[Annibaddh]

Originally Posted by hdman

I did an analysis about this a few months back and I was surprised to see the results.

My dad bought a Maruti Suzuki 800 (base model) in December 2000. Although, I don't remember the exact quotation but he paid approx. Rs.2,25,000 at the time. (Please correct me if anyone remembers the actual quote.)

I took the inflation number from Inflation.eu (https://www.inflation.eu/en/inflatio...ion-india.aspx) and found that if you compound that to today's Rupee, it comes around Rs.8,27,575. (I cross checked the numbers with Bloomberg and they are close)

So essentially, in 2000's Maruti prices you can get a GNCAP 5 star rated Tata Altroz XT in Mumbai. I was certainly taken aback.

Let's take another example, Honda City iVTEC ZX MT costs Rs.15,92,756 in Mumbai as of July 2021. When accounted for inflation, the car would cost Rs.4,15,973 in 1997, when the original was launched. So in real terms, Honda City didn't just get better over time but also got cheaper.

Since, OEMs have to make profits and take account of costs in real terms (i.e. adjusted for inflation), the costs today are sort of justified if you really think about it. Let me leave you with another take from this analysis, there are high chances that you have been paying almost the same money (in real terms) while upgrading cars over the years. The thought is, the cars aren't getting expensive but the rupee is getting cheaper.

Attaching the spreadsheet here. Please let me know if I made an error anywhere.

Best,
Harsh Dhiman

I think as many people have pointed out, the key question is costs have quadrupled but have incomes?

I differ in my opinion though vs most people that income hasn't kept up. My own income has grown slightly slower but still become considerable vs back then! And while some things like cars have become dearer, not solely because of inflationary factors, some others have become not so bad. I could never afford a house back then (the EMi would have killed me), but now I've bought a significantly superior house and still have sufficient left over to pay my monthly bills and then some. Because house prices have sort of plateaued vs income since 2012. I still spend roughly the same on my international and domestic holidays. so there's the fact that costs have affected various sectors differently.

3. The very composition of cars on the road now has transformed! We can see that in segment-wise sales, can't we? More Dzires then Altos? More compact SUVs then small cars? Where is all that money coming from if incomes haven't kept up ? Heck even in my residential area in Jaipur I could nary see a luxury car back in 2012-2013. They were unheard of! There were a sum total of 2 households who owned a German. Now, every third house has one.

4. As some of you pointed out - manufacturers have become more profit conscious. As they should. A profitable market means carmakers would see reason to launch more and bring better cars - they generate a return.

My singular issue with cars however is that while 'seemingly' cars are becoming better - safer, we've started seeing a lot of compromise on quality and customer satisfaction even by larger, highly profitable players. I'm not sure if they really are better.

Hyundai's QC has become incredibly worse. So have their service costs and the very attitude to customers. Their cars may 'seem' superior but really aren't (removal of all discs from some of ther popular cars a case in point). They have more features but I can live without features, but literally may not without some of the stuff they are omitting!

Maruti has become even cheaper in quality if ever there was such a thing possible. Most global car makers don't take India seriously in spite of actually tasting success.

VAG's latest platforms feel inferior in every way. Ford's quality cuts across their lineup are visible. And what to even say about their Endeavour cost cuts!

Simply put, I don't mind spending money to buy a decent car. But short of a Camry (great all round quality, hybrid and efficiency, comfort with reasonable fun on the road) as an upgrade for my Vento I just can't see anything worth the effort. Hence the decision to retain my 122K run 9-yr old steed for another 6 years.

[hdman]

Originally Posted by Annibaddh

I think as many people have pointed out, the key question is costs have quadrupled but have incomes?

I differ in my opinion though vs most people that income hasn't kept up. My own income has grown slightly slower but still become considerable vs back then! And while some things like cars have become dearer, not solely because of inflationary factors, some others have become not so bad. I could never afford a house back then (the EMi would have killed me), but now I've bought a significantly superior house and still have sufficient left over to pay my monthly bills and then some. Because house prices have sort of plateaued vs income since 2012. I still spend roughly the same on my international and domestic holidays. so there's the fact that costs have affected various sectors differently.

I get your point but your income depends on which space you're working in. I know it's a commonly known fact but will reiterate for the sake of discussion, fresh out of college IT developers can start easily at 30 LPA while people seeking employment in sectors elsewhere do not. Your income also depends how the sector evolves, Financial Services have evolved a lot in past few decades but agriculture hasn't. Point is, income growth is subjective.

