[luky_13]

Originally Posted by GTO

Taxes, Volumes & Local Manufacturing

- Volumes : Most years, the Accord has sold 400,000 cars in the States (each year). Even a Maruti Alto doesn't sell as much in India. Where do you think the economies of scale are?

That's a startling revelation, I knew that there is huge difference in volumes but not so much. Honda India produces no more than 6000 civic's in a year, their American counterparts produce 250,000 in the same time. So thats 1:41

Originally Posted by KumaravelS

probably by 2025$ our scale of economies might match U.S

Not only the production in economies of scale but also in the eco-system

I back calculated what could be the excess we are paying even after the import tax.

Cost of Civic in U.S = 20000$
as per honda website % of Indianisation in Civic is 74%Honda in India | Honda Siel Cars India Ltd | Honda Manufacturers India
So roughly the manufacturing cost of 74% Civic in India (assuming lower labour cost in India is offset by lesser economies of scale and productivity in India) = 14800$
remaining 5200$ warrants 55% import duty for CKD, which works out to be 8060$
total cost for Honda after importing components is 22860$ which is 4140$ more as it is sold at 27000$
so we India's loose out 4140$ in real economies of scale or productivity terms.

I think the custom duty on CKD is 10% + Excise duty + blah blah = 27~30%, refer Custom Duty :: SIAM

Originally Posted by narry

hi
like to add more bad infrastructure also increase costs simple example
india does not have good shipping ports
when i was doing simple production in india which was electronic products it
took me 3 or 4 month to finish production because i had to import many ics from usa and taiwan
the same production i can finish in china in 2 days
yes 2 days
narry

I think this will have an impact on cost, but minimal.

[narry]

Originally Posted by luky_13

That's a startling revelation, I knew that there is huge difference in volumes but not so much. Honda India produces no more than 6000 civic's in a year, their American counterparts produce 250,000 in the same time. So thats 1:41



I think the custom duty on CKD is 10% + Excise duty + blah blah = 27~30%, refer Custom Duty :: SIAM



I think this will have an impact on cost, but minimal.

no
time = money also what about corruption also increase cost
narry

[agup48]

I got my Honda Accord LX for 16k. Tell your brother in law to go through Costco if he has it. He can get discounts.

You have to haggle, don't be afraid of walking out either. If you get treated poorly, don't go back, think of when something goes wrong. Can't say that enough, don't fall for their gimmicks or tricks.

[KumaravelS]

Originally Posted by luky_13

I think the custom duty on CKD is 10% + Excise duty + blah blah = 27~30%, refer Custom Duty :: SIAM

Some components are levied with 100% and some 10%.. I relied on the info from http://www.team-bhp.com/forum/indian...dian-cars.html It leads to an another corollary, that apart from Customs and taxes, there are other hidden cost which adds up and makes an imported car price to be substantially higher than what it is charged in the developed markets.

Originally Posted by luky_13

I think this will have an impact on cost, but minimal.

Originally Posted by narry

no
time = money also what about corruption also increase cost
narry

I agree with Narry. This infrastructure bottleneck (including the red tape and delay) costs around 20 ~ 25% of the cost of the car.

[carboy]

Originally Posted by KumaravelS

I agree with Narry. This infrastructure bottleneck (including the red tape and delay) costs around 20 ~ 25% of the cost of the car.

What is the basis for this figure - how do you estimate that it costs 20-25% of the car cost?

[zaks]

We are a developing country so it means on the whole excluding the labor charges it costs more to produce a car than in US. Also the taxes are heavy to fund govt income and henceforth its expenses of public utility like roads, hospitals, schools, police, etc.

[KumaravelS]

Originally Posted by carboy

What is the basis for this figure - how do you estimate that it costs 20-25% of the car cost?

If we take two economies (equate economy here to country), the difference in cost of production (of a product ) is due to the proximity and availability of some resources more favorable to one economy than the other.
Resources includes tangible resources like minerals, labour. and intangible resource of access to the tangible resources. The access to tangible resource or "barriers to access resources" is determined by policy and the market. Cost of tangible resources could be directly computed. Whereas intangible resource cost reflects in the final difference of cost of product.

As per my calculation final difference of cost (excluding the Govt tax/import duty) is 20~25% for civic. I consider that as the cost of bottleneck.

[carboy]

Originally Posted by KumaravelS

If we take two economies (equate economy here to country), the difference in cost of production (of a product ) is due to the proximity and availability of some resources more favorable to one economy than the other.
Resources includes tangible resources like minerals, labour. and intangible resource of access to the tangible resources. The access to tangible resource or "barriers to access resources" is determined by policy and the market. Cost of tangible resources could be directly computed. Whereas intangible resource cost reflects in the final difference of cost of product.

