[shankar.balan]

its the duties and taxes that ensure that budget / regular joe/ middle class buyers are doomed to the purchase and use of vehicles at the cheaper end of the market. Else they have to take monster sized loans and buy what is essentially a depreciating asset.
The only other way is to explore the used car market properly in search of a good deal - let the first owner bear the brunt of the depreciation and let the second owner enjoy the benefit!
Even then, take this case: The Tucson used to cost about 8-9 lacs brand new in Thailand/ OZ/ NZ in 2005-2006. The same vehicle cost 18-19 lacs on road here in India at the same time. Now, 5 years later, if one were to look for and buy a 5 year old Tucson in India, one is probably going to pay 8-9 lacs here in India.
Essentially one is paying the same price NOW for this second hand vehicle, as people in other countries used to pay 5 years ago for a brand new example of the same vehicle.
It is upto the manufacturers also to invest in proper facilities here in India to reduce the costs to the consumer and leverage their facilities to build different vehicles. This way they benefit from a far larger level of consumer adoption as well as a lower cost manufacturing base which they can leverage for their exports too.
I cannot understand what stops their great honchos in Management from doing so. Looks like Renault with its plans, might be amongst the first ones to try to do this - hope they succeed and teach all the other fellows a good lesson! Both Hyundai and Ford should have gotten around to doing this properly by now since they've been here more than 10 years. But no, their greed and short sightedness has prevented them from seeing the big picture!
Having said this, this may apply to the International Brands. But what prevents our own fully Indian manufactured vehicles to be priced fairly and offer good features and quality at that price? Nothing but the same greed and short sighted ness plus a mistaken positioning of their brands vis a vis the international manufacturers. Their constant and idiotic search for the mythical holy grail of "premium" is another stumbling block!

[sridhar-v]

What I have done is a rough and ready comparison of prices of approximately similar variants in UK & India. The reasons for looking @ UK prices are as follows:-

1. Vehicles are RHD drive. Models specs are also similar. So it is an apples to apples comparison. The only caveat is that there is obviously some difference in accessories specs. Mostly in airbags & ICE equipments. But it is very difficult to isolate the cost of this difference.
2. Almost all vehicles are imported into the UK. So some amount of shipping/logistics costs gets built in.
3. Sales volumes of individual models, in the UK, are low as the models are not the largest selling. So dealer margins and costs of carrying spares inventory will be higher. Possibly % wise as much as in India, but cannot be sure as I lack complete data on this.
4. VAT in UK is 20%. CVD or Excise in India (on CBU & CKD respectively) is 24%+Rs.20,000. So pretty much comparable. The basic game changer is the Import duty in India @ 60% for CBU & 30% for CKD. Also we pay additional VAT of between 0% to 14-16% depending on the state of purchase & whether CBU or CKD. And us unfortunate souls in Maharashtra pay additional Octroi. I think it is around 5% for Mumbai.
5. Insurance costs in UK vis a vis India is something for which I do not have data. Possibly some BHPians in the UK can help out.
6. All these calculation are a rough & ready working. Will try and add more analysis and, after working out some costing scenarios, my working of what the convertor factor should be for CBU & CKD vehicles. Please feel free to point out any errors or add more data.
7. As my preference is for Automatic gearbox I have concentrated on these variants. . But same formulas can be applied to other variants.
8. Over the next few days (actually able to work on this only in the late evenings/early nights-) the data & attached comparison will be updated for a) Fully localised cars & b) Localised cars with some major import content.

Initial reading of the data is that we are being ripped off in the CKD vehicles – much more than CBUs. The costing of the CBU Chevorlet Captivia confirms my hunch that pricing of almost all models should be a lot more competetive. Will analyse this price & work out my justifications over the coming days.


The working is as follows:-

Prices in UK are from the website www.carbuyer.co.uk
Prices in India are from Overdrive September issue – Mumbai on road prices shown in the magazine.
Conversion rate is taken as 74 INRs. To 1 GBP.
Indian prices include a lifetime RTO tax whereas UK has excise (aka road tax) payable on annual basis. I have assumed that the extra payable in India on this a/c should be considered as an additional cost of buying a luxury item in India. (And definitely a large car/suv is a luxury in India!!)
The premium over GBP to INR rate gives an indication of the effect of i) Import duties & differences in tax structures & ii) Excess premium that the manufacturer is charging.

[mayankk]

nice!
Put it here, youll grab more eyeballs.

http://www.team-bhp.com/forum/collec...ed-off-16.html

[ajay0612]

The Premium column is misleading as it is inclusive of fair conversion price. Please deduct 100 from each value to denote the premium only. Yes. we are being ripped apart. We (the common men) don't deserve safety and have no right to enjoy luxury. We are mere Mortals. On the other hand we are born and work to fatten the pockets of traders, stars, politicians and thugs so that they can enjoy these overpriced luxuries and go to hell.

