[aniketi]

Are cars costly now? Obviously all will say Yes! But what is the reality? Are cars really costly nowadays? What if I say cars are actually cheaper now? Will you agree to me? I am sure you will say NO. Okay let's find it out.

When we say something is costly, we definitely need to compare it's price for last few years then only we can say that yes, it's costly now. This is the simple method which is followed for years everywhere in the world. For example if something was costing Rs. 100 three years back and now it is at Rs. 150, we can safely say it has become costly now even after considering standard inflation here. Most of the things have impact of inflation and that is the main reason why things become pricey every year by some amount. Real estate prices, fuel prices, grocery prices, vegetables and fruits prices, etc. are the basic parameters responsible for inflation.

Coming back to cars now. People keep saying cars are very costly now, after GST they have become very costly, etc. But what is the reality here? Let's check it out.

Example 1: Maruti Zen was launched somewhere around 1997 and from what I remember it was costing around 4 Lakhs OTR in the year 2000 (Correct me if I am wrong). When I purchased Ignis Zeta last year in July 2023, it costed me 7.9 Lakhs OTR. Now if I compare features here, Ignis has loads of more features like 2 airbags, ABS with EBD, Hill assist, Keyless entry, Alloy wheels, Spoiler, Roof rails, Infotainment system with Android Auto and Apple Car play, Steering mounted controls, Electrically operated mirrors, fog lamps, rear wiper & few more. On top of that my Ignis is automatic (AMT). Also Ignis has much better, refined BS6 engine (1.2 L against 1.0 L Zen had at that time) with more power and fuel efficiency. So ideally if we see prices of Zen in the year 2000, similar Ignis should have costed me at least 12-14 Lakhs today considering all the features I got and 23 years of Inflation. But I got it for just under 8 Lakhs which is very cheap if I consider car prices in 2000.

Example 2: Maruti Esteem was costing around 7 Lakhs OTR in the year 2000 and now after 24 years, one can purchase Maruti Ciaz at around 12-13 Lakhs OTR with loads of more features, more space, better engine and what not. Considering inflation and other parameters, it should have costed 20+ Lakhs but in reality you are getting it for much less price. Same for Honda City as well.

Example 3: Lets take one example of bike now. I purchased Bajaj Caliber 110 cc bike in 1998 for 65K OTR. It was a very nice bike and I used it for more than 1 lakh kms. If I want to purchase 110 cc bike today from Bajaj, Honda or TVS, it will cost around 1 Lakh only after whopping 26 years!! Isn't it crazy? Definitely yes. Looks like inflation has very very less impact on bike prices. Again todays bikes are having better engines and better tech along with some nice features which were not present before. So I can safely say that we are getting bikes at very attractive, good price even after 25 years.

Now I will add more fun to discussion. In todays world middle class is earning much better than before, say 15-20 years back. If I take example of my own, when I started my job in July 2000 my salary was 70K per annum (yes, you read it right, it was recession time and I was in mechanical field), that is approximately 5K per month in hand. So buying car worth Rs. 4 Lakhs is like spending more than your full 5+ years of income. Now in 2024, my income is 25+ Lakhs and buying a car worth 8-10 lakhs is just spending of my 4-5 months salary. That is the reason we can see so many cars pouring on our streets every day. People are having much better purchasing power now and spending on cars is not that big amount for them, that's the reality. People think cars are costly mainly because they want big, powerful car with many fancy features which they might never use or hardly use in day to day life or without which they can easily live with.

When I see todays car market closely, there are still many good cars which are value for money. But car companies are looting people on the name of various fancy or so called essential features. One can easily live without features like wireless charging, ventilated seats, auto wipers or lights, sunroofs moonroofs, mood lighting and what not. If you see cars like Creta, it starts from 13-14 Lakhs OTR and goes till 25-26 Lakhs which is insane. So people are paying extra amount just for fancy features as main car is same with all safety features. Same happens with many other cars. Companies like Toyota just looting people due to lack of competition in those particular segments. Cars from German manufacturers are costly on the name of safety and brand name. They are just looting people when people purchase new car and then in servicing as well for years to come.

Lastly I just want to say that go for car purchase with eyes open and see what all features you really need. There will always be good VFM cars available in the market. Happy driving

[avira_tk]

We're getting better cars for the same inflation adjusted amounts when you consider the post 2010 vehicles. The earlier period had very little competition and I remember the zen had a waiting list, and was really expensive for its time, circa 1994. The inflation adjusted price for that 3.5 lakhs is 26 lakhs today(almost 30 days to the day) , the price of a top end Creta today, so the market has shifted to this segment.

The availability of cheap finance has expanded affordability, my car loan costs what a housing loan would cost back in the day. There is no point buying a basic car today, ventilated seats and automatic ac and transmission should be the bare minimum requirement, otherwise it's barely a step up from the ambassador.

