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Old 16th November 2009, 11:37   #1
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Default Indian assembled luxury car prices = similar imports!?

This question has always intrigued me. I find most CKD cars being priced on par similar to full duty paid imports. Some auto mags did a costing in 2002 and found a 20 to 30% saving in assembling locally a cost which makers don't pass on to consumers.

This is prevalant with MB/now BMW/Audi/Volvo etc. Not sure what is the case with Accord/Laura/Golf. The New Superb seems competitively priced but I don't know the costing so can't comment if true. Infact the new Superb is cheaper which goes to show that there is ample room to play around. I wish this could be exposed and leveraged in the media someway so consumers can benefit.

I think this needs to be looked into and actioned in some sort of way so as to rationalise prices!

Last edited by canonball : 16th November 2009 at 11:45.
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Old 16th November 2009, 12:10   #2
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Since they cant make money through volumes which is less given the numbers that they sell, they are just trying to make more money out of every car thats sold. So its for their advantage not customer's
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Old 16th November 2009, 12:23   #3
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I totally agree with what you but this is a never ending battle. . .
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Old 16th November 2009, 12:37   #4
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Commerce ministry can easily regulate to stop this profiteering attitude of manufacturers. Commerce ministry can allow importing cars for personal needs at 20% import duty to check the price of CKD units.
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Old 16th November 2009, 12:44   #5
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Hari who do you reckon will take notice at commerce ministry? Sure can use some help from the press can anyone pitch in? Sahil worth try mate things will never change if we don't try!
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Old 16th November 2009, 13:11   #6
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Business logic is very simple - Make money from higer volumes or higer margins. Exception to this rule is Maruti which makes money from both volumes & margins. Case in point is the 800 which could be priced much lower than what it actually is.
Coming back to companies like MBIL. These manuf. make money purely from margins. They have too much of a snob value & hence if they drop their prices there will be too much of them & in the bargain destroy their brand value. People who are anyway buying these cars dont care much for the prices either. Buying a CKD is also much more sense since MBIL will readily service it. Importing the same thing privately will have its own problems when it comes to service.
The commerce ministry is always kept happy by such manuf. hence they might not interfere much. The worse thing that they might do is raise the duties further. Big newspapers might also not show much interest in fighting these kind of issues. They are too much dependent on advertising revenues from these companies. If a smaller media gets involved they would either be bought over or be forced to crush the topic. Anyway they would hardly have any impact also.
If some 1 can PM me concrete details I will try & discuss it with some friends of mine in the media. However please dont take this as an assurance.
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Old 16th November 2009, 22:44   #7
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Who do you think will be the first to object???
The owners themselves

Just imagine what would happen to Benz if comparable BMWs were 20-30% more expensive.People would look down at benz owners as cheapskates who cant afford the beemer, wont they? At least in their own circles the merc will come to be regardedd as a cheaper brand a la skoda(not in India). That would be suicide for the premium carmaker whose main asset is the brand name.

Premium cars if priced higher would be said to 'command' the premium thus tend to be percieved as more stylish or better than another brand which offers the same thing at a slightly lesser cost.
Countless analogies can be used to demonstrate this, im sure u can think about some now yourself.
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Old 17th November 2009, 11:29   #8
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I thought with wealth comes wisdom and depth but it seems we are dominated by the rich (neo rich?) to whom showing off and shallow competition makes a big difference. On a lighter note owning a BMW meant being less rich than owning a MB!? I thought it is more to do with state of mind and preference anyway I think in India awarness is a big issue people lack depth and to masses everything is one upman ship phew!

I think my car being more expensive than my friends or vice versa is no indicator. At least this is what I see amongst the people I know, some who can afford to park 4 s classes in their driveway more around in Corolla's & Innova's etc. I also see a lot of urban young people not really caring about this stuff for them

Last edited by canonball : 17th November 2009 at 11:34.
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Old 17th November 2009, 11:46   #9
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interesting thoughts in this thread.

For example a Tucson costs about 8 lacs equivalent abroad at first hand, and in India (where it comes as a CKD/SKD/CBU -??) we have to pay the duty and the price shoots to about 17-18 on the road straightaway.

If it were to come in as a CKD, would Hyundai price it at a more competitive price like say maybe 10-12 lacs?

I dont think the manufacturers are going to pass on any more benefit to the consumer than they have to.

Unless the new thinking is that they intend to manufacture the cars here, there will always be a difference in price and us consumers will be forced to pay up if we want that particular car.

In that sense we are still pretty much a protectionist economy where our indigenous manufacturers need this level of protection.
But for how much longer is this going to continue should be the real question!

Do please correct me wherever I may have made an error in my assumptions.

Quote:
Originally Posted by canonball View Post
This question has always intrigued me. I find most CKD cars being priced on par similar to full duty paid imports. Some auto mags did a costing in 2002 and found a 20 to 30% saving in assembling locally a cost which makers don't pass on to consumers.

This is prevalant with MB/now BMW/Audi/Volvo etc. Not sure what is the case with Accord/Laura/Golf. The New Superb seems competitively priced but I don't know the costing so can't comment if true. Infact the new Superb is cheaper which goes to show that there is ample room to play around. I wish this could be exposed and leveraged in the media someway so consumers can benefit.

I think this needs to be looked into and actioned in some sort of way so as to rationalise prices!

Last edited by shankar.balan : 17th November 2009 at 11:47.
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Old 17th November 2009, 12:01   #10
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Look, it's a capitalist economy.

