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Old 3rd February 2011, 09:49   #16
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Well I guess the Germans are in the right track!
Yes it is to be understood that Indian Auto Market is one of the toughest market in world where VFM is not a USP but a mantra to sell.
With extensive market research and knowing this VW,Nissan and other brands offering high priced products have come down.
But in the case of Maruthi and Tata they are bit over confident about themself especially the Aria.
with Indian market heading towards 4th largest in the world in near future the game plan of Gemans will work and Maruti, Tata and Hyundai will rework their strategy
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Old 3rd February 2011, 10:05   #17
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Submitting this view.

It is much easier for Brands to make the journey from "Premium" towards "greater accessibility" - read; VFM. This is because the aspiration value is already built and the brand is simply widening its base. (Commoditization of Brands.)

The reverse journey from VFM to Premium, is not so easy at all but a long, hard, tough, back breaking climb.

Consumers would be more inclined to pay for a stripped down version of the super-badge - as in the case of BMW X1 - whether it lacks the features that set a BMW apart from the rest of the world or not.

Consumers would love to own a Tag Heuer watch for its inherent badge value as well as engineering reputation - by buying the Formula 1 Quartz watch which is the cheapest one available from that brand. (Now it is quite a different matter that Quartz watches are nowhere near as precision engineered as Automatic watches are - but they are much more affordable - which is why many top brands have gotten into the Quartz watch market and thereby created greater access for the mass consumer.)

But one would generally feel like cribbing like the blazes if one is asked to pay big money for a Tata or a Maruti or a Mahindra World SUV despite these vehicles being super-loaded with features etc.

The same way that one would crib like the blazes to buy a XYLYS (Swiss made) watch - which is effectively only a Titan with a fancy price tag. (Frankly a significant number of consumers would much rather buy a Citizen, Seiko or a Tissot in preference to the said XYLYS if they wanted to spend say 15-20 grand on a watch)

It is also a case of familiarity breeding contempt, in a sense. We are all overly familiar with these Indian marques but are not sufficiently motivated to pay big bucks for them. Possibly we in India are still kind of over-awed by the "phoren" tag - but it must be conceded that Indian manufacturers are yet to reach certain standards in fit, finish and quality. Tata and Maruti and Mahindra need to get the home base right before they start fiddling about with high prices.

there is also the point about "status" - which we Indians are extremely conscious of. A car is still a huge status symbol and is not yet viewed as an utility item.

Ultimately the sales numbers will tell the truth.
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Old 3rd February 2011, 10:17   #18
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Great thread GTO

my Take

1) X1 - Great move BMW - we now get to buy reasonably priced premium brands. Yep the X1 (especially the better priced variants) does have lots of essential (for 20L+ vehicles) aspects missing, but yet one does get close to buying a new BMW for about 27L OTR. - But there are other better options if one is not too bothered with the brand.

2) VW has got for the correct value with the Polo and Vento and must be appreciated for it. The Jetta and Passat are another story.

I may add that with the new Fabia, Yeti and Superb Skoda too has learnt to price cars much better and the numbers show that.

3) Nissan and Toyota - They are VFM brands that are learning to correct themselves before then suddenly find themselves out of the market. When will Honda learn? (It is now reduced to a 1 model wonder in India)

4) Ford was always a mid segment, mid brand company and it is not also priced well, for the first time in the figo after the Icon. the Fiesta Limited Editions if made into permanent pricing one can add the Fiesta too into the list. Hope the new fiesta does not miss the trick.

5) Maruti - Has missed the game with the Kizache. I don't belive it will sell, nor will it add any noticable brand impact to the company. Superb and Accords and even the Laura are better deals.

6) Santa Fe - I believe Hyundai has got most of its pricing upto 10L Ok and the Santa fe too would have worked it it had AT within this price band w/o AT they needed to be 1L lesser than the fortuner and will end up having limited sales, but that seems to be what they want presently.

7) TATA Aria - It is just not competing with the Innova. I was recently interviewed by a O&M person (as a buyer). and all questions were in relation to the Fortuner, Captiva, Endy, etc. Yep it is priced high and that is a challenge for the Brand, but the bigger battle is positioning the vehicle for the right type of customers. Yes I would have loved it being priced 1.5L lesser, but even at 17.6L OTR is still do find it to be not just VFM but also a better product compared to options even 5L higher priced that I considered while going in for it. I guess for one who does not buy it as it does not meet the 7 adult criteria it is expensive and for those looking for something that is a mix of lifestyle vehicle, SUV that seats 5 adults and 2 seats and looks good this seems VFM.

