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The ridiculous price hikes by BMW, Audi and Mercedes-Benz

18th March 2015, 16:12 by Tushar Kamath

German luxury cars offer unparalleled safety, quality & driving pleasure, although the gap from cars a segment lower (e.g. Skoda Superb) has grown slimmer in recent time. They are among the ultimate expressions of prestige, but no longer enjoy the exclusivity they once did. Today, put together, Mercedes-Benz, Audi and BMW account for ~28,000 dispatches per annum! Safe to say they are fairly commonplace now.

It's been a hare vs tortoise race between German luxury car prices and inflation - in this case, the hare wins. Consider this, the C-Class used to cost 25 lakhs on the road a decade ago. Today, it's more like 50 lakhs. Just 4 years back, you could buy a Bimmer 520D for 40 lakhs. Now, it's close to 60!

The A4, C-Class & 3 Series were once the entry point into their respective brands and cost 30 lakhs (or less). In pursuit of volumes, the luxury brands brought in smaller cars like the A3, CLA-Class etc. One naturally thought that the smaller models would be cheaper, some even predicting 20 lakh prices! Well, that's not the way German manufacturers would have it. As if in collusion, all 3 luxury marques took their entry-level sedans (A4, C-Class, 3 Series), executive sedans (A6, E-Class, 5 Series) and luxury barges (A8, S-Class, 7 Series) a full segment above.

The primary cause of this price inflation is the arrival of lower offerings from the German titan three (A-Class, B-Class, CLA-Class, A3, 1-Series). The assumption was that these cars would make the luxo brands more attainable. However, instead of pricing the small cars below Rs 20 Lakh, they uprated the price tags of the higher segment models, and maintained / increased their minimum margin! Translated, you pay the same money today for an A3 / CLA that you did for an A4 / C earlier.

Here, we take a year-by-year look at the best-selling sedans sold by the Germans in India and get an idea of just how much dearer they've become over the past decade (by analyzing the average on-road Delhi price). Prices in the images attached are in Lakhs:

Observations:

There isn’t a doubt that nearly all cars from the 3 German manufacturers are ridiculously overpriced.

To provide a little perspective, back in 2005, the C-Class petrol used to cost around Rs 24.84 Lakh, while the diesel was yours for Rs 27 lakh. Today, you can't buy a new C-Class for less than Rs 45-46 lakh!

Mercedes brought in the current (W205) C-Class as a CBU at Rs 40.9 Lakh (ex-Delhi) in November 2014. The same car was launched in its locally assembled avatar in February 2015. Price? Still Rs 40.9 Lakh!

In 2010-11, you could buy a Mercedes E-Class or BMW 5-Series for around Rs 40-44 Lakh (on the road). Less than what the segment lower C-Class costs today!

Effectively, what they've done is: CLA = early C-class, C-Class = early E-Class, while the E-Class sits dangerously close to where the earlier S-Class was.

Similarly, the 1-Series, A3 etc. now occupy a space that earlier belonged to the 3-series and A4.

In January 2011, you could buy a BMW 520d for Rs 40 Lakh on-road, Delhi. Today, it costs Rs 58.30 Lakh (nearly a 50% price increase in only 4 years!). The BMW 530D cost about 50 lakhs on the road at the time of its launch in 2010. You'll pay 70 big ones for it today.

10 years back, you could buy an S-Class or 7-Series for around Rs 64 lakh. Today, both cost close to Rs 1.5 Crore. That's a 250% increase in 10 years, or an average of 25% per year.

The B180 Sport was launched in 2012 at Rs 24.87 lakh. At the time, the price of the C-Class hovered around Rs 30 Lakh. Come 2015, the B180 Sport costs Rs 28 Lakh, while the C-Class is priced at Rs 41 Lakh. What came in between? Apart from the generation change in the C-Class, Mercedes launched the CLA-Class, with prices starting at around Rs 32 Lakh (all prices, ex-Mumbai).

The best example of overpricing is perhaps the A3 (price up to 39 lakhs on the road). You could buy its mechanically identical sibling with more cabin space (the Octavia) for half the money. In terms of size, the A3 is more like a Rapid than an Octavia.

This audacious price increase hasn't had any negative impact on net sales (but it's not led to growth either). Annually, Audi and Mercedes both sold more than 10,000 cars. Goes to show that this pricing strategy has worked well for their business….but been awful for customers. Equally, these inflated prices aren't sustainable and the Germans know it. If Audi & Mercedes sales have increased, it's because of the smaller cars. No real growth in the E-Class or A6 segment. Take a look at BMW; it doesn't have any popular small cars, thus it's sales have shrunk to 6,000 odd! Another indication is the whopping discount (of up to 10 lakhs) available on the bigger cars.

What about taxes? Haven't they increased?

Yes, but certainly not to the extent at which the German luxo brands have raised their prices! Let's look at some other models that have a high import content or are CBUs.

The Skoda Superb - a German luxury car in its own right - was launched at Rs. 18.80 lakhs (ex-Delhi). 6 years down, the Superb has a starting price of 21.50 lakhs.

Proof that import costs & duties take limited blame: In 2006, the CBU Honda CR-V was launched at Rs 18.4 Lakh ex-Delhi. Today, the same car (locally built) starts at Rs 21 Lakh. An increase of around 14% only.

Similarly, you could buy a Toyota Camry AT in 2006 @ Rs 21.40 lakh ex-Delhi. In 2015, the latest Camry costs Rs 26.60 lakh. An increase of around 24% in 9 years.

The above-mentioned 3 cars are either fully imported or have high import content, and face the same taxes as the German luxury cars. It's extremely unnerving that, while their cars have seen a price increase of 15-25% over a decade, German luxury cars have become more expensive by 50-250% in a similar time frame.

The Upside?

Massive discounts are always available. Dealers will offer you lakhs off before you even ask. The Germans themselves know these prices aren't sustainable. As an example, Audi was offering Rs. 7 Lakh off certain trims of the A4. BMW was offering up to 10 Lakh off on the 5-Series.

Enthusiasts, don't sweat. The higher they go, the harder they fall!! Good news is that you can get some killer used car deals. 3 year old examples of the E-class, 5-series and A6 can be yours for Rs 30 Lakh (or less). Half the price of what they cost brand new.

List of locally assembled models: