[avishar]

These are cars are actually cheap to begin with.

It is just that the average buying capacity of an Indian car buyer has not risen as fast as costs have. Which in this case, would be the cost to develop and sell a car with a globally acceptable set of minimum features, build quality and safety. This is important because Indian consumers are not going to accept old generation cars. We want the best and latest and increasingly it is becoming very difficult to sell us such products at the prices which we like. Volkswagen, for example, could ship over the tools of the VW Gol, a car based on the ancient PQ platform and sell it for maybe Rs 6 lakhs here. Will it sell? No. What we want is the last Polo at Rs 8-12 lakhs...which is impossible.

They are not "overpriced" compared to anywhere else. The price of comparable models in other countries are not too different, for example if one were to compare the prices of Seltos or the Innova or Ecosport in developed or developing countries.

If anything, cars in India are still quite cheap. And I think it also needs to be accepted that a price of Rs 10 lakh or roughly $13000 is already at the threshold territory of what a modern car can be developed for, especially when you talking about CSUVs or sedans. Rs 10 lakh is a lot of money for most of us, but in reality this is already the bare minimum costs these days for a new car, anywhere in the world.

Now the tax component is a separate story but I think as far as ex-factory prices go, I doubt there is anymore costs that can be cut.

[aa1997]

While cars have indeed become expensive another reason is that the emergence of new size categories. There is a hatch/suv/sedan at 3.8/4/4.2/4.4 metres and they cover the market from 5L up to 20L. The incremental price we pay doesn’t translate into a equally bigger car. So while upgrading we have to jump atleast 2 segments to get a bigger vehicle. At the same time it’s a great market for first time buyers as they can exactly get what they want - Turbo petrols, NA, DCT, CVT, AMT, even EVs.

We were upgrading from Elite i20 (sold for 5.5L after 4years & 35k kms) and kept a budget of 15L with key requirements being Automatic and SUV.

Nexon AMT was a top contender but the refinement wasn’t to my liking. All compact SUVs were rejected well because they were too compact and we wanted a bigger car since we have used hatchbacks until now. While Seltos and Creta have Auto variants around 17L, We didn’t want to go for the lesser equipped variants as the plan was to use it for 5-7 years.

So we reevaluated our current use case and felt automatic was the immediate need. We compromised on the all other parameters and finally we ended up with a Grand i10 Nios AMT (8.2L OTR HYD) after checking out every vehicle under 20L. Anyway a 2nd vehicle would be required from next year so a Safari or Innova would perfectly complement the Nios and complete the garage.

[GTO]

Great discussion! Cars are definitely overpriced today. Some more contributors from my end:

- Focus on profits over market-share. You can see this in the pricing of new cars like the Fortuner update, Kushaq, A-Class etc. It's a change of mindset for car manufacturers as market growth numbers in India have slowed down, so why not sell similar numbers at a higher price?

- The chip shortage has restricted supplies. It is truly a seller's market today.

- Lesser competition in the 15+ lakh segments from brands like Maruti, Honda, Toyota etc. This gives the brands behind the Creta, Seltos, Harrier etc. a lot more pricing leeway. How many 25 - 35 lakh sedans are there in the market? Even among large SUVs, the Kodiaq is absent (temporarily), Tiguan is gone and the Alturas G4 is finished which gives players like the Fortuner & Endeavour the freedom to charge whatever they want.

I think there are still many value-for-money cars in the 6 - 13 lakh space due to the sheer competition (primarily from Maruti), but in the segments above that, it's all about fat profits.

[warp_10]

- Govt cess + tax forms definitely 30 - 40% of the cost.
- Cost of raw materials have gone up considerably (well so has inflation)
- Chip shortages add to the problem in hand
- Even the base models now are expected with airbags and better safety features (crash ratings are needle movers for the next gen customers)
- Companies have to provide feature parity of ton of features now and with the way folks review, cutting costs becomes tougher.
- India is no longer the cheap labor market as to what it was a decade back

As for the small car segments, its definitely a tight ship that needs to be run. Given all these, I don't think the companies are to be blamed here for the cost of small cars (they are expected to be profitable, not here for charity for sure).

For the 12L+ cars, yea I don't think the above argument might hold. The Indian companies have not penetrated that segment well yet. Hope we have more Indian companies coming up with better cars in that segment, creating a better competition scenario there to bring costs down.

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[AZT]

Pretty much all important points have been made. Also judging by the Kushaq example, manufacturers are fine selling lesser volume as long as they make more per car. Base Kushaq could have sold more at 9.99 lakh price but they're fine selling lesser and making 50k extra per car.