[SmartCat]

Reason for this unusual phenomenon is Economies of Scale.
https://en.wikipedia.org/wiki/Economies_of_scale



As sales go up, the manufacturer is able to push the cost down, as parts/component prices are lower. It also helps that employee/worker salaries are typically just 5% of overall revenues for Indian automobile companies. So salary inflation does not negatively affect automobile companies that much.

In the year 2000, sales of passenger cars were around 40,000 per month. Now, it is 10x more. In the year 2000, bike sales were approximately 450,000 units per month. And now it is 1.8 million per month . That is 4x more. Economies of scale gains for two wheelers is far lower than that of cars, since year 2000 sales were quite high to being with.

Of course, car/bike price is still higher than what it was in year 2000, but is significantly lower than inflation rate. Also, manufacturers equip cars with lots of features, since that's what the customers wants.

[gupta_chd]

Originally Posted by aniketi

Example 1: Maruti Zen was launched somewhere around 1997 and from what I remember it was costing around 4 Lakhs OTR in the year 2000 (Correct me if I am wrong).

Example 2: Maruti Esteem was costing around 7 Lakhs OTR in the year 2000

Although I concur with your views but sorry to pinpoint, I guess old cars prices mentioned by you are on higher side for the year 2000.

1. I purchased Zen LXi in Nov 2003, and it did cost me about 3.45 lakh OTR. It was a facelift just launched with increased prices and without a penny of discount.

2. My friend bought Maruti Esteem in 2004 as I recall, don't exactly remember the variant but it did cost him about 5.2 lakh OTR.

The absolute prices of these cars in year 2000 should have been even lower by 10-15% going by the trend.

[anandhsub]

The Indian Statistics office publishes an Inflation rate for car prices. It has averaged 4.5% YoY since 2015. ( This does have some quality adjustments as well).




Just to compare the overall inflation rate has been ~5% since Jan 2015



So, car prices haven't gone up at the same pace as inflation, but can't say they are much cheaper as well..

[Emvi]

Originally Posted by aniketi

Are cars costly now? Obviously all will say Yes! But what is the reality? Are cars really costly nowadays? What if I say cars are actually cheaper now? Will you agree to me? I am sure you will say NO. Okay let's find it out.

While I understand the gist of your post, you may want to verify this. When my father bought me a Bajaj Pulsar 180 in 2002, it cost us ~INR 63k on the road back then, I remember.

Example 3: Lets take one example of bike now. I purchased Bajaj Caliber 110 cc bike in 1998 for 65K OTR.

And like you pointed out, the increased earning power of individuals these days has ensured our streets are busy. However, it's worth noting that entry-level cars seem pricier these days. Back in the day, base models of the Maruti 800 and Omni used to cost much less. With the market evolving and stricter safety and emission norms, even basic variants of entry-level cars are now decently specced, which means they aren’t sold cheaply.

[Guna]

You may be right with the examples of Zen and Esteem but it is not true with many other cars which are in demand.

I had purchased a top end Honda city for 8 lacs in 2003. Now it costs 3 times more. You could buy a large hatchback like Hyundai Getz for 5 lacs and now something like i20 costs 3 times and a top end Venue, 4 times.

As you move up the segments, the price hike is even more steep. Skoda Octavia costed 10 lacs in 2008 but it would cross 40 lacs if they launch the revised model now. Honda CRV/Ford Endeavour were 15 lac SUVs and now similar cars are inching closer to 60 lacs.

[antz.bin]

Something wrong with example #3

I had a 2002 Bajaj Caliber 115 (Hoodibaba) that was purchased for the princely sum of ₹44,554. I had received a massive discount of ₹500 at the time. I remember that the 110cc Caliber was cheaper at that time.

[Bhokal]

That Caliber price in 1998 looks wrong. I bought Pulsar 150 DTSi in 2006 for 60k on road.

[AJ56]

Cars are much cheaper now, our economy has inflated at roughly 6.5% (average) over the past 20 years. Car prices haven’t increased by 6.5% year over year, making them much cheaper.

For eg. our Honda City was 8L on road back in 2002, 22 years ago. At 6.5% the present value of that money is 32L. Whereas the same City is only 18.29L on road today. It’s nearly half of what it cost back then.

Take another mass market example, the Camry Hybrid was 36L on road back in 2015, 9.5 years ago. Today the same car is 52L (let alone the heavy discounts), whereas the present value of the same amount should be 66L. Making it over 20% cheaper today than it was in 2015.

Take something nicer like an S500, it was 1.2cr on road back in 2005, 19 years ago. Today that amount is equivalent to 4cr but an S450 is only 2.14cr, making it nearly 50% cheaper to buy today.

The only folks complaining about cars feeling more expensive are those whose pay hasn’t kept up with the depreciation of the rupee, essentially reducing their purchasing power.

I’m not saying cars aren’t overpriced, they most definitely are due to our government eating 59% in taxes from the ex factory cost but that’s another point entirely. They’re still cheaper than they were before.

[shankar.balan]

To buy a car in the 1970’s and 1980’s and 1990’s one had to have a ready bank balance. It is only in the mid to late 2000’s, that with the proliferation of easy retail credit and loans that the world changed. As did the vehicles on offer, their features and their prices.

