[Contrapunto]

Originally Posted by Tushar

Again this isn't to blame the German car makers. It's people who choose to buy them at the end of the day. However, your brand/rivals/segment play a big role in what your pricing should be. Merc, Audi and BMW are smart and their strategy has clearly worked as a win-win for them - but, the fact is they have increased their prices by upsetting percentages, when compared to the rest of the market.

I think its is interesting how this pricing strategy manifests itself in used car prices. Most cars from the top 3 luxury brands get heavily discounted. Just a couple of weeks back, I asked around, and the local Merc dealer offered a certified 20,000 Km run 2012 200 CGI at less than 20 lakhs, slightly lower for a 3 series and around 17.5 for an X1 with a similar mileage. Interestingly, I would have to pay a similar amount for a top spec Fortuner 3.0 L AT of similar vintage and Kms run !! Clearly something is amiss. And I think that missing piece of the puzzle is "service costs". The market is well aware of the horrendous costs of service and spares of the top 3 brands and the relative affordability + reliability of Toyotas and THAT gets priced into the used car prices. Conversely, take a look the used car prices of a Prado, which is almost 1 crore OTR today. An S class owner can only dream of getting such valuation in the resale market.

For further read, please refer to this thread < http://www.team-bhp.com/forum/super-...-business.html >

I think this plays out in the valuations of other cars as well e.g. pre-owned Passat vs. a pre-owned Camry etc.

This may not be the full story, but I am confident this is an interesting perspective that I wanted to bring forward in this forum. I just wonder if we will see the collapse of the luxury segment like the D+ sedan segment at the next recession. It would be sad, but the top three German marques will have nobody but themselves to blame.

[spyder_p8]

Is there any reason why we would discuss the German trio in particular? Is it simply because it is easier to ridicule these auto giants? Hope someone can answer that in a rationale way. If not, anyone can go and have a look at the awful Toyota India website only to find the price list after 10 minutes. Please take a look at the price of a Fortuner which now stands appox at 30Lakhs. That too with that feature list that can be fitted on a sticky note. If that's not enough, scroll down and have a look at the Prado. 1Crore and 18laks in total.

Considering the import duties and the level of localization the germans have, we should not be surprised. Having said that, the price of a product is not decided on the cost price. The price is decided on what the customer is willing to pay. Thats also true for other products( ex - Apple). The world is a free place and no one is forcing us to buy these cars . And no one is stopping the Hondas/Toyotas to venture into these territory.Just that it would need craftsmanship which is solely lacking with the Japanese. Otherwise, why would try to overlook a Cayenne and buy a Prado instead.

[drsingh]

It is a well established fact that Indians pay more for 'perceived luxury' and 'status symbols'. The luxury goods industry has always marked up prices in India by 25-50%.

Its just business. If people are willing to pay up, the price will go up.

[GKR9900]

A brilliant thread and one that is absolutely the need of the hour!
These German and British marques have been taking the Indian customer for a ride for quite some time now. Accepted that no matter what the prices are, there will always be people to buy them. But the way their prices go up makes me want to pull my hair out and eat it!

I love them big boys! The Germans and the Brits. Their cars were more than just cars. They have a soul and somehow felt alive! So it aches my heart to see how these manufacturers go from a commitment towards their customer to all out piracy to increase their fat profit margins. It's just good business, I know, but is it really now? What would happen if you were to adopt such bonkers pricing strategy in the US or UK? So what are your excuses?

'We don't have enough numbers to justify local production' - As someone has already mentioned, it's more of a chicken-egg paradox. You can't expect to introduce a 35L car at 50L and then rant about not enough people buying them to justify it being produced locally. That is kind of like shifting the blame on to the customers' heads. It's like saying 'Dudes! Better buy more of our cars at these ridiculous prices if you want to see them being produced here. Or else, just deal with it!' And how the hell did a CBU C-Class end up being in the same price bracket as a CKD C-Class with even fewer equipment? Beats me !

