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Old 2nd February 2011, 17:00   #1
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Default Premium brands going down the value-for-money road, & VFM brands becoming overpriced!

Seriously, what on earth is happening here?

BMW prices the X1 at a completely, unexpected, 22 lakh rupees. You will agree that it's a great price for a SUV-ish vehicle from one of the world's most revered automotive marques.

Volkswagen undercuts the Honda City with the Vento. Even the fully-loaded Vento diesel is rather well-priced. And as an all-rounded C segment sedan, it's as good as it gets.

Toyota, one who successfully gets away with a 2 lakh rupee premium on the Innova (vis a vis the Xylo) takes the Etios bang in the Dzire / Manza territory. Such is the response that Toyota is already sitting on a 6 - 9 month waiting list.

Nissan, earlier known for the CBU-priced X-Trail, Teana and 370Z launches the Micra (with a driver airbag!!) for 3.98 lakhs.

Ford, a brand that sold the Fiesta at 8+ lakhs, and the Endeavour at 20 lakhs, managed killer pricing for the Figo (starting at 3.5 lakhs).

On the other hand, there are India's "BIG THREE":

Maruti.....the most respected nameplate in India, known for VFM, that prices the Kizashi at 16.5 lakhs! That's over 19 lakhs on the road in Bombay, and 20 in Bangalore. This, for a car whose interior space equals that of a 11 lakh rupee Toyota Altis.

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!

Hyundai...the Santro is incredibly VFM, the i10 may be premium priced, but well worth it IMO. Yet, the Santa Fe costs 27 lakhs OTR in Bombay and nearly 30 lakhs for the 4WD!

How is it that the same brands that get it perfectly well in a cost-competitive scenario, lose it all in the premium segment? Over-optimistic? Launching only for presence (and caring a damn about sales)? Volumes so poor, compared to their mainstream products, that they simply cant be bothered?

Last edited by GTO : 2nd February 2011 at 17:02.
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Old 2nd February 2011, 17:19   #2
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

And Mercedes Benz has just commissioned a possible Small car specifically for the Indian Market.
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Old 2nd February 2011, 17:19   #3
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Well, this reminds me of Top Gear India cover page this month which reads-

"Cheap BMWs, Pricey Marutis', Perfect Audis'- Whats the world coming to?".

Another big analogy is the Korean/ Japanese divide. Koreans used to play VFM, while japs had better technology. Now, Japs are playing brand image while Koreans like Hyundai have taken a big leap in technology!

As for the Kizashi- I believe its just that they DONT CARE for the insignificant numbers that the sales may generate. Otherwise, they would have chosen the CKD route, and priced it lower. Same happened to the Grand Vitara as well. Hopefully, they get it right with the pricing of new Swift and SX4 diesel, else its in big trouble!

However, I still don't believe its exorbitantly priced. IMHO, no other petrol car in the same price bracket offers more, if brand value is out of the equation!

For example: Civic AT is 13.8L ex-showroom Delhi. Add 4L more, you get a 2.4L (1.8L) engine with 178ps (132ps), almost 3 secs off on the 0-100 times, 6 airbags (2), projector lamps, Powered seats etc! Also, its just 1L more than a laura petrol, with almost same space, better power and lot more equipment! Altis top-end also touches 15L and doesnt compare in specs too!

But still, I am sure it will struggle to sell.

Santa FE was a big surprise for me! I'm sure they studied the Fortuner success story, and yet- priced it several lakhs upwards of the most successful launch in recent times!

Aria, is a different ball game altogether compared to Kizashi and SantaFE. One, TATA had to pay heavy on the R&D grounds up (For all the technology they are using first time on the Aria!), and they had to make sure it doesn't suffer from quality issues. Both of which pushed the costs high! TATA would have tried their best to reduce the numbers, as these numbers matter more to them, as compared to the other CBU/ CKD competition!

Last edited by CrAzY dRiVeR : 2nd February 2011 at 17:37.
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Old 2nd February 2011, 17:30   #4
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Quote:
And Mercedes Benz has just commissioned a possible Small car specifically for the Indian Market.
Great News!

Quote:
Well, this reminds me of Top Gear India cover page this month which reads-

"Cheap BMWs, Pricey Marutis', Perfect Audis'- Whats the world coming to?".