From economics standpoint, we haven't been doing good since last 7-8 years. In 2019 (pre-pandemic times), we still had 45 year high unemployment rate (https://www.livemint.com/news/india/...306879836.html), which is regarded one of the most important measure of economic health. If you think about it, that's the worst even before the liberalisation took place and surpassed even the emergency. Sure, the stock prices are at all time high but stock markets do not reflect real economy rather shows how the wealthy have been doing. Also, lot of money comes from foreign investors which has no lock-in can be taken out instantly in times of crisis, that's what we saw in March 2020. Also, inflation acts in different ways on different things. I have taken CPI (Consumer Price Index) inflation numbers, while government likes to advertise WPI (Wholesale Price Index) in their numbers. You can judge why. Each has their own baskets of goods which are tracked for rise in prices, mostly consumed items like wheat, rice, etc. (could only think of food, lunchtime is close ) So somethings may get cheaper, like mobile phones while the other may not. Real estate and gold aren't the best measure of inflation anymore. So, I don't really a reason why cars aren't getting any better while getting expensive - we haven't made any real progress, just made inflation. Nevertheless, these comparisons do throw a lot of light on these subtle things.

[redjeck]

Inflated prices , bad roads , duty structure , no parking , the travails of car ownership in India are endless . It’s not one factor but several .

I have decide to stick to sub 20 L cars and replace every 30 months .

For someone who had a peppy little Mazda Miata in the United States , driving and ownership both were a joy . Milk was costlier than unleaded

Looks like it’s cheaper and better to fulfill all my car fantasies by renting in EU and US .

[imp!]

Cars are definitely overpriced. One can try and justify it until kingdom come. Truth of the matter is that todays feature laden cars which are generally low on power, engine size come with severe cost cutting and high prices. This is evident across segments and reeks of automakers desire to squeeze every last bit of profit out of a customer, value be damned.

You can't hide behind improved features and higher safety ratings as a justification for the increased price. These things have become significantly cheaper to implement over previous generations. The manufacturers are currently riding high on pent up demand. What happens when people stop buying cars every three to five years and like many of us enthusiasts look at 7 - 10 year horizons.

Sat in the current flavour of the month Kushaq? Feels like it belongs two segments lower. Driven the Hyundai Alcazar 2.0 Petrol? Anemic engine, brakes with fantastic bite but terrible stopping power, great feature set, but, I doubt it will age well beyond the three year mark. All the airbags in the world won't help a Chassis with questionable inherent safety. A 3 series that costs 60 Lakhs? A 5 series that costs 75-85? An E class that is 80-90 Lakhs? There is no justification for that kind of pricing.

[Durango Dude]

Car Companies literally give kick backs to the Govt in the form of taxes!! If you really delve in the tax structure it's untenable and day light robbery. Almost 40-50% percent of the car's price is 'kickback' tax to the Govt for this what the Govt does is taxes imports at around 150% and more and 'protects' the companies operating on Indian soil. Govt acts as a sort of 'Dadha' collecting taxes and protecting local companies and shielding it from competition from abroad: so what you get is what the local companies dish out which you have to grin and bear it, if you have deep enough pockets then you can get yourself a flashy car by paying absolutely worthless amounts of money and maintain it like a 'mistress'. So if you pay Rs 10-12 L it's worth is actually only 5-6L and rest is extortion money the Govt charges on your behalf from the car companies.

[Neversaygbye]

Interesting thread and while I agree that most cars nowadays are expensive compared to even 5 years back, I wouldn't really blame taxation as the main factor, which seems to be coming out from most of the posts.

Punitive taxation was there earlier as well - successive governments have always treated cars as luxury items. However, the problem is with the base. The ex-showroom cost of cars even 5 years back was much lower, hence the on road cost was lower and you could still get a decent set of features within 10-12 Lakhs even after factoring in the high taxes. Now the base itself has shot up, hence the landing cost for a similar car has gone beyond 15 Lakhs.

In my opinion, there are multiple reasons for the base to have increased, and some of these have been covered in other posts as well:

1. Premium pricing and profiteering: In market research, two things are studied - willingness to pay and ability to pay. Fact remains that despite the cost of cars increasing dramatically over the last 10 years, many people have both the ability and the willingness to pay, as can be seen from the monthly dispatch numbers. Hence OEMs are pushing the segment price elasticity bubble and they will continue to raise prices and rake in profits till the bubble bursts and sales take a hit (which has possibly happened with the new i20). Even a brand like Tata that was known for VFM pricing in the past has now started playing this premiumization game, if the pricing of the Harrier and Safari twins is anything to go by. This is similar to cigarettes, which once upon a time was a price inelastic category and could absorb any kind of price hike but eventually demand fell once they became just too expensive.

2. More features compared to earlier models resulting in a higher cost of manufacturing: Cars nowadays come with all kinds of stuff including air purifiers, et al, all of which add to the cost. Many of these things are cosmetic and superfluous but gel with the buyers. This pushes up the cost. How many people buy the base model these days?

