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Old 27th April 2018, 22:31   #61
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Default Re: Overpriced cars : Myth or reality?

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Originally Posted by Jeroen View Post
In democracies there is a saying. If you are not at the dinner table, you are the dinner. That is the pitfall for people who only bitch and moan. Others might rise to the challenge and drive the change they see fit. If you don't engage you are not very likely to find the outcome to your liking. More to bitch and moan about.
Again, I have never said people don't have the right to bitch and moan. All I said it isn't going to get you unaware and it is unlikely to drive change. Either start doing something about it or accept it and move on.
Wise words. In India the poor especially those organized as villages or slum clusters engage with the political forces. Those in the middle and upper middle and maybe rich classes don't - we shy away - we are frightened by the political process - most of the time we don't even know who the local councilor is let alone having the courage to deal with him - and then we hide behind the fear and grumble night and day. Those who deal with the bureaucracy and the politicians fear them the least.

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Originally Posted by rdst_1 View Post
Let me point out that even I don't have any problems with paying these taxes.
Happy to hear that.
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You have only quoted the stats when it comes to collection of the taxes. What about statistics on how these taxes are utilized.
Because the context was the crib about the undue burden borne by the hapless salaried income tax payer. If how Govt is spending budgets wastefully is a subject you wish to debate a new thread can be launched by you under Shifting Gears.
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And until then, I would definitely be vocal about how our high tax rates are an injustice on the people.
By all means. You are a part of the 99% majority on this emotion. But have we ever done anything about it - even something as basic as a letter to the editor. That is the point Jeroen and I are trying to make. Whining without action is a meaningless wail. No point in any of us venting on the internet behind a pseudonym. My general Manager in Britain is forever complaining about the 50% plus income tax he has to pay. Its universal.


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Originally Posted by timuseravan View Post
Filling income tax is not the same as paying tax! Almost 50% of the people who file do not have any tax liability at all. And of the people who actually pay, again almost 50% have a liability of less than 1lakh.
So the calculation of 9% households paying 14% of the tax is just not correct. Per my rough guessestimate, it is 3% of the households who are paying 10-12% of tax.
We can start splitting hairs till the cows come home and miss the main point altogether. The top 15% of people in our country own at the most liberal estimate 79% of the national wealth*. You and I are a part of that 15%. We pay our maid servants something between Rs 5000 to 15,000 a month. Why crib about having to pay income tax or a few lakhs of tax on a car that costs more than what that maid will earn in 10 years. This thread is beginning to read like the 15% richest in the country grumbling about having to pay a tax on a purchase (car) that the other 85% would consider a super luxury item.

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Originally Posted by peus017 View Post
The whole tax thing reminds me of a forwarded message -
peus017 - you are the chap who started this almighty row .Folks like me, along with many others on T-BHP are that tenth man in your British joke. I have no complaints. If the top 2% or 3% in a country don't pay the highest income taxes then who will. That Lexus LS500 at Rs 177 lakhs is overpriced I say

*research report by Credit Sussie

Last edited by V.Narayan : 27th April 2018 at 22:48.
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Old 27th April 2018, 23:39   #62
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Originally Posted by V.Narayan View Post
Happy to hear that.
Because the context was the crib about the undue burden borne by the hapless salaried income tax payer. If how Govt is spending budgets wastefully is a subject you wish to debate a new thread can be launched by you under Shifting Gears.
But sir, these are two sides of the same coin and the discussion is incomplete without talking about both aspects. You do have to agree that if the government spends the money it collects as taxes efficiently and without corruption, it can either automatically lower the tax rates or increase the quality and standards of government services.

I don't have problems with higher taxes on luxury items like cars. However, I feel, that the government can only justify those higher taxes if they provide the basic infrastructure for everyone. If a car is a luxury item which not many can afford, then the government needs to at least offer a dependable and robust public transport system. If they can't do that, that turns a car into a necessity and not a luxury as it is being made out to be.
In the thread about auto subscriptions, I said that I wouldn't mind not owning a car if the public transport was upto the mark. However, until that happens, a car is definitely a necessity. If I didn't have one, I would not have been able to get my father to the hospital in time because the nearest ambulance takes 20-30 minutes just to get to my house.
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Old 28th April 2018, 03:04   #63
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Default Re: Overpriced cars : Myth or reality?