Looking back, my first car was a 11-12 years old Maruti 800 DX Old Shape (1984 model), which cost me Rs 75000 in 1996 and which represented around 5-6 months of earnings. I did have to take a part loan at some usurious rate of interest.

In those days the Zen had just come out and the original MH410 cost about 3.7 lacs on road in Madras. The Esteem too came out at about 4.5 lacs on road in Madras. The Esteem at the time, was actually considered an ‘ostentatious car’!

When the Opel Astra, Daewoo Cielo and Ford Escort came out, it was only ‘Captains’ of Industry or very Senior Executives and Company Owners who could buy these. The same with the original Mercedes W124 which was launched around then. Only persons at the level of ‘Chairman’ of a big Conglomerate could afford one of those.

Another barometric measure; College students, even those from really well off homes, would hardly ever have been given a personal car to themselves in those days.

Most folks who joined the workforce then, in their ‘first engagements’ used to commute (if they were slightly privileged), on scooters and motorbikes.

There is a vast contrast today if one looks around one. The entire profile of vehicle owners overall across the country, has undergone a visceral change.

The point is, cars have always been expensive relative to the wages earned.

According to me, they still are expensive things - even after due consideration given to inflation and growth and all the variables as have been postulated in the multiple posts on this thread.

However, what has actually changed in our world is the easy availability and indeed proliferation of credit, which in a way, is fuelling the endless cycle of consumption.

If, for a moment, we take away the ‘credit’ piece, we will see an immediate downward correction of the purchase patterns around us, which will then become much more proportionate to the real earnings of the purchasers.

And the contrast we would see around us, would be much starker than it is now.

[jetsetgo08]

Barring Maruti cars below Rs10L almost all other cars have followed the inflation curve. However, it is debatable as there is economies of scale, invisible cost cutting w.r.t sheet metal weight, which they are compensating with a few additional safety features.

Consider the launch price of 2015 Creta-
https://www.team-bhp.com/forum/test-...a-1st-gen.html (Review: Hyundai Creta (1st-gen))

and launch price of 2005 Innova-
https://www.team-bhp.com/forum/india...-launched.html (Toyota Innova Launched !!!)

These 2 have perfectly followed the inflation curve, which is one of the reasons they have the highest resale value as well. There are many more such examples.

[saket77]

Originally Posted by gupta_chd

Although I concur with your views but sorry to pinpoint, I guess old cars prices mentioned by you are on higher side for the year 2000.

1. I purchased Zen LXi in Nov 2003, and it did cost me about 3.45 lakh OTR. It was a facelift just launched with increased prices and without a penny of discount.

Hello.

Unless Maruti reduced the prices of Zen for 2003 facelift model, which could be a possibility, the old Zen did retail for about 4L OTR, that too for the base variant- LX. Here’s the invoice for our Zen LX bought in Dec- 2002. The Ex showroom price was 3.63L. Adding road tax, registration and insurance, it would easily border the 4L mark. The only discount provided was a free first year insurance by Maruti worth Rs 14K. The LXi variant was easily over 4L on road then.

I had written on the topic before, albeit just a small post on it.
https://www.team-bhp.com/forum/india...ml#post5839203 (The Indian Middle Class isn't buying cars like it used to)

Good to have a thread by OP to discuss it further. Thanks to smartcat for his expert views.

[Turbanator]

Originally Posted by saket77

Unless Maruti reduced the prices of Zen for 2003 facelift model, which could be a possibility, the old Zen did retail for about 4L OTR, that too for the base variant- LX.

The original Zen was such a great car. Most of the stuff was from Japan in the early years. I had one 96/97 MY I recollect, got it sometime in 99 from our company directors. It will go at crazy speeds and the smoothness was at another level. Short gearshifts, it was so fun. Cretas or Seltos of today can't come anywhere. For that matter, everything from RD350 to regular CB100 used to be of such high quality.. good old days

[saket77]

Originally Posted by Turbanator

The original Zen was such a great car. Most of the stuff was from Japan in the early years. I had one 96/97 MY I recollect, got it sometime in 99 from our company directors. It will go at crazy speeds and the smoothness was at another level. Short gearshifts, it was so fun. Cretas or Seltos of today can't come anywhere. For that matter, everything from RD350 to regular CB100 used to be of such high quality.. good old days

So true! A Zen in 90s was the ultimate hot wheels. Ours of 2002 was among the last lots of the old jellybean design and quite late in the product cycle, but it still had some Japanese parts. On performance front, it was much ahead of its time. Still it is hard to beat in terms of city drivability and economy wise. Same goes for many automobiles of that era.

Coming back to the topic, I feel that cars were expensive to begin with. Just that prices have rationalised over the years owing to the economies of scale as smartcat opined. Post COVID, both opportunity of price rise due to demand- supply gap and rise in input costs gave the momentum to shoot the prices over the roof. Add the emission norms to the mix as well.