3. Weak Rupee: This affects brands which have a low degree of localization

4. The aforementioned government taxes

Car manufacturers are also focusing on the top end of the market, as that is where the fat margins lie. Only a few manufacturers have low cost volume sellers. In fact, I can't think of any other than Maruti and Renault (Alto+Espresso and Kwid respectively) off the top of my head.

However, what this also means is that there is a large consumer segment waiting to be tapped - those that cannot afford the 10L+ cars and are having to settle for either Maruti or Renault or are going the pre-worshipped route. Then there are people like me who hold onto their cars for 10 years and more. I am sure that more and more people are joining my tribe considering the high cost of a new acquisition. As long as demand at the top end remains robust, OEMs will not bother to woo these segments.

Things will only change once sales of cars in the 10 Lakhs plus range start taking a hit but sales of those in the sub 10L range remain constant or increase. Then there will be a slew of launches in this price segment as no OEM will want to miss the bus. But I don't see that happening anytime soon.

[Tucker48]

I'm assuming that the OP is talking about factory prices otherwise if we include taxes then most of the things are overpriced IMHO.

Regarding factory prices, printing more money causes inflation (or the value of the product holds but value of money goes down). US has printed about 40% more dollars than what it has printed in it's entire history. Prices were expected to up. I'm hoping that we don't enter hyperinflation otherwise the price of cars in India will become prohibitive for some while becoming more affordable for others (depending upon income sources and investments).

[Padcot Prakash]

Price of the Vehicle - 9,88,965
+ GST (28%) - 2,76,910
+ Cess (17%) - 1,68,124
+ TCS (.75%) - 10,755

Total - 14,44,755

I have a 2014 Vento TDI highline MT done just shy of 150,000 kms. Well maintained and drives like a gem. Was hoping to upgrade to Octavia/ Tiguan. But looking at current pricing , I have decided to keep the vento for another 3-4 years or 250,000 kms at the least.

I'm expecting expenses on the clutch , steering column, injectors and electricals. None of these having been touched yet. May be even the A/C unit will come up with some issues and other electricals.

I have decided to invest the full value of a new CSUV and with the returns on the investment ( simple returns of 8% pa ) , take care of the expenses of this car.

The question is , what after 3 years ?

I don't see value in investing 25+ lakhs on current cars especially looking at resale values of German brands.

For business owners it is better to invoice a new car on business name , gets depreciation and refunds on GST. I don't know on the cess part. Is it refundable ?

[vinya_jag]

I feel, we are buying cars across Gernerations, and the trends have changed a lot.

The last few Car generations in India have been about getting the car right. Now, that we have had it right, we are trying to better things very differently.

Consider the following cars.

2000 - The Zen - The perfect premium car for a small family.

It had nothing pretty much. No power steering, Terrible AC, Small Boot, low ground clearance (Enough for the humps those days), a casette player which was optional.

Those days, we were all upgrading from travelling in KSRTC buses, carrying hand luggage bags. So, the Zen's boot was adequate enough. Power again very much adequate. There were fewer slow cars to overtake then. Kids in the back seat would have gazed outside for hours, with the windows rolled down.

2010 - The Polo - Again, probably the perfect car for a small family

It again had pretty much everything for that generation. A larger Boot over the Zen. Perfectly mated engine. All the basics were sorted. Air bags, Power steering, Alloy wheels, Powerful Diesel engine, Silent cabin, electically adjustable mirrors, rear wipers, defoggers, Brilliant sound system, height adjustable seats, adjustable steerig column.

And now, on our recent trip, I just noticed that our luggage had grown multi fold. We were carrying 3 badminton rackets, badminton shoes, 3 laptops, their chargers, mobile phone chargers, a football, a second pair of footwear, clothes that would last a week, and a Jackfruit. Also, some of our arterial roads in Bangalore are so bad, that I had to be doubly careful on some of the patches. Our daughter couldn't spend time watching outside, she just wanted her favourite songs played over and over again.

2021 - Probably a Creta makes more sense?

The larger boot, larger leg room for the ever growing younger generation, More clearance, Some infotainment. It ticks all those boxes, so, should we be paying a little over the Polo?

But why are we paying so much more?
Just take a look at some of the non-optional features on the car

- Skid plates
- Roof rails
- Piano black B Pillar
- Side sill garnish
- Shark fin antenna
- Rear spoiler (On a creta, for aero dynamics?)
- Ambient lighting
- 11 in touch screen
- Wireless charging
- Signature cascading grille

I would rather buy a 2010ish Generation BMW and enjoy the real car comforts, than the newer non-car comforts, and ask my kid to wind down the windows, listen to the engine noise.

[Rahul Bhalgat]

Originally Posted by Padcot Prakash

I have a 2014 Vento TDI highline MT done just shy of 150,000 kms. Well maintained and drives like a gem. Was hoping to upgrade to Octavia/ Tiguan. But looking at current pricing , I have decided to keep the vento for another 3-4 years or 250,000 kms at the least.