It's a shame this thread has been hijacked into a sermon on national development, migration, personal income tax and what not?!

It'll be good if people stick to the topic i.e CARS.
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Old 28th April 2018, 08:50   #64
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Default Re: Overpriced cars : Myth or reality?

Usually any manufacturer makes about 6~8 % profit per car, again this is an approximate value and it changes based on multiple factors (How well is the product doing, competitors, company's direction, economy of the company etc).

Each manufacturer has got a different direction, for example, for Maruti the major focus goes on improving the Fuel Efficiency, Volkswagen is too focused on getting the Ride and Handling characteristics right, Hyundai places the overall product feel to be of high importance.
With so much of variations in the direction, price is played by lot of dynamic variables.
1. Segment wise response from Industry.
2. Company's Brand Value (TATA had to price Tiago and Tigor very strategically to ensure people buy the proiduct, thus regaining its spoiled repute)
3. Directional costs (Volkswagen investing in tuning of Suspension, Hyundai on quality of Trims, MAruti on Fuel Economy, etc.)

In case of Yaris, I believe Toyota took Indian Market for granted. People owning or driving a Toyota have always been satisfied by the Company's Support, be it at the dealership or the Service Center. But thing to note is, markets have changed drastically, India is growing stronger than ever, with so many options to choose from, and the quality of drivers is also improving, Yaris will definitely get sold, but not close to what Toyota would have expected.
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Old 28th April 2018, 09:57   #65
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Default Re: Overpriced cars : Myth or reality?

Mod Note: No more off-topic posts, guys. Please discuss ONLY the overpricing of cars here.
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Old 28th April 2018, 15:54   #66
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Default Re: Overpriced cars : Myth or reality?

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Originally Posted by Nifty.Nishy View Post
Usually any manufacturer makes about 6~8 % profit per car, again this is an approximate value and it changes based on multiple factors (How well is the product doing, competitors, company's direction, economy of the company etc).
"Profit" margin per car is closer to 20 - 30%. That is, raw material costs are 70 to 80% of a car company's revenues - this data is available in annual reports of listed companies like Maruti, Tata Motors, M&M and so on.

But a car company has to pay for R&D costs, employee costs, capital expenditure (new factory), transport costs, marketing costs, dealership commission and interest towards loans taken too. So when you bring all the above into the equation, the net profit margin of most car companies ends up in the 6 to 8% range.

Last edited by SmartCat : 28th April 2018 at 15:55.
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Old 29th April 2018, 12:47   #67
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"Profit" margin per car is closer to 20 - 30%. That is, raw material costs are 70 to 80% of a car company's revenues - this data is available in annual reports of listed companies like Maruti, Tata Motors, M&M and so on.

But a car company has to pay for R&D costs, employee costs, capital expenditure (new factory), transport costs, marketing costs, dealership commission and interest towards loans taken too. So when you bring all the above into the equation, the net profit margin of most car companies ends up in the 6 to 8% range.
Well the companies are concerned with the nett income after all expenses are paid, and that is quite low.

In fact most large vehicle manufacturers make more money in vehicle financing than by manufacturing.
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Old 29th April 2018, 13:54   #68
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Cars in india are definitely over priced. There is a sudden rise in the last 6-8 years.

A family friend was planing to upgrade from his 2012 Honda City V-MT. He has a budget of 17 Lakhs, when I told him he can get a new City or Yaris at that price he has decided to retain his old car for a while. What has a changed? 4 airbags and a sunroof? When he had got his 2012 City he had an option of getting the Sunroof but he didn't. So it wasn't really a deal breaker for him but 7.5 Lakhs today more for the top end City with the same engine is atrocious. Increase in taxes doesn't show any change in the infrastructure either. This was just one example but there are many similar to this where segments have moved
Up.