Isnh't it nice that even a common man (well not literally) can also afford a Toyota? Tata's are no longer a small company by any means. I was just working on some project for them and although I did not reveal the name of the company, my team in Korea knew which company I am talking about!
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Old 2nd February 2011, 17:41   #5
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

The i20 has actually helped santa fe ensure a decent start, Hyundai's "target for one year at 500 odd units IIRC" was met as all the initial lots were booked.
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Old 2nd February 2011, 17:46   #6
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

In the mentioned brands, my take is as follows:

BMW & Volkswagen: Getting into unexplored territories, and making their cars accessible to a wider population. Great move by the Germans indeed (and with plans of Merc’s India specific model, it is getting better)

Toyota & Nissan: I will not consider these as premium brands, bringing VFM options. These companies are known for their VFM (or cheap / no-nonsense offerings). Just that in India, it has the so called the premium image. So I guess, it is more of a market alignment here . These cars are at home in the Suzuki, Hyundai category.

Ford: Been in our market for so long, and happy to see that they learned from the mistakes, and putting up a good show now. Hope this continues with the new Fiesta, Focus and other future launches. And hope they get the wonderful Mondeo back - with a realistic pricing!

Suzuki & Tata: Trying to build up a premium image. But as you mentioned, a CBU Kizashi is like a wrong launch vehicle for that purpose, and the Aria – 15 lakhs Innova killer?

Hyundai: Pretty aligned with the VFM brand image. I guess they are testing waters with the CBU Santa FE, to bring in other expensive models.
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Old 2nd February 2011, 17:50   #7
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Well, Hyundai & Nissan both demonstrate completely contrary pricing strategies at the two ends of the spectrum (in both cases, the top end come in as CBU).

Can't figure why companies of their stature cannot take a conscious decision to build the high end ones in India!

And, to add on a personal rant, I cannot understand why our Indian manufacturers cannot give a "complete" option in the SUV category - I'm almost 100% certain that the new Mahindra SUV will be another soft-roader with AWD but No 4L option.....
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Originally Posted by vb-san View Post
and the Aria – 15 lakhs Innova killer?
Btw, TML never conceived the Aria as an Innova killer, it's just another incorrect perception on the aam junta's part.

Last edited by suman : 2nd February 2011 at 17:53.
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Old 2nd February 2011, 17:52   #8
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Isn't it confusing to compare aria with an innova? I thought Tata compares aria with captiva, CR-V, fortuner, etc segment. At least in terms of segment and technology (4X4) and other godies implied, it should be in the CUV segment, not in MPV segment. Tata has Grande Mk-2 for this purpose. Yes, its positioning could be a bit confusing.

As far as Hyundai is concerned, they bought santa fe a full 3 years after its international introduction, made it a decent success, and on the other hand, delayed the sonata launch to 2012. Perhaps i20 was the testing ground, the next will be to make the new verna RB an "i20 success" and then see the sonata a "santa fe" success. Hyundai's plan looks pretty confusing.
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Old 2nd February 2011, 17:53   #9
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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
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!
I guess this will sound like a bit of OT

Agreed that these expensive cars are sold only in big cities like Mumbai, Delhi, Bangalore etc and what matters is their prices in big cities but my Aria Pride model was 16.6 lacs on road as it was registered out of octroi and on top of that I saved another 40k by getting the insurance and registration done by myself. So atleast for me it is not expensive but rather VFM. At times you can also blame the high prices on local levies and not just on the manufacturers.

So does Aria Pride even at 16.6 lacs on road seem to be overpriced?

Last edited by psbali : 2nd February 2011 at 17:54. Reason: addition.
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Old 2nd February 2011, 18:05   #10
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Quote:
Originally Posted by suman View Post
Btw, TML never conceived the Aria as an Innova killer, it's just another incorrect perception on the aam junta's part.
Quote:
Originally Posted by sidindica View Post
Isn't it confusing to compare aria with an innova? I thought Tata compares aria with captiva, CR-V, fortuner, etc segment. At least in terms of segment and technology (4X4) and other godies implied, it should be in the CUV segment, not in MPV segment. Tata has Grande Mk-2 for this purpose. Yes, its positioning could be a bit confusing.
Agree with the above views. As Sid mentioned, it is a bit of a confused product - by looks, clearly an MPV in the lines of an Innova and by function, cross-over in the lines of a Yeti, or a CR-V. And I guess the confused positioning and pricing maybe to stay away from the taxi crowd.
Personally, I don't get that premium feel with an Aria. No offence - just my personal take

Last edited by vb-san : 2nd February 2011 at 18:06.
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Old 2nd February 2011, 18:16   #11
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

Great topic GTO!

Well, I, for one, am very happy that the German brands are becoming more and more affordable day by day. I guess VW has tried to go upmarket (in BMW/Merc category) many a times with limited success. Phaeton, is an example. So, having partially burnt its finders, it is back at its place. Providing somewhat better 'quality' cars than most Japs at a slight premium. BTW,when will I be able to buy a spanking new Audi/Beemer

Japs in India have taken 'full advantage' of the fact that most people in India swear by Honda and Toyota. Thus, their cars tend to be a little costlier then they ought to be. Other Japs like Nissan and Mitsu don't seem to have much brand equity in India.

