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Originally Posted by damager21 I expect the launch price to be in the range of 5.3 lacs ex-showroom Delhi. As mentioned in my previous post, Honda will have a saving of 15% excise duty on Honda City price because of its length (4m+) and bigger petrol motor (1.5 litre). This 15% reduction will itself bring down the price to 6.3 lacs.
Beyond this, Honda will have lot of cost savings on components considering Jazz is smaller than City. |
I think you are being overoptimistic with respect to the next-gen Jazz's pricing.
First of all, a hatchback is not necessarily cheaper to produce than an equivalent sedan. Hatchbacks require additional strengthening around the C pillar and this can add to costs. Secondly, the City's engine is sub 1.5l (1498cc) and hence attracts an excise of 24% and not 27%. That said, the Jazz with a 1.2l petrol or 1.5l diesel will only attract 12%, so there is a substantial saving there though somewhat less than what you claim. Thirdly, the Jazz is not much smaller than the City. The width and the interior space are about the same. Only the sedan's protruding boot is absent and the wheelbase is a little smaller. All said and done, since the Jazz and the City share the same platform, their production costs are likely to be in the same ballpark. If at all, the Jazz may be marginally costlier on a per unit basis, especially if its smaller volumes necessitate the import of any components that are not shared with the City.
But most importantly, cost is only one of several factors that impact pricing. I think the factor that will have the greatest impact on the Jazz's pricing will be the success or otherwise of the new City and the Mobilio. It is for a reason that these are being launched before the Jazz.
Honda clearly views the Brio, Amaze, City and Mobilio as being more 'suited' for the Indian market than the Jazz. This is not to say that the Jazz will find no takers, but if (say) the Amaze and the Jazz were to be priced similarly, there would be more buyers for the Amaze than for the Jazz. And given that the Jazz is from a fundamentally more expensive platform, it will generate lower margins than the Amaze at the same price. Likewise, the City's costs are probably in the same ballpark as the Jazz, except for the excise, but the City can command a much higher pricing that more than offsets the higher excise. So the City will generate more margins than the Jazz. The Mobilio being based on the Brio platform will have relatively low costs, and can also command higher pricing being a UV. Again, margins are likely to be higher than the Jazz.
If there were no constraints on production capacity, it would make sense for Honda to sell as many units of the Jazz as the market can take even at wafer-thin margins. However, in practice, Honda is capacity-constrained. Even after including the new Tapukara plant, media reports suggest a capacity of only around 20k cars per month. Of course, this number is only indicative as actual capacity will vary depending on the models being produced, the number of shifts, any supply chain bottlenecks, etc. Nonetheless, if the City and Mobilio are successful in the market, there may not be much spare capacity for the Jazz and Honda would be tempted to price it higher to make the most out of this small volume. On the other hand, if the City and the Mobilio don't do well enough and leave behind a substantial amount of un-utilized production capacity, Honda will face some pressure to price the Jazz at lower levels to generate more volumes.
In summary, I think Honda will first try to generate as much volumes as possible from the Brio, Amaze, Mobilio and City. The Jazz's pricing will be substantially influenced by Honda's success (or the lack of it) with respect to these four models. While Honda is unlikely to repeat its earlier pricing disaster (at one time the Jazz was priced at 7.30-7.70 lakh ex-showroom - this was before the major price correction in 2011), expectations of pricing around 5.30-5.50 L are, IMHO, grossly overoptimistic.
If the City and the Mobilio do reasonably well, I think the Jazz will be launched only in higher trims and the ex-showroom price won't be less than 6.50 lakh for the petrol version, which is approximately the current ex-showroom price for the i20 Asta petrol. On the other hand, if the Mobilio is a disaster, we may see a lower trim Jazz (sans ABS and airbags) priced at around 5.7L.
I also happen to think that the City and Mobilio will do well and hence the odds of a sub-6 L Jazz are, well, pretty low.