The most annoying changes are the sub4m sedans, Petrol's less than 1.2L engine and Diesel's less than 1.5L engine. Those policies have killed good engines from our market.
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Old 29th April 2018, 14:49   #69
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Well, we can debate endlessly on cars being overpriced or not, eventually its a function of demand at certain price point.
If Honda city can sell at average 15 lakh level why would you price it any lower as car manufacturer.
Manufacturers do not have unlimited capacity at assembly line, nor do they have any altruistic interest to please car enthusiasts.
Almost all successful models command 40-50% higher price ( or more) compared to five years ago, its not due to higher taxes or inflation, its simply cleaver pricing.
The same cleaver pricing could become moronic if sales start dwindling.
Do we see the tide turning in this news -

Sales fall as people in metros start ditching cars - https://timesofindia.indiatimes.com/...w/63956575.cms
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Old 29th April 2018, 15:38   #70
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Default Re: Overpriced cars : Myth or reality?

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The most annoying changes are the sub4m sedans, Petrol's less than 1.2L engine and Diesel's less than 1.5L engine. Those policies have killed good engines from our market.
IMHO, the very idea of toying around 4m rule has had direct impact on car prices. Car makers have introduced Compact Sedans category, so we have both hatchbacks and Compact sedans under 4m trying to outdo each other. Sure, there have been engineering marvels, but that has only lead manufacturers to project cars above 4m as much premium product thereby pushing the envelope. The chain continues to next segment and so on.

4m rule has really strangled the industry and we don't get to see wider engine options in same body as other markets do, neither we get to sample much more capable cars from existing manufacturers. Where the Swifts, Balenos, i20s are selling like hot cakes, we also see Polo, Jazz, Fiesta, Micra either being phased out or not even being considered. Other than new body styles and features, we are seeing very little or no upgrades on power and performance fronts. That is now making us question whether we are being charged more for what we are offered?
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Old 29th April 2018, 23:53   #71
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Default Re: Overpriced cars : Myth or reality?

In relative terms, I can say that price of cars has increased, but I am not sure if they are overpriced.

We went to campus recruitments in our engineering college, companies like Infosys, Wipro and TCS offered 3 Lakh Rupees per annum (Lpa) then back in 2009. Price of a diesel sedan was 9 to 9.7 lakh on the road (top model)
Its 2018, and 'truck'* companies mentioned above offer the same 'package' of 3 lpa to college freshers and a top end diesel sedan costs around 12 to 13 lakhs on the road. Does that make the car overpriced ? Yes for a fresher, no for a man earning since last 9 years as his salary has increased with time.

A Honda Brio S version that we bought in September 2013 for 5.35L costs 6.15L today, for almost the same feature list. Does that make the car overpriced ? Yes, for both freshers as well as experienced people, As we feel the car offers the same value that it did just 4 years back and a hike of more than 50,000 INR ???

*truck companies : word used by students as they hire students by truck loads (more than say 100 per college)
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Old 30th April 2018, 00:18   #72
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Well everyone's seems to be using the approach of inflation to calculate if the cars are over-priced. Well the answer is yes. In most countries, car's are seen as necessity rather than luxury. Hence the taxes and rules on what kind of car should be produced are quite lower than what we have in India.

Simple fact is, car prices are over-priced for what they're worth. There is a really good article on finances that says you should not spend more than 35% of your pre-tax annual income on a car (Advice for American consumers).

If we take into account per capita income based on PPP (Purchasing Power Parity), then it's only $1670 or Rs. 1,11,255.40 (conversion at the value when writing this article). For most people, they cannot and should not buy a car at this salary. Even the cheapest car, which is Tata Nano, starts at Rs. 2,46,000. Which is 200% of their salary.

Now, that is just for the general population. While you may argue that it's a bold generalization on how much people earn, keep in mind that is average salary people earn in this country. Of course, there are jobs which are much higher paying, but you get the idea.