Hyundai, I think, is the best case study. It has not only introduced its cars at higher price but also increased its technology/design footprint considerably. So, it matches up.

1. Hyundai is introducing 'direct injection/turbo charging' in its production models--> Honda still hasn't.
2. Hyundai has bag full of diesel engines--> Honda has next to nil.
3. Hyundai has introduced dual clutch transmission recently--> Honda is still struggling.
4. Their new design language seems to impress everybody, me included.
5. Their build quality is getting better day by day.

So, Hyundai people seem to be working very hard to make their products better. With the passage of time, if they start pricing (the trend has already begun)their products on par with the Japs, so be it. No wonder that Toyota considers Hyundai the biggest threat to its dominance.

Last edited by Abhi_Automobile : 2nd February 2011 at 18:18.
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Old 2nd February 2011, 22:59   #12
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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
Volkswagen undercuts the Honda City with the Vento. Even the fully-loaded Vento diesel is rather well-priced. And as an all-rounded C segment sedan, it's as good as it gets.
A bit off topic but i believe the Vento could have been priced even better. Look at the Swift v/s Dzire pricing and the Polo v/s Vento pricing (i've taken these two as the sedans are the same as the hatch plus a boot). The Vento sedan does have a better engine and more features compared to the hatch but it still could have been priced better IMO.

Quote:
Maruti.....the most respected nameplate in India, known for VFM, that prices the Kizashi at 16.5 lakhs! That's over 19 lakhs on the road in Bombay, and 20 in Bangalore. This, for a car whose interior space equals that of a 11 lakh rupee Toyota Altis.
Im sorry but your comparison is flawed GTO. You are comparing the base Altis which does not have any features and the top specced Kizashi. You have to compare cars which are equally specced and in this case only the top end models of the Altis and Civic even come close to the Kizashi's level of kit. The top end Altis Petrol costs 16.2 lakhs in Bangalore, and 17.4 lakhs for the auto. Similarly the Civic V MT costs 16.3 lakhs and V AT costs 17.2 lakhs. If you compare against these prices, the Kizashi MT at ~20 lakhs in Bangalore certainly makes a case for itself.

Another comparison is the Fiat 500 which is also a CBU and is priced at 14.8 lakhs ex showroom!

Last edited by radiokidb : 2nd February 2011 at 23:01.
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Old 2nd February 2011, 23:19   #13
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

I guess Kizashi launch has triggered this thread. Let me take a contrarian view on Maruti's strategy with Kizashi. This is purely my opinion and should be taken in that light.

In business, not all products are for making profits. Certain products are pushed into the market for various competitive reasons that may not have much connection with the products' own sales. Imagine two big business houses M and T both competing in the car market but they focus on different segments. While M is focussed on cheaper cars, T caters only to high-end affluent customers. Now consider a situation where T comes with a big plan to penetrate into M's stronghold - that's cheaper cars. T starts launching cars that are competitively priced against M's cars. M feels threatened that its market share will drop. It needs to send a strong signal to T that it is not liking T's move. So it launches a product that is in T's territory but is priced such that T wouldn't be threatened much. But it sends a signal to T that if T is aggressive, then M would launch a price-war in T's territory causing a big dent into T's margins. M has no real intention to sell cars in T's stronghold - it only wants to keep the threat alive. So, it doesn't even make the product on its own and doesn't do anything to bring the product cost down. It just holds the place with the product to convey a message that the threat could be genuine.
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Old 2nd February 2011, 23:24   #14
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

It depends how you look at it, taking the full ownership costs into consideration.
Instead of the Kizashi, I could spend 2L more and get home the M/T Skoda Superb, with more features, more space, similar performance.
Also, when I go to sell it, the 2L I invested on the Superb would easily come back to my pocket.

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).
There are only a handful of enthusiasts who would be willing to pay extra for the superior performance. The rest, would just prefer alternatives. I do see it going the Vitara way.

Heck, for 5L more, you can get a BMW X1 that offers similar space, but has the brand value of a BMW.
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Old 3rd February 2011, 08:21   #15
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Default Re: Premium brands going down the value-for-money road, & VFM brands becoming overpri

It is all about after sales and service where the manufacturer banks on.

Certainly the big brands viz. BMW, Toyota, Merc etc. will have a lucrative after sales strategy.

Even the small and cheap segments like Figo too come with similar strategy IMHO.
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