As per my calculation final difference of cost (excluding the Govt tax/import duty) is 20~25% for civic. I consider that as the cost of bottleneck.

I know you meant cost of product is 20-25% difference. But what I am asking for is the actual calculation by which you reached this figure.

[narry]

Originally Posted by carboy

I know you meant cost of product is 20-25% difference. But what I am asking for is the actual calculation by which you reached this figure.

hi
u see for example if i want to setup a car factory i needed many permisions from goverment department
and all this process is slow also this + up the cost also
u see when tata launched the nano and project was delayed in west bengal
it will add up to the cost also
big companies work on profit for example
even though labour is cheaper in india other infrastruture cost are much higher and lot of time is wasted this add up to the cost
do u think the big companies will pay this additional cost from there pocket is a big NO ultimately this cost has to be paid by the consumer or end user
narry

[carboy]

Originally Posted by narry

hi
u see for example if i want to setup a car factory i needed many permisions from goverment department
and all this process is slow also this + up the cost also
u see when tata launched the nano and project was delayed in west bengal
it will add up to the cost also
big companies work on profit for example
even though labour is cheaper in india other infrastruture cost are much higher and lot of time is wasted this add up to the cost
do u think the big companies will pay this additional cost from there pocket is a big NO ultimately this cost has to be paid by the consumer or end user
narry

I don't know how I can make this clearer, but I am not disputing the fact that is 20-25% costlier - I have no opinion on this, whatsoever.

What I am asking for is the calculation by which the 20-25 number was arrived at.

[KumaravelS]

Originally Posted by KumaravelS

probably by 2025$ our scale of economies might match U.S

Not only the production in economies of scale but also in the eco-system

I back calculated what could be the excess we are paying even after the import tax.

Cost of Civic in U.S = 20000$
as per honda website % of Indianisation in Civic is 74%Honda in India | Honda Siel Cars India Ltd | Honda Manufacturers India
So roughly the manufacturing cost of 74% Civic in India (assuming lower labour cost in India is offset by lesser economies of scale and productivity in India) = 14800$
remaining 5200$ warrants 55% import duty for CKD, which works out to be 8060$
total cost for Honda after importing components is 22860$ which is 4140$ more as it is sold at 27000$
so we India's loose out 4140$ in real economies of scale or productivity terms.

I doubt this too.. If you compare the pre-owned car price in U.S vis a vis India, I think it there would be similar difference.

Originally Posted by carboy

I know you meant cost of product is 20-25% difference. But what I am asking for is the actual calculation by which you reached this figure.

4140/20000 = 20.7%. Previously I thought it is the cost of scale of economies. I correct myself, it is actually cost of bottleneck.

[carboy]

Originally Posted by KumaravelS

4140/20000 = 20.7%. Previously I thought it is the cost of scale of economies. I correct myself, it is actually cost of bottleneck.

This isn't a calculation showing that the cost of manufacturing is 20-25% more in India. This is the difference in selling price between India & US after considering import duty for whatever percentage is imported.
There is no way to assume that this 20-25% comes from additional bottleneck costs or economies of scale or whatever. For all you know, it may be the premium which Honda has decided to charge in India or anything else.

[narry]

Originally Posted by carboy

This isn't a calculation showing that the cost of manufacturing is 20-25% more in India. This is the difference in selling price between India & US after considering import duty for whatever percentage is imported.
There is no way to assume that this 20-25% comes from additional bottleneck costs or economies of scale or whatever. For all you know, it may be the premium which Honda has decided to charge in India or anything else.

hi
kindly explain your calculation of cost so i can understand more

narry

[carboy]

Originally Posted by narry

hi
kindly explain your calculation of cost so i can understand more

narry

I haven't posted my estimation of cost at all - so I am not sure what calculation you are asking for?

I have no idea about the costs & I haven't posted anything which suggests that I do.

[KumaravelS]

Originally Posted by carboy

This isn't a calculation showing that the cost of manufacturing is 20-25% more in India. This is the difference in selling price between India & US after considering import duty for whatever percentage is imported.
There is no way to assume that this 20-25% comes from additional bottleneck costs or economies of scale or whatever. For all you know, it may be the premium which Honda has decided to charge in India or anything else.

Hypothetically you could be correct that it is premium that Honda charges. But why would not Honda reduce the premium and sell more cars and thereby earn more than just by selling fewer cars with Jacked up prices.

Its a competitive world, and after exhausting growth in developed market all are looking into developing market to expand and grow.
My view is that companies would prefer to sell more pieces and earn more.