Manufacturers are out to make money. If they cant, why would they bother selling cars in India? Margins on colume cars(the small hatches, small sedans like Fiesta, etc) are razor thin. They make money on volumes and through service.

With cars like Merc and BMW, they cant rely on volumes to make money. How can you blame the company for overpricing their cars? Maybe one day when a lot more Indians are buying Mercs, BMWs and Audis, they will drop their prices.

You cant expect the government to interfere. It would be disgusting and pathetic and totally ruin India's image in the world. I'm sure there are some WTO rules to prevent this from happening. The companies like BMW, Merc dont need to pay anyone in the Indian govt or lobby against some sort of legislation. There simply should NOT be any legislation.

This is the basis for a free economy. This is why we have everything available in India. Mercs, BMWs, Audis, Volvos, Lamborghinis, Bentleys, everything! Was this there in the 1970s and 1980s? Nope. Simply because at that time, we didnt have a free economy.

It's very stupid to ask them to get their prices down. It's their product. If you dont like it or cant afford it, dont buy it! Buy a Honda!
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Old 17th November 2009, 12:18   #11
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Quote:
Originally Posted by canonball View Post
This question has always intrigued me. I find most CKD cars being priced on par similar to full duty paid imports. Some auto mags did a costing in 2002 and found a 20 to 30% saving in assembling locally a cost which makers don't pass on to consumers.

This is prevalant with MB/now BMW/Audi/Volvo etc. Not sure what is the case with Accord/Laura/Golf. The New Superb seems competitively priced but I don't know the costing so can't comment if true. Infact the new Superb is cheaper which goes to show that there is ample room to play around. I wish this could be exposed and leveraged in the media someway so consumers can benefit.

I think this needs to be looked into and actioned in some sort of way so as to rationalise prices!
Welcome to economics.
If you ask any guy doing business / or any economist, he will tell you that price has got nothing to do with your costs.

Price is simply the value perceived by customer. Customer is willing to pay the higher price, if he was not, the prices would've come down.
This is capitalism in work.

If you believe in "rationalizing" price, effectively you believe in communist doctrine.
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Old 17th November 2009, 12:24   #12
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Quote:
Originally Posted by harimakesh View Post
Commerce ministry can easily regulate to stop this profiteering attitude of manufacturers. Commerce ministry can allow importing cars for personal needs at 20% import duty to check the price of CKD units.
Ok taking this further, then lets have a PSU making automobiles, which launches cars priced at their cost, for the benefit of poor, or even lower than cost, with subsidy coming from govt, funded by our tax money.

But then why should govt bother about what rich ppl are paying for their needs?


Poor ppl can't buy even M800/Nano, forget about CKD/CBU foreign cars.
Besides, higher price means higher revenue for govt.

Last edited by alpha1 : 17th November 2009 at 12:26.
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Old 17th November 2009, 12:36   #13
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Hey Nikhilb/alpha not sure where you are going with this but the idea is to get awarness up and make the consumer more knowledgable I am not sure what you guy are talking about but we are consumers and have a rights and freedom to express!

MB's were never discounted before around the world they are now and in big measures in India why because there is competition, and your theory of price dropping with volumes picking (more indians buying) is some new economic conecpt to me! If volumes go up it means demand is increasing and prices normally increase with demand (may be if they try dropping/rationalising prices more people will buy!? = good for the brand as volumes are always good) so I am not sure who is stupid and a communist? Sir are you aware of the automobile lobby so in your defination isn't that pathetic as well so why cant consumers have a lobby. Last read, the world is flat, India is growing, we are the next big thing speed is important and we have folks taking of 20 year trunaround times being ok with eg of the 80's/90's. Looks like we have protectionist in our midst kidding So take it easy, and no one has asked car makers to drop their prices we are taking awarness and pressure cheers. Request all contributing to stick to the pointand refrain from subjective remarks/personal jibes.

PS Alpha Maruti is a PSU and has revolutionalised the car in India!! And now we have Tata who has proved that there is a car even cheaper. So if all parts of the market are getting cost competitive don't you reckon so will the luxury, look at the west and certain 2nd world countries owning and maintianing an MB is not a rich mans game anymore and that sir is democracy & capitalism at its best. What is happening here is that they are milking the cow which is the most unstrategic old grandfather approach for a young country!

By the way it took MB 10+ years to become profitable in India so much for having business sence!? That to with a leased plant and a very very lean CKD setup. They got the entire market price point/volume demand s&%#%. So much for being businessmen!? Everyone complained they wanted one but the car was simply not worth it and an outdated model goes to show where their brains are? even today they don't offer a comp warrenty plan in 2009!?

Do go and check they sell more cars in Thailand with the population of Mumbai may be?!

Last edited by canonball : 17th November 2009 at 12:53.
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Old 17th November 2009, 13:39   #14
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Intersting thread!

The govt.'s so called labor protection imposes 139% customs duties on CBU imports which indirectly benefits the greedy premium brands to price CKD's near CBU levels. This lobbying must go in a free economy, imagine an entry level Merc or BMW to be priced at $30K?

The law of supply-demand doesnt work here (but does for a volume say a Maruti DDiS - high demand means high pricing thru premium), look at it practically - higher volume for a premium brand means meeting the required ECO and costs should go south.
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Old 17th November 2009, 16:01   #15
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Yea !

Lets completely forget the cost of setting up a manufacturing base in the country to sell token units yaaaar !!

The cost in the west is easily absorbed as they do volume sales.. The same cannot be said in developing countries.
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