Quote:
Originally Posted by power ranger Today I was reading the launch of Force Traveller 26, the new 26 seater from Force motors.
The specs are mind blowing with Mercedes engine and gear box, monocoque chasis, dual mass flywheel, all 4 disc brakes, electronic indicators for wear and tear of brake pads, LCRV etc
Now, the question to auto experts is as follows :
This vehicle has an ex-showroom price of 10.87 lakhs. Compare to something like the Vento.
Now, how are these commercial vehicles with all these features priced so low ? Doesn't it need more metal, glass, bigger air conditioner, painting and so on to manufacture.
Whereas, sedans like manza cost so much. If somebody says sedans have better engine, gear box etc, I am confused as this has Mercedes-Benz engine and these vehicles far outlive the sedans.
So why do cars cost so much ? Although the raw materials itself look more for these vehicles... Imagine 26 seats cost....
Are cars overpriced both by government and manufacturers just to exploit as a luxury item ?
Can somebody explain? |
1. A lot is dependent upon the specifications of the parts used. For eg., a starter motor spec to last 25000 cycles in low cost cars, can go up to 80000 cycles in high end cars. AC Compressor switch also has similar specifications. Alloy wheels have metallurgical specs - material density and strength used.
Heck, even engine parts have different specs from different vehicles. I have heard that for a car to perform at sub-zero temperatures optimally, engine part specs, and not just the engine oil, needs to be changed. An Audi, BMW, Merc, Honda, VW generally use higher specs since there is no R&D in India and they are simply provided the specs by the parent company. Suzuki, Hyundai, GM generally make lower spec cars in India when compared with Rest of the World. If the chrome parts of a vehicle are speced to last 5 years in humid/coastal environments, vs 3 yrs for first appearance of rust, the cost of chrome parts DOUBLES. Simply - wheel nuts that are normal steel finish cost 1/4th that of wheels nuts with high quality chrome finish (see wheel nuts on BMW/Merc/Honda/Toyota/VW vs the wheel nuts on Hyundai/Suzuki/Skoda, and you'll understand)
For eg. for a fact I know that Suzuki Swift exported from India is a much higher quality car with higher spec parts than the one that is sold in Indian dealerships, albeit at a premium.
Same corollary applies to Commercial vehicles. Specs of most cosmetic parts in commercial vehicles are much lower which make them cost lower. However, suspension, chassis (if not a monocoque build), steering are over engineered to help them better ward of abusive usage/overload. Paint finish is also of a lower spec in commercial vehicles (Solid paint < Teflon Finish paint < Metallic Paint < Pearl Finish Paint in quality+cost).
That's why a Scorpio will cost less than a Hyundai Verna inspite of more metal, heavier built and larger engine. Specifications of parts/automotive systems/paint changes all equations.
2. A monocoque chassis car is inherently cheaper to produce by fully automotive assemble lines, however investment for robotic welders is massively capital intensive. Vis-a-vis a body-on-chassis build like a Bolero/Sumo can make do with manual labour assembly with simple machines. To break-even costs therefore, a Tata Manza may be pitched at a higher cost as compared to a Tata Sumo to recover the capital invested during a product's lifetime.
3. Market Segmentation and positioning forces a company to price a product in a particular range inspite of pressures on bottom-end, and maybe even losses. Team-Bhp has a thread on how Fiat Uno was sold at a loss to position Fiat as a brand in the market, however now Fiat has been pulled up for excise-duty evasion. Similarly, Honda in Jazz, which is in all other countries as costly as the City, had to offer huge discounts for selling it in India, and finally even reposition to get in line with market pricing for the premium hatchback segment. I was told Jazz is as costly, if not more, to manufacture as the City, so that would mean extremely low margins or a loss to basically build a brand or maintain presence in a segment.
Price of the car also needs to recover input costs like Research, Development, Testing, Homologation, Above-the-line Marketing (huge TV/Print Ad Costs) for a particular model during its lifetime since in a Profit-Loss statement of a model, all the above are expense heads and only the sale price of the car is in revenue head!
Here goes, a detailed MBA-like case study answer for an innocuous seeming simple question! Hope this suffices as a general answer! All are welcome to add-in further as & how they feel.