'The taxes' - Yeah right! We have analysed here objectively how far taxes has contributed to price hikes. IIRC, a few years back, there was a move from the GOI to increase taxes on these luxury marques which they fought tooth and nail to oppose. It was a time when BMW and Audi were trying to find a foothold in India. 'The taxes would make our aspirational cars even more difficult to reach the Indian customers' they said. Brought tears to me eyes then. Fast forward a few years, they've increased prices even more than the Government themselves.

'The discounts' - I don't know much about how that works. But this seems to be a move to help the dealers reap in more profit. Indians love discounts. Considering that the manufacturers themselves have bloated up the cost of the vehicle, it's the discretion of the dealer to decide how much discount has to be provided. They get a wider price range to play with. And accept it, no dealer is interested in making the customer's wallet less lighter. It's just business.

And don't even get me started on the affordable luxury models A3/CLA. I kinda feel stupid following these cars for over 2 years just to be handed over the fact that these are actually the next A4/C (atleast in my mind).

Here's what this pricing means in one sentence:
People who buy the A3 now, after a few years can upgrade to an A3 with the current A4's size and the current A6's pricing! Doesn't make any sense , does it?

Surprisingly, the only player in India that seems to carry out this bonkers pricing strategy with utmost success is Asian (Hello Toyota!). I just couldn't see why people would pay such hefty sums for an Innova or Fortuner, until a few months ago. Then I realized, it's just the peace of mind that comes associated with Toyota. Buy it, fill it, drive it, sell it with no holes burning on one's pocket. While the luxo badges overprice their products in the name of sheer brand value, Toyota seems to overprice theirs for reliability! Not a bad move, when you think about it. With the growing number of Germans and Brits breaking down and the manufacturers themselves blaming either the owner or 'Indian conditions' , I am seriously contemplating on making my next car a Toyota, no matter what kind of an enthusiast I am.

It is in this scenario that I recollect this bit of news from China.

http://www.wsj.com/articles/jaguar-l...ina-1406278090

Isn't there a similar agency in India to check the price hike of products such as these?

I seriously doubt whether the situation is gonna change any time soon. It's a mix of mindsets of the people, government and manufacturers. Local production of luxury/exotics in India still seems like a distant dream

[zenren]

Originally Posted by Tushar

Its not just a question of the prices going up. Audacious price increases are not limited to German car brands, but they are best pronounced in the segment. The fact is that manufacturers across the board often increase the prices of their best selling models because they know people will buy them.

...
Again this isn't to blame the German car makers. It's people who choose to buy them at the end of the day. However, your brand/rivals/segment play a big role in what your pricing should be. Merc, Audi and BMW are smart and their strategy has clearly worked as a win-win for them - but, the fact is they have increased their prices by upsetting percentages, when compared to the rest of the market.

This is one place where I would give credit to Maruti. They have not only resisted the urge to do a steep hike for the best sellers but prevented their competitors from doing the same. The sub-10L segment sees reasonable prices in every segment where there is a best seller Maruti. In those segments where Maruti doesn't exist, we have numerous examples of exorbitant prices or hikes like the Innova, Duster, Aria and so on.

[arnabchak]

Originally Posted by zenren

This is one place where I would give credit to Maruti. They have not only resisted the urge to do a steep hike for the best sellers but prevented their competitors from doing the same. The sub-10L segment sees reasonable prices in every segment where there is a best seller Maruti. In those segments where Maruti doesn't exist, we have numerous examples of exorbitant prices or hikes like the Innova, Duster, Aria and so on.

+1 to your view Zen.
However, the case of Aria is rather peculiar.

It was a pricing disaster at the time of the launch(aka Fiesta) but then subsequent price cuts have made it a more VFM offering.
Innova case is simply inexplicable and completely unjustified though.