For business owners it is better to invoice a new car on business name , gets depreciation and refunds on GST. I don't know on the cess part. Is it refundable ?

I understand your decision to retain the Vento till 2,50,000 km. It makes sense IMO.

A business owner does not get GST input credit (what you are referring to as refund) even if he registers the car in the name of business. The input credit can only be availed by those who trade in cars.

[kosjam]

Originally Posted by vinya_jag

But why are we paying so much more?
Just take a look at some of the non-optional features on the car

- Skid plates
- Roof rails
- Piano black B Pillar
- Side sill garnish
- Shark fin antenna
- Rear spoiler (On a creta, for aero dynamics?)
- Ambient lighting
- 11 in touch screen
- Wireless charging
- Signature cascading grille

I believe you've hit the nail on the head. It is these optionals, which as u rightly said are not even required for a decent drive experience, which the manufacturers use to drive up the cost.

For example, the latest rage is a sunroof. Lets be honest, how many people are actually going to use this feature in a hot/humid/dusty country like India once the initial excitement fade away?

If the manufacturers took out a trim devoid of all non drive required accessories which only serve to imrpove the "flaunt" value, all other trims would see a major dip.

And as they say, reputation matters, due to which hyundai is able to charge an outrageous premium for Creta, whose book even Tata is now trying to take a page out of...

[ganesc]

Having read all these, my respect for Maruti goes up even more for what they were able to do so far. The cost rise could affect them too as any other manufacturer and yet they are able to maintain a decent value for money proposition.

Going by the analysis the young bhp’ian mentioned, the current Maruti is extremely cheap compared to the earlier generations, given the same inflation pointed out isn’t it? And how else can they achieve that without cutting corner somewhere while still meeting the government norms?

Personally, was looking to replace a 2013, 120K run Ertiga ZDI used by my Father back home with something similar (smaller footprint, no gizmos, occasional 7 seater) but don’t have much of options. Going by the reviews, Alcazar has poor 3rd row seats (Never liked a Hyundai somehow) and Safari at 20+Lacs!? Crysta was too big to handle and has become extremely pricey that it hardly makes sense anymore, at least in my case.
Hope Maruti launches that sweet 1.5 diesel, automatic XL6/7 with not so much premium.

[Nanolover]

I was also thinking cara are overpriced until we recently brought home s presso vxi automatic. Al inclusive on road 5.2 lakhs in not a bad deal at all considering it has abs and an airbag. My nano automatic brought 6 years ago for 3.2 lakhs on road seems grossly overpriced in comparison. Remeber nowadays we have to pay for 3 years insurance also.

So yes, cars in higher segments are slowly getting unaffordable ,but that's because people are willing to pay and buy them. If Mercedes or BMW priced a model at 50 lakhs and nobody brought them,then price will automatically come down. Manufacturers price according to what the market will withstand.

[white_wolf]

The cost of cars has really escalated in last 5-6 years. Prior to that (i.e from 2000s to 2015 ish) the inflation was a little bit adjusted by reduction in the material cost like plastics replacing metal in a big way, cheaper electronics etc. These were the technologies that helped people.

In the last few years however, technology and features are used by car companies to jack up prices. For eg. Android auto and Carplay - this 7" unit for Maruti costs around only 10,000 but in the name of this feature addition i remember maruti charging somewhere around 40,000 for one car. When i checked for retrofit on my car the maruti dealer told me the cost was 70,000 which is insanely high. Rear View cameras are another example - they are much less expensive to the car companies than to the car buyers.

Long story short, the new options and features create more value for the carmaker than for the user. Hence i would always recommend to go with car with strong fundamentals (read power-train and safety equipment) and leave the bling aside. It would save lots of cost upfront and in long term ownership as well.

[cpabhijit]

Originally Posted by thiagust

I have been looking for an upgrade on my GT TSI 2013 model and have been blown away by the recent pricing trends in Indian auto scene. .

First up, that is a really difficult car to upgrade from. It was one of the best hatches that money could buy in 2013 and 8 years on, it still checks most boxes.

9.3L in 2013. Keeping pace with inflation, to buy the same car now, you'll have to shell out 14.6L, right? That way, a Polo GT TSI is available at around 13L now, I guess? Sans the lovely DSG, yes I know. But I'm sure it has a lot of other things that our GT TSI doesn't have. Maybe some useful features and some of the non-essential things that someone has beautifully listed out (shark fin antenna?! ).

India's per capita income has gone up by only 52% in the same period while the same car's price has gone up by ~50%.

I'm not sure if we can easily conclude that cars are more expensive today. Car prices have gone up, keeping pace with inflation and per capita income has gone up to a similar extent. The only things which have grown beyond these are our wants and aspirations. And hence, maybe, the 'upgrades' seem expensive!