[rockporiom]

Year 2011, This was a very adventurous year for us as after nearly 15 years we were buying a brand spanking new car by trading in our age old 1000. It is a completely different story that no one bought the 1000 and we just gave it away.

Company: MSIL
car: DZIRE ZXI
Year of MFG: 2011
Price: 7,10,000 OTR Ahmedabad

Would say that the price was just superb for what we got. A big(ish) car(more than 4 meters)

Fast forward 2012

Maruti Suzuki India Limited launches the all new Dzire under 4 Meters in Length to take benefit of tax regulations for cars under 4000 mm in length. So what is the price? Hmm, nothing changed the price is the same but we get a newer looking interior and a disgusting looking exterior(leaving that for a separate thread). The point here is this car changed a lot of things in the Indian car scene.

When I was on the lookout to change my car in 2011 these were the following contenders:

1) Toyota Etios
2) The Manza
3) to some extent even the Hyundai Accent

Fast forward 2015

The segments have all shuffled up. The segment that the Etios and Manza cater to has almost vanished. This segment now is ruled by under 4 meter monstrosities. So now some of the cars that were above 4M, now have become under 4 meters and still cost the same, in fact even more than what they used to cost when they were below that length.

So now after the Dzire which is essentially a hatch with a tiny boot a person has to straight way look at cars above 10 Lakhs if he/she wants a meaningful upgrade.

Leaving the compactness aside if we look at the recent launches namely the Creta and the S cross we see that they are creating a completely different segment at sub 15 Lakhs prices.

For e.g. A jetta TDI DSG in 2013 costed about 19 Lakhs OTR Ahmedabad. Now the same car costs close to 24 Lakhs OTR Ahmedabad. So the end value a customer is getting is still of a 18 Lakh rupee car but at 25 lakhs.

Let's take another example the bigger Dzire ZDI in 2011 costed about 7.95 Lakhs OTR Ahmedabad. Now the smaller Dzire ZDI costs close to 9 lakhs OTR Ahmedabad.

The inflation has caused a huge shift in the segments of cars.

The thread on the inflation of German luxury cars states only the Big three namely: Audi, BMW and Mercedes but the change in the prices up there has caused huge changes in the lower price bracket.

Looking at a C2 segment example now.

Cars in 2011:
1) Honda city
2) Sx4
3) Vento (newly launched)

all priced at max 10 - 11 Lakhs on road

Cars in 2015
1) Honda City
2) Ciaz
3) Vento

Apart from the Ciaz the other both touch 14 Lakhs OTR Ahmedabad but looking at the difference in engine capacity between the Ciaz and the others even the Ciaz is overpriced at close to 12.5 Lakhs OTR Ahmedabad.

Note: All prices are for top variants

Now these so called C2 segment cars are becoming a substitute to the D1 segment which mainly has/had the corolla, the civic, the Cruze.

The civic has now been replaced by the updated city which is bang in between the 3rd gen city and civic. So what happened to the sub 10 lakh segement? Simple, it has vanished due to inflaton. Due to price increase the C1 segement in reality has now become the compact segment and the C2 segment is gunning for the D Segment.

So, here is a glaring market gap that I show you:

Year 2015

Honda AMAZE VX IVTEC AT (costliest petrol)
Price: 9 Lakhs OTR AHMEDABAD

Honda City VX CVT ( costliest petrol)
Price: 13.5 Lakhs OTR

Year 2011

MSIL DZIRE ZXI (costliest petrol)
Price: 7,10,000

MSIL SX4 ZXI (costliest petrol)
Price: 10.3 Lakhs OTR Ahmedabad

Price difference in 2011: 3.2 Lakhs

Price difference in 2015: 4.5 Lakhs

Price difference between 2011 and 2015: 1.3 Lakhs

Difference in Value:

The cars in 2011 were both above 4 meters in length.

The cars in 2015 aren't completely comparable as one is below 4m and one is way above 4M.