Let's take another example. IT Consultant at TCS. Median income is Rs. 10,00,000. If we use the rule of 35, maximum they should buy is a top-end Tata Nano. If you have kids, that should go down even more. This is considering people in United States don't have to pay for their child's education until they pass high school and government gives them tax returns depending on how many kids they have.

Overall, yes, cars are overpriced for what most people in this country earn, and that is for local manufacturers. If we add foreign, then it's not even a question. I mean I bought my Golf GTI for less than what I can buy a Polo GTI for here. Sure it's a CBU unit, but even if it was CKD, it would be priced only 5-6L less. Which is only 2L less than what I paid.

Let's not even talk about the luxury car manufacturers at this point. Yes the cars in India are over-priced, with lot less functionality, and less safety features than what most of the world gets.
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Old 30th April 2018, 09:29   #73
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Yes, Cars are overpriced today and spare parts are even further overpriced.
Now why I make such a statement? There is something called as break even point for every car or vehicle that is manufactured by OEM. Take an example of engine of Honda City Petrol. This engine exists from so many days. Break even point for this engine is already reached for manufacturer, still we don't see any price cut. All tools required to manufacture this engine are all in once place, no further R&D is going on. So apart from machines operation cost, there is no cost involved in manufacturing of this engine. Do customers get benefit of this? Big NO.
Now imagine case of Maruti, We are seeing same engine blocks for so many years which are plonked in different vehicles. And looking at the sales numbers, break even point for each and every single part is reached very early in life cycle of that vehicle. Still every facelift where very minor tweaks are carried out, we customers are charged few thousands, note that everything else in the vehicle remaining same. And those tweaks to call it facelift, say redesigned bumper does not necessarily require entirely new tool. Existing tool is modified in such a case. This modification in tool does not even costs cumulative price we pay for that vehicle. So within one or two shifts of assembly line operations, cost of modified tool is overcome.

Let me give you another example based on OEM experience that I have. Say for a completley new small vehicle like Nano, whatever structural elememts that you see including all sheet metal panels and plastic trims, manufacturing costs within 20K to 40K to some company. This includes spot welding, arc welding, fasteners ,etc. In short this is the cost of raw material plus operation cost. Make a note that this is entirely new product and does not share a single part from existing set of vehicles. Now add engine cost, electrical parts and painting. And at what price this product is sold to customers? After reaching break even point for new tools, imagine profit margins for that particular vehicle. Now in case of accidental repairs how much do we pay for say a door?
In this case R&D costs are not involved. R&D costs are one time investments from my point of view, once you have a setup there is not much you need to do apart from wages of employees and software licenses.

Considering volumes produced and sold, yes they are really OVERPRICED.
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Old 30th April 2018, 10:53   #74
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Considering volumes produced and sold, yes they are really OVERPRICED.

According to your logic only cars that are sold at a loss are not overpriced? Or maybe only a small margin?

As I said before I dont understand the correlation between the cost price and of an item and whether its selling price is too high or too low.

These are commercial enterprises and they are in business to make a profit. In order to do so they tend to make substantial investment, R&D, plant, tooling, staff etc etc. thus taking considerable risk and when they start making a profit you believe their sales prices should come down? Companies don't operate like that, in fact you can't operate like that I would argue.

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Old 30th April 2018, 11:13   #75
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These are commercial enterprises and they are in business to make a profit. In order to do so they tend to make substantial investment, R&D, plant, tooling, staff etc etc. thus taking considerable risk and when they start making a profit you believe their sales prices should come down?

Jeroen
I am not saying that sales prices should come down, what my point is that say for Honda City Petrol vehicle when you are not changing much, features are same, engine is same and at a particular time when you launch a so called facelift with redesigned bumper and new headlamps and taillamps, why should you increase the price of a stable product by a lakh? Redesigning bumper or front grill costs peanuts to "commercial enterprises in business to make a profit". Front end change that we see in facelifted city is not a work of more than a week in R&D including modification of tool/s. Now for established product with such minor change/s, jump in price is definitely not at all justifiable. So as compared to pre-facelift model, yes facelift model is overpriced.
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