Irrespective great thread and observations all through out.
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Old 3rd February 2011, 10:26   #19
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Well, it is a given that small cars are going to sell in lakhs for a while and everyone wants to enter the segment. But everyone does not taste success. GM and Nissan will make another attempt while Ford and Toyota were bang on target. We'll have to see how VW and BMW fare in their respective entry level cars.

On the other hand Maruti, Hyundai and TML are established players in the volume segment and want to leverage the network to sell expensive cars. In case of Maruti and Hyundai they are bringing their products from overseas with an expensive price. While TML produced and expensive car to eventually sell in the overseas markets.

IMO there are growth prospects for all players as long as they take care of the quality and position their products well.
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Old 3rd February 2011, 10:27   #20
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Interesting dynamics. The likes of Toyota have seen the higher ground and gained the trust on quality at the respectable rates for the respectable packages. Also, having earned a premium at higher grounds, it is possibly easy investments for the biggies at lower levels.
So when they come down to the mass market, they can very well bank on their trust gained, returns on investments and know how to address the customer's at more or less correct price perspectives with good quality and package.

However, the ones going upward probably miss the custommer's perspective on the quality and overall package that is required at the higher levels and end up creating confusing situations.
While for decades we have been seeing the Maruti's and Tata's ruling the game, suddenly you start seeing a good lot of small cars from the biggies and they easily move in these lower segment markets with the quality, price and overall package.
When Maruti or for that matter Suzuki starts to package something for the higher segment, Kizashi, they are probably not able to understand customer's perspective of looking at those price points for a qualitative package.

Aria for that matter has created quite a confusion in a non-existing segment and probably thats why is yet to catch up, although a pretty good package, it is confusing how it spreads the same package with additions here and there to compete with lower MUVs, to Mid-Sedan's to Middle-higher end SUVs all in one shot. IMO it would have been probably better to target in a clear manner, different segments in different packages with different price points. But ofcourse there are various different perspectives of looking at this one particular XOver.
However, this in no way gives Toyota right to give the Etios interior treatment they have given. In that respect, Toyota seems to be taking people for ride, though the overall quality is certainly a class apart at the package it is being offered.

Just my 2 bits
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Old 3rd February 2011, 10:34   #21
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

With a plethora of foreign players coming in to the Indian market, almost every one is feeling the heat; even Maruti has tough competition is every segment! Guess all manufacturers have realized the necessity to broaden their horizons to survive.

As mentality would go, you would trust a premium brand to come out with something for the masses more than you would trust a brand that caters to the masses suddenly coming out with a premium products.

Ford, which had Escort first started descending and now we have a winner in Figo. Same with Toyota, after all their premium stuff, Etios comes out. Case with BMW, Toyota etc. is that they are establishes strongly as a premium brand which gives you safety, every possible comfort and luxury that can come in that price. So, when they come out with a "cheap" Etios, people would naturally trust that they would got the car right without compromising on the basics.

While with Maruti, the first thing that will come to mind looking at their premium Kizashi : "Can they really pull it off? They are best at making everything with the minimum cost" etc.

Apart from the competition, I think manufacturers must have realized that the growth in the Indian automobile industry lies with the mass-production cars. The no. of people wanting to buy their first car or having a budget constraint but still wanting a car is certainly way huge than that of people buying their 2nd car or one just to indulge.
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Old 3rd February 2011, 10:49   #22
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Elementary , my dear sir. You need VFM models to corner the mass market, so called bottom of the pyramid. Higher you go, VFM is not all that important.

Even in the case of BMW, VW, Toyota or Ford, the aggressively priced models are their low end offerings.

Last edited by CoolFire : 3rd February 2011 at 10:51.
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Old 3rd February 2011, 11:04   #23
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Kizashi priced at around $20K in the US is priced in India at 16.5 L !! Surely companies have determined India to be a place for minting money.