[wilful]

It is probably part of their strategy for the Indian market which obviously is not high up on their priority markets (a long way down in fact, I would assume).
Luxury hotels for example, have steep rack rates on which sizable discounts are offered (at their discretion).
I guess they want to keep the general perception of pricey=luxurious=hugely aspirational (snob value) intact and hence the pricing. Discounts are something not known widely and hence this public perception can remain intact.
And going by the ever increasing numbers of the trio on the roads in my town it seems to be working.

[lurker]

Originally Posted by GKR9900

I love them big boys! The Germans and the Brits.

the americans were the 'big boys' with naturally aspirated big engines that they euros with their smaller engines were trying to compete with. The classic example is the big engine sportscar the chevy corvette. They do not need a turbo because they are big anyway. The Audis and BMW's need turbos because they were basically smaller engines pretending to be big on performance.

Originally Posted by GKR9900

They have a soul and somehow felt alive!

It was actually a smaller kid screaming for attention that you mistook for a soul.

[tsk1979]

Originally Posted by Tushar

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

I kind of disagree here.
Lets look at the imported cars.
2005 : S class for 64 lakh INR
This is 6400000/44 USD =
145000$ Approx

2015 - 11500000/64 USD = 179000$ Approx

So increase over 10 years = 23% Price increase.

This is not much I think.

[shobhit.shri]

I think German three are to Indian men what diamond jewelry and silk sarees are to women .

I think the buyer profile we are discussing here is different from what these brands are seeing in their showrooms. From what I have seen on the road, most of these cars are chauffeur driven so it's all about status and far less about the car per se and its value.

[spyder_p8]

Originally Posted by zenren

This is one place where I would give credit to Maruti. They have not only resisted the urge to do a steep hike for the best sellers but prevented their competitors from doing the same. The sub-10L segment sees reasonable prices in every segment where there is a best seller Maruti. In those segments where Maruti doesn't exist, we have numerous examples of exorbitant prices or hikes like the Innova, Duster, Aria and so on.

There is not even a comparison. Maruti never had success in the 10L+ segment. Brand value matters to many when it comes to spending close to Million Rupees. Though recently i see Ciaz climbing charts. buts that because of the exceptional value it provides in that segment. The City is still the leader.

[narayan]

I can think of the below reasons

1) Sizes of the cars are increasing
2) Feature set has dramatically changed. The safety levels, kit etc is far better than what was on offer earlier
3) Product life cycle is coming down dramatically. Hence the companies have to charge more to recover their investment
4) After the first 6 months of launch there is deep discounting - so the companies have to price high to make up for the losses in the latter part of the product life cycle

Lastly AND MOST IMPORTANTLY - the target segment is also making much more money than they were in the 90s or 2000s. So why not charge them more ?? After all every business exists to price their products at the highest economically viable point. So why not ?

[scooby05]

I remember buying the first Indian W124- E220 in 1996 for approx 12.50 lacs mumbai registered, from Concorde Motors. Today I guess an E petrol would start at 48 on road!!
One may see the Import prices on Zauba and realise the mark ups on the mercs.

[sreejith1830]

The funniest thing is the cost of the Prado and Landcruiser in India.Must be cause of the high duties which CBUs attract.Pity the guys buying a prado for 1.18Cr.
Come on guys,the Prado is not a luxury car,its a workhorse with leather seats as an option, a lumpy ride and a Toyota badge.Any idea about the actual sales figures for the prado?

[rsidd]

Originally Posted by Tushar

Goes to show that this pricing strategy has worked well for their business….but been awful for customers.

Actually, no. Customers who balk at the price of an Audi can get a Skoda or something. Indian customers have persuaded themselves that the big three Germans are worth extra money, and it makes them happy to throw their cash at these vendors. For example, the Audi A4 and the Honda Accord are both priced starting around GBP 24000 in the UK. In India, the Accord was sold for a similar price and discontinued. The A4 is priced about 50% more and is doing fine. Win-win for the manufacturer who rakes in the profit, and for the customer who shows off his (usually "his") expensive premium car. If the A4 cost the same as a Hyundai Sonata, what would be the point of buying it?