/i20. These are from more price sensitive segments and the people buying these cars have different budgets and diffetent requirements. So Astar is not competing with the Alto and Getz is not competing with the i20. But a City Zx would have competed with the ANHC and Altis with Corolla. So the manufacurers took the old models off the market so that they dont eat into the sales of the new model. Simple common sense.
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Old 5th October 2009, 15:56   #44
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Any logic behind discontinuing the Qualis when it was going strong? The Innova is much more than what the Qualis was. Essentially, they killed a useful model with no replacement. Was that business acumen? Or was that a case of following a policy for its own sake? ......

Partly true. But look at it this way.
When the qualis was made here in India, like with other Toyota models, most of the parts were being sourced from various locatons (mainly Thailand, Indonesia). As the qualis had already reached the end of PLC there, a newer model was in the pipeline for them.

While India still had the potential to devour thousands of Qualis more, it was a concern on the parts supply and related logistics. Even some pressed sheet metal parts, die segments & spares were being sourced from outside.

Discontinuing Qualis there and continuing it here would have meant that there was absolutely no backup of maintenance, part supply etc.

Hence, the wiser decision seen was to discontinue the qualis and herald the Innova.
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Old 8th February 2010, 11:26   #45
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as our Indian market evolves and develops we also will see a more regular and frequent phasing out of older models.

today the vehicle market here is only in its nascent stage - we have years to go before the car buying public evolves en-masse to that extent!

The Japanese and Korean car brands have become strong across the world largely because of their "never say die" attitude and wholehearted embrace of innovation and development coupled with speed of execution!
Excellent Consumer Value Proposition is amongst their strongest points!

Last edited by shankar.balan : 8th February 2010 at 11:34.
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