Last edited by snorting bull : 3rd February 2011 at 11:05. Reason: Added country
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Old 3rd February 2011, 11:12   #24
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

vicious duty structure for imports and CBU's - even SKD's

Skoda Yeti - upper end spec in UK is about 18-20K GBP incl 17.5% VAT - 14 lacs approx.
India - same thing is at 22 lacs almost.

Hyundai Santa Fe - 22 -23K GBP incl 17.5% VAT - 17 lacs approx.
India - same thing is at 24 lacs almost.

This is probably why all vehicles that are considered to be affordable and mid-level abroad become super-premium status symbols in India! This headroom created via duty structures could be the reason why some of our own manufacturers are taking the prices up for their newer offerings.



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Originally Posted by snorting bull View Post
Kizashi priced at around $20K in the US is priced in India at 16.5 L !! Surely companies have determined India to be a place for minting money.

Last edited by shankar.balan : 3rd February 2011 at 11:14.
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Old 3rd February 2011, 11:13   #25
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

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Originally Posted by GTO View Post
Seriously, what on earth is happening here?

Tata....the world's cheapest car on one hand (Nano) and India's most expensive MUV on the other. We all agree that the Aria is one heck of an MUV, but at what price? The base variant costs 15 lakhs on the road, Bombay, while the top goes to 18 lakhs!
@ GTO, At the launch time, even I felt Aria was on the costlier side. But after getting the feel of the vehicle and from market feedback from users, I feel Aria is a VFM product. True, the brand Tata is not ready to charge a premium but I seriously doubt if Tata is charging any for the vehicle.

Aria comes heavily loaded and is a very good product. The Fit and Finish makes the Safari looks like a Goods Auto. Unfortunately people compare it with an Innova which is a MUV clearly a segment below. The ride quality and Interiors of Aria is way better than a Fortuner. And "if" Toyota is ever going to bring out a vehicle on the lines of Aria loaded similarly it would be a clean 10 lacks costlier. I don't think the brand deserves that much of premium.
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Old 3rd February 2011, 12:05   #26
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Quote:
Originally Posted by snorting bull View Post
Kizashi priced at around $20K in the US is priced in India at 16.5 L !! Surely companies have determined India to be a place for minting money.
IMHO Maruti would be having the same margin (or slightly more) as their US model. Blame the high price to the import duties. Half the price goes to the Govt which embezzles them.

I thoroughly support the Kizashi even at this price. It is such a good car and deserves to sell well. It even deserves to come in as a CKD. I would take it over the Corolla/Civic top-end anyday. Add Maruti's service backup to even the remotest of corners of India where you wish to take your car.
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Old 3rd February 2011, 12:19   #27
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Irrespective of whether the Kizashi sells or not, looks like MSIL is getting more than its money's worth in product/brand attention, if this thread and the article in an auto-mag that someone mentioned, is taken into account.

Whether MSIL goofed up on price would be known when the sales figures come in, but I think the least this would do is help change the image of MSIL as primarily a small car manufacturer. And I am guessing that is what MSIL really intends with this car, rather than targeting sales figures.

Quote:
Originally Posted by lamborghini
In comparison to the top end Altis, one would be paying 4L extra for a car that just has better performance and a few extra features (namely the safety features). However, I would lose out on resale, image, maintainance costs. Why would a consumer buy the Kizashi?

At the end of the day, the car is terribly overpriced, and a person paying 19L for a Kizashi, would easily pay 1-2L more a much more loaded and comfortable car, that would offer better dynamics as well (the superb).
When you compare the K with Altis, it is "just a few extra features". But when K is compared with the Superb, the latter is "loaded". Funny.

And while we never fail to cry hoarse about companies scrimping on safety features, but when we have 6 Airbags in the K, it is just a few extra features. Since the Hondas and Toyotas are lagging here, it becomes a useless feature.
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Old 3rd February 2011, 13:24   #28
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

IMHO all auto markets are touch, all auto markets are price value conscious, all auto markets are hyper competitive. One can't say only the India market is touch or value conscious or price sensitive, given that most cars are bought for significantly more than they cost in developed economies.

Its just purchasing power and disposable income that come into play. With VW we have the ironic situation of Skoda being more expensive in India due to legacy positioning, with the Japs we have them positioned more as luxury than value in India.