A bit confusing? Let us look at a better comparison between similar cars

Year 2011

MSIL Dzire Zxi
Price: 7.1 Lakhs OTR

MSIL SX4 Zxi
Price: 10.3 Lakhs OTR

Year 2015

MSIL Dzire Zxi (Costliest petrol)
Price: 7.9 Lakhs OTR

MSIL CIAZ zxi+ ( costliest petrol)
Price: 10.6 Lakhs

Price difference in 2011: 3.2 Lakhs

Price difference in 2015: 2.7 Lakhs

Now, you might be wondering " hey the difference has reduced so that is good right?" WRONG we also need to take into consideration the following facts:

1. The Dzire has reduced in length from 2011 to 2015.

2. The Dzire has lesser boot space.

3. The SX4 had a 1.6 VVT whereas the Ciaz gets a 1.4 VVT.

So in total a customer going for the dzire now would lose 300mm in length and 110L in boot space.

In the Ciaz the customer would lose the punchy 1.6L VVT and get the 1.4L VVT instead.

Some might argue that the cars have more features and better interiors. My question is does features like Bluetooth and push button cost a manufacturer as much as a bigger engine or a longer car? I don't think so. The difference in prices might have reduced but the difference in value that a customer would get has in fact increased i.e. they get lesser value for what they pay.

Even if we take the example of the city which is way costlier than its previous iteration we see that though some features have increased but there has been a huge hit in terms of build quality.

On close observation you would notice that the C1 is heading to replace the C2, C2 is replacing the D1 and so on. What this has caused is the segment that existed between the compact segment and the C2 is no longer there. The only survivors of that segment is namely the etios and Manza which would soon be replaced.

Another superb example would be the Jetta and Passat.

The Passat in 2013 costed about 24 Lakhs OTR Ahmedabad and the Jetta costed about 18 Lakhs OTR Ahmedabad. Now, the Passat has been discontinued and the Jetta costs close to 24 Lakhs OTR Ahmedabad.

One example from the big three in comparison to 2011 in 2015 the B class replaces the C class, the C class replaces the E class, so on and so forth.

My question is till when would this trend continue? Where would it stop?

[Aditya]

Thread moved from the Assembly Line to the Indian Car Scene. Thanks for sharing!

[vinair]

Originally Posted by rockporiom

My question is till when would this trend continue? Where would it stop?

I don't think this is a trend that is going to cease in future, it is the way forward.

Classic example, the new Hyundai Creta, with the top end variant touch 17 lacs on road (Bangalore), suddenly all other models priced around or below the Creta (read XUV 5OO in particular) and above Creta (read Innova) started making sense for the price brackets they are in. And with 30,000+ bookings in the kitty, it seems everyone feels justified with the Creta pricing.

While Innova still seems pricey (for the top end variant) when compared to the features it offers, the way forward seems clear. As one manufacturer ups the ante, it either spells doom or creates an opportunity for others as well to move the game up.

With the Creta pricing, other manufacturers were sure that their offerings too would be in the radar now of an potential customer without having to try too hard.

[DicKy]

Sadly the pricing will still go up and like how most of the actions were concentrated on sub 10 lakh cars in the past decade, in the future all will be 10+lakh, with the sub 10lakh having just budget cars, the same way it is in most of the international markets with the only difference being there for 10-15lakhs you may have a wide variety from the Corolla to Fortuner size SUVs, but here you will get a sub 4m car or examples of 'perfect SUVs' for that money.

Except maybe the Safari/Scorpio and budget hatches all other price points have changed tremendously. The Endeavour segment used to be around 14-17 lakhs. Now they are touching 30lakhs OTR price.

And a top end diesel sub 4m sedan is touching almost 10lakhs OTR, whch was not just City/Verna segment , but Corolla/Civic segment just 6 years ago.
But then times change, so does the car prices which will keep on increasing, but i think the govt should come down heavy on any cartel pricing, which is alos doubtful given the hold of SIAM,

(OT : Remeber a few years back many had said there was a dearth of options in the 10-15 lakhs space. Now it looks like everyone is there :P

[comfortablynumb]

Originally Posted by DicKy

Except maybe the Safari/Scorpio and budget hatches all other price points have changed tremendously. :P

Don't know about Safari, but the Scorpio's prices have moved northwards pretty fast too.

The on-road price of my Scorpio SLE was 9.30L in 2010. If we assume that the S6 variant of the new generation Scorpio (with an ex-showroom price of 10.20L in Pune) maps to the erstwhile SLE, then it will touch a whopping 12L + on-road!