Also the localization being cheaper is probably a myth. I haven't seen any car get cheaper with increased localization so that's probably just to grab some headlines, from a price point may not be a significant benefit.

This is also why the used car market is booming. I'd suggest keeping a tab on some cars and pulling the trigger whenever you find something good.

[saikishor]

IIRC back in 2010, when we were shopping for a car the top three contenders were Chevrolet Beat, Hyundai i10 and Fiat Punto. Punto was 7 lacs back then. The i10 we looked at was a black shade automatic with sunroof. It was priced at around 4.65 lacs onroad. The Beat LT(O) was priced at 4.5 lacs onroad. And Cruze was priced at 12.5 lacs. Well, 11 years later, you dont even get a base spec Tiago for 4.5 lacs! Talk about inflation!

[anb]

The vehicles in India are heavily overpriced due to taxation. The factory cost of Seltos GTX Plus is 11 lakhs and the on road price is 21 lakhs. Nearly 100 percentage tax on the factory price. The insurance amount is increased massively in the last 5 years.

[wildsdi5530]

Can someone do an actual costing of a car based on its parts breakup, eliminating the taxes at every level from raw material to finished product?

What I mean is that we all know what the GST, Road tax, Registration charges, GST on insurance and accessories, etc. is. I would like to know the taxes that go to the govt before GST on Ex showroom prices.

Like if 750kg of steel is used, the costing of the same without excise. Cost of electronic components without the customs duty. Royalty costs excluding the taxes.

This would give a number excluding the manufacturing cost (salaries) and Taxes (at all levels).

(The reason I ask is an article about 2 years ago, which I cannot find which did an spending analysis of a middle class person earning 10 Lakhs per annum who ends up paying 92% of his earnings to the govt in some form or another) Perhaps cars are a similar story.

[Equus]

In 2007, I got my Honda City GXi manual for 8.5L on road - this is NHC with the iDSI engine. No air bags or even ABS and perhaps ZERO strain ASEAN safety ratings. Even if you had the money, you couldnt get the safety options.

Today you can have a base Honda City for a few lakhs more but a significantly more safer car ! Dont discount this.

[NetfreakBombay]

Originally Posted by wildsdi5530

I would like to know the taxes that go to the govt before GST.....

This should be zero. E.g.: steel supplier will pay GST (say 5% for example). But buyer will be able to claim "credit" for this 5%.

Only end-user will have to pay tax that cannot be claimed.

[anand.shankar]

Originally Posted by puntOOs

I needed an upgrade from my Punto. Especially with EVs going to takeover in 3-4 years, new car prices didn't make any sense. I bought a used VW Jetta this month that ticked most of my boxes instead.

Totally understand your statement, I have a 2015 Punto Evo Emotion, I paid 8.15 Lacs for a decently specced, well-built Diesel hatch. At 8Lacs I can only get a NIOS or a Tigor today!

[wildsdi5530]

Originally Posted by NetfreakBombay

This should be zero. E.g.: steel supplier will pay GST (say 5% for example). But buyer will be able to claim "credit" for this 5%.

Please read my post. We are not talking about GST. I mean excise, customs, royalty tax, etc.

[NetfreakBombay]

Originally Posted by wildsdi5530

GST. I mean excise, customs, royalty tax, etc.

GST includes excise and customs* (IGST). Royalty is a different matter that is between India entity and parent org (Say Maruti and Suzuki).

*Under the GST regime, Article 269A constitutionally mandates that supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. So import of goods or services will be treated as deemed inter-State supplies and would be subject to Integrated tax.

https://www.cbic.gov.in/resources//h...GST_Regime.pdf

[wildsdi5530]

Originally Posted by NetfreakBombay

GST includes excise and customs* (IGST)

Off topic.

I'm no expert, but as I understand that only the integrated tax can be claimed as input tax credit.

[KPR]

Cars are definitely high priced as compared to what was 5 years back.
For the kerb weight of car let me compare the money I put in terms of ₹/Kg of car.

Average weight of most sub 4m SUVs are 1200 Kg approximately.
Exception here are Mahindra TUV300/Bolero Neo which weighs 1600 Kg and XUV300 at 1360 Kg approximately. Now considering ₹9,99,990 or an ex showroom of 10L that I pay -

Non Mahindra sub 4m SUVs - ₹833/Kg of car
XUV300 - ₹735/Kg
Bolero Neo - ₹625/Kg

Can I console myself with Mahindra cars as VFM in segment or more car per car ? I know this yardstick is debatable yet some facts they are.