Ultimately with more competition perhaps these inconsistencies between global and local will wither away and we will have better pricing that is reflective of the lower purchasing power here, lower cost of business overall. For the average american for instance a Civic at $18k or a CRV at $25k is a fraction of his yearly salary as compared to an Indian professional where a Civic at 15 lakhs or a CRV at 28 lakhs cannot really be considered a fraction of the average professional salary.

The argument here is not that the cars should be lower priced but at least given the lower costs here they should be priced in line with developed economy prices which would deliver the Civic at 10 and the CRV at 13, some folks will talk about taxes but other economies have taxes too and stronger environmental and regulatory frameworks that cost money, and others will point to capital investments but better pricing will deliver better volumes as opposed to cream pricing for lower volumes, better to have consistent global pricing. A CRV at $50k is not going to generate volumes and justify capital investments made in the US and its not priced as such since it will not make business sense so why have it priced like that in India?

IMHO Honda is particularly guilty here on constantly pushing the prices higher as is Skoda, both taking advantage of a relatively immature market. And other car makers seem to be taking their lead, even Mahindra and Tata have been pushing upwards, Honda and Mahindra have excellent volumes to justify their pricing for some model though. But now with VW with Vento and others car makers getting here hopefully there will be a correction across.

Ultimately better pricing will deliver volumes and profit rather than the cream strategy - often use in developing economies due to wide disparities, which ideally will become less significant as more people get better paid.

Last edited by raul : 3rd February 2011 at 13:27.
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Old 3rd February 2011, 13:35   #29
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

appreciate some of your points but to put things in perspective the Aria is a Van with 4WD in the end.
And while the effort made by Tata is great, the pricing is way too high and hence will impact volumes. There are only a few people who will view the product offering objectively, place a value for each feature and possibly pay the price. Even then, the product is in danger of being let down heavily by its badge value. And there is one more thing - going by Tata's general form, in making guinea pigs of their consumers and making changes and improvements based on "real life" experimentation, it will take at least 1 or 2 years of peaceful trouble free ownership as well as high quality after sales experience and the publicization of the same, for this product to gain credibility.
Most people, inlcuding myself are thinking right now - 19 lacs? for a TATA? No way!!


Quote:
Originally Posted by channelv View Post
@ GTO, At the launch time, even I felt Aria was on the costlier side. But after getting the feel of the vehicle and from market feedback from users, I feel Aria is a VFM product. True, the brand Tata is not ready to charge a premium but I seriously doubt if Tata is charging any for the vehicle.

Aria comes heavily loaded and is a very good product. The Fit and Finish makes the Safari looks like a Goods Auto. Unfortunately people compare it with an Innova which is a MUV clearly a segment below. The ride quality and Interiors of Aria is way better than a Fortuner. And "if" Toyota is ever going to bring out a vehicle on the lines of Aria loaded similarly it would be a clean 10 lacks costlier. I don't think the brand deserves that much of premium.
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Old 3rd February 2011, 21:21   #30
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Quote:
Originally Posted by shankar.balan View Post
appreciate some of your points but to put things in perspective the Aria is a Van with 4WD in the end.
Wow! If Aria is a van than surely Innova is a bus and Fortuner a Truck.

Quote:
Originally Posted by shankar.balan View Post
And while the effort made by Tata is great, the pricing is way too high and hence will impact volumes. There are only a few people who will view the product offering objectively, place a value for each feature and possibly pay the price.
It is those few people whose rationality forces manufacturers to provide more 'real value' than superficial one (i.e. brand premium).

Quote:
Originally Posted by shankar.balan View Post
Even then, the product is in danger of being let down heavily by its badge value. And there is one more thing - going by Tata's general form, in making guinea pigs of their consumers and making changes and improvements based on "real life" experimentation, it will take at least 1 or 2 years of peaceful trouble free ownership as well as high quality after sales experience and the publicization of the same, for this product to gain credibility.
Well. Such an accusation needs to be supported by data. The charge dismisses the whole system of product testing, homologation and approval process. I don't think so many people buying Tata vehicles can remain guinea pig for such a long time.

Quote:
Originally Posted by shankar.balan View Post
Most people, inlcuding myself are thinking right now - 19 lacs? for a TATA? No way!!
For them, there is long winding line at the counter of Fortuner. Rest can pick up Aria today and earn a year of their life.

Last edited by ajay0612 : 3rd February 2011 at 21:22. Reason: typo
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