Cheers,
Vikram

[Bhodrolok]

Instead of calling it a shift in segments, I think its more the price range of a segment has shifted upwards. So a C2 now is what used to be close to the D1 segment earlier. However I do think this will continue and consolidation will happen only if there is some financial crisis and the demand starts dropping considerably much like our real estate markets!

[hybridpetrol]

The way various businesses have battled inflation is by either increasing the prices or by reducing the quantity of the product. Just take example of any FMCG product, such as a biscuit packet. A few years back these used to come in standard sizes such as 100g, and say they used to cost Rs.10. Then later on they introduced non-standard sizes where they are now selling 80g for the same Rs.10.
This is also the same case.
Auto manufacturers want to increase their sales as well as profit Y-O-Y, so they offer less at the same price. Hence the quantity on offer move towards left and the prices move towards right. This happen slowly, that rarely anyone sit up and take notice.
Now S-Cross 1.6 seems like a dream engine, whereas there were many such engines on offer in the past for half the price or less.
Of course, rain sensing wipers, auto headlamps, push button start, keyless entry all this have made sure that they add a lot of value to the user! I am sure all these are just cheap electronics (how much does a light sensor costs? Rs.100?), but the whole customer base is supremely satisfied so that they can overlook the important points about a car - such as the engine displacement.
Another example is the Celerio Diesel - It offers 800cc Diesel engine at more than the price of some 1.1L Diesel engines. If this trend succeeds, they will continue to offer much lower displacement engines, may be add in a turbo, and a host of inexpensive convenience features to keep the product at the same price point.
Swift - 800cc Turbo petrol, automatic projector headlamps, magic seats, etc - for same Rs.7L OTR in 2018. Any takers?

[ani_meher]

India has average price inflation of 8% (of course debatable). So if you simply increase the past prices by 8% per year (by multiplying by 1.08 for every year), you will get similar gap. A car costing 10 L in 2011 will now cost 13.60lakhs just because of inflation. If it is a hit car, or by greedy manufacturer, it will cost even more.

Even the price difference is increased by this amount. And this will continue. This increasing gap may give manufacturers new markets to explore.

[rockporiom]

In response to some comments that say the trend would continue.

This trend could work in a market where the disposable income i.e. the income that remains after removing all kinds of expenses and taxes, increases. In our market this isn't happening at a fast enough rate to match the increasing prices of the cars.

Earlier a person having 10 Lakhs could stretch a bit and go for for the top of the line city AT but now there is no way a person having a budget of 10 lakhs can stretch upto 13.5 lakhs. The person would have to settle for something under 4M. Heck, even the ecosport costs close to 11 Lakhs OTR.

The trend is dangerously increasing and that day is not far when a million rupee car would mean a under 4 meter hatch with a boot.

Same with the luxury segment. I could buy the fortuner if i had a budget of about 25 Lakhs earlier but now the fortuner costs 30 Lakhs and the only cars that come in the sub 25 lakhs price bracket are the octavia or the jetta.

The problem is people are still buying cars at these stupid prices without the slightest hesitation. People are just compromising and settling for a lower variant or a lower segment.

I would like to give my own example. In 2013 when I bought the Kizashi I had a budget of max 30 Lakhs. At this budget i could stretch a slight bit and get myself a c class, a X1, a 320d or an A4. Now I can't even imagine getting those cars at their current pricing.

How many, feel that at 18 Lakhs OTR in today's time the Kizashi would have been a VFM product? I bet many would since the only other sedans in this budget now would be namely (drum roll):

1) corolla altis ( did someone say overpriced?)
2) jetta tsi (power?)
3) Cruze ( long in the tooth?)
4) elantra (handling?)
5) fluence (is it still in the market?)

Can't think of any other car. Strange when we are spending close to 20 big ones we have only 5 options. the creta costs almost as much as the Kizashi. Who imagined that creta would cost as much as a japanese CBU when they said Kizashi is over priced.

[VeluM]

Originally Posted by rockporiom

Strange when we are spending close to 20 big ones we have only 5 options. the creta costs almost as much as the Kizashi. Who imagined that creta would cost as much as a japanese CBU when they said Kizashi is over priced.

The Creta is overpriced, but the Kizashi was well priced at the time. The problem is our Diesel biased market and the terrible FE of a 2.4L, relatively heavy petrol car. The CVT would have only made that worse, and a lot of buyers in that segment prefer ATs.

But I agree that the trend is alarming. When the Yeti was launched, I wanted to get to the point where I could afford one at 18L OTR. Now I will need nearly 28L to get the Elegance 4x4. With a number of additional features, yes, but it still is mentally inexplicable that one would need to spend 10L more to buy the same car.

The trend can be justified (to a small extent) by the number of standard features that are available in cars these days. Previously it was the basic vehicle, and to get features one had to go up the line, whereas now even the base models of many cars are quite acceptable with the exception of safety which is given the last priority.

There was a time when the trend was the reverse. For example in 99/00, a Zen Lx was nearly 4L on road, which is more expensive than the Lxi that had internally adjustable side mirrors, body coloured bumpers (?), and power steering in 2007.

[Vitalstatistiks]

Quite frankly, the whole thing is rubbish. Is this a collaborative move between the manufacturers, I don't know. But it is too much of a coincidence when all manufactures simultaneously start pricing their comparable offerings to those for one segment above !

In D1 segment, Octavia/Laura, Jetta, Corolla and, most recently, Elantra. All just moved from being available for 12-15 lakhs (for a variant you will buy) to 20-22 lakhs. If Civic were to be re-introduced, it here where it will be. Elantra just increased its prices by almost 2 lakhs on the AT version, with a minor facelift !

In C2, City, Vento, Verna all moved from 8-10 lakhs bracket to 11-13 lakhs.

In D2, Camry and Superb moved from 20-22 lakhs to starting at 27 odd.

Same trend can be seen in higher segment, with BMW, Mercedes and Audi, all three bumping up prices of their respective, comparable sedans to those of one segment above.

It is too much of a coincidence for it to happen across the car industry, across the manufacturers, around the same time period (post-2011).

[hybridpetrol]

Originally Posted by rockporiom

The trend is dangerously increasing and that day is not far when a million rupee car would mean a under 4 meter hatch with a boot.

A VW Polo GT already costs a million rupee OTR. While the segment it is in is still a niche, it is not long before the GT is discontinued and a regular Polo would cost a million. Diesel variants of Elite i20 are already touching a million, while i20 Active has already crossed it. These cars will set an example and prove that there are eager buyers with stretched pockets to buy at premium price tags.
Two years down the line, petrol cars would cost what diesel cars are costing now.
The trick of increasing prices, without anybody noticing: Drop a few features in top variant, for the same price and provide a feature with less worth. While this might keep some customers happy for sometime, one or two years later, the manufacturer can provide the same features which were dropped earlier, in an all new upgraded version, at a premium of about a lakh or two
The car would sell like hot cakes disregarding the price, due to the freshness of the product. Everybody forgets what was the price a few years back, and the annual report of the manufacturer looks great!!
Disclaimer: This above scenario is purely fictional, and any resemblance to the original and elite i20 is purely coincidental

[lamborghini]

Originally Posted by Vitalstatistiks

It is too much of a coincidence for it to happen across the car industry, across the manufacturers, around the same time period (post-2011).

Isn't this around the time when recession hit and the exchange rate hit an all time low (or high depending on your perspective)?
Maybe that explains the shift in pricing, along with smaller models filling in the voids.

As for the topic - I am going crazy explaining to people why our Laura L&K costed 22.5L when the car is a '15L ki gaadi'. 'You could have bought the 320D CE for a little more'

[alpha1]

Originally Posted by rockporiom

This trend could work in a market where the disposable income i.e. the income that remains after removing all kinds of expenses and taxes, increases. In our market this isn't happening at a fast enough rate to match the increasing prices of the cars.

Well to be honest, the income increase IS happening at a faster rate!
Which explains your statement below:

The problem is people are still buying (increasing number of) cars at these stupid prices without the slightest hesitation.

So why should any manufacturer reduce prices ever?

[Bhodrolok]

Maybe that's when manufacturers realized that the competition in A & B segments is too cut throat for any of them to make any money. So they did the next best thing, they decided to target the higher segments where they have more elbow room to price their products with profitability.

Originally Posted by Vitalstatistiks

In C2, City, Vento, Verna all moved from 8-10 lakhs bracket to 11-13 lakhs.

In D2, Camry and Superb moved from 20-22 lakhs to starting at 27 odd.[/i]

Same trend can be seen in higher segment, with BMW, Mercedes and Audi, all three bumping up prices of their respective, comparable sedans to those of one segment above.