[sridhar-v]

Originally Posted by ajay0612

The Premium column is misleading as it is inclusive of fair conversion price. Please deduct 100 from each value to denote the premium only. Yes. we are being ripped apart. We (the common men) don't deserve safety and have no right to enjoy luxury. We are mere Mortals. On the other hand we are born and work to fatten the pockets of traders, stars, politicians and thugs so that they can enjoy these overpriced luxuries and go to hell.

Corrected premium calculation. makes a lot more sense now. Thanks!

[julupani]

One simple point.

How many of those cars whose UK price you have taken are actually made in UK??

As far as I know not many cars are actually made in the UK any more, almost everything comes from outside UK. And what sort of import duties are charged over there?? For example every BMW, Merc or Audi sold in the UK comes in as a CBU, while we in India have facilities of all three manufacturers.

If you actually check among the major manufacturer's, on JLR, Ford, GM and Honda have facilities in the UK. BMW too has facilities but only for the Mini. Other than that Rolls Royce, Bentley, Lotus and Aston Martin make cars in the UK.

I think the reason why the in the UK the Jags and LR is so much cheaper, is because it happens to be made there.

Another point to consider is that each car will have different transportation costs, since they come from a variety of countries today.

And other than that remember the company is not out there to charge you the minimum possible price they possibly can. Prices are determined by demand and supply. If the manufacturer feels it can charge a certain amount and still generate good volumes, then it is their right to charge that amount.

Companies are there to make money, not to do charity after all.

[ajay0612]

Originally Posted by julupani

And other than that remember the company is not out there to charge you the minimum possible price they possibly can. Prices are determined by demand and supply. If the manufacturer feels it can charge a certain amount and still generate good volumes, then it is their right to charge that amount.
Companies are there to make money, not to do charity after all.

That is where ethics come into play. The pricing is fairly simple. One should not charge as much as possible, but as much as is fairly possible. For many of such thugs/looters/easy money makers, it is fair to give fat margin to these luxury good makers, but they will lunge forward to grab/kill a rickshaw puller if he asks for a few bucks extra!

[mayankk]

Originally Posted by julupani

One simple point.

How many of those cars whose UK price you have taken are actually made in UK??

As far as I know not many cars are actually made in the UK any more, almost everything comes from outside UK. And what sort of import duties are charged over there?? For example every BMW, Merc or Audi sold in the UK comes in as a CBU, while we in India have facilities of all three manufacturers.

If you actually check among the major manufacturer's, on JLR, Ford, GM and Honda have facilities in the UK. BMW too has facilities but only for the Mini. Other than that Rolls Royce, Bentley, Lotus and Aston Martin make cars in the UK.

I think the reason why the in the UK the Jags and LR is so much cheaper, is because it happens to be made there.

Another point to consider is that each car will have different transportation costs, since they come from a variety of countries today.

And other than that remember the company is not out there to charge you the minimum possible price they possibly can. Prices are determined by demand and supply. If the manufacturer feels it can charge a certain amount and still generate good volumes, then it is their right to charge that amount.

Companies are there to make money, not to do charity after all.

Even if the car is not made in UK, it can be got from the EU.
That is one advantage they have.
Their concept of a CBU, and our concept of a CBU are miles apart, mostly in rupee terms.

[suhaas307]

People in the UK might as the same question, when they get a big fat bill every month, owing to congestion-charges. One must remember that it isn't wise to compare different markets. Every auto-market has its own characteristics, where the customer tends to influence the car-manufacturer, and this influence is translated into results and solutions.

In India, we prefer sedans. That's why, we see cars that were originally made and designed to be hatchbacks, but converted into sedans, because there is a market-demand for it. Similarly, in the UK, you don't find these sedans. You find plenty of hatchbacks. Even the Civic sold there is a hatch.

As julupani had asked, how many of these cars are actually made in the UK? Very few. But in India, Mercedes had set up shop ages ago, BMW and Audi too, had followed suit. In about 5 years, we should see tremendous growth in the auto-sector in India. With companies like Ferrari and Porsche setting up dealerships and service centers, and JLR setting up an assembly-plant, the future looks bright.

Don't worry about the costs, especially with CBUs and CKDs. It would even out, with enhanced and improved localization.

EDIT: Insurance is a huge thing in the UK. Getting your car insured isn't as simple as a few signatures and a one-on-one talk with the agent. You will be scrutinized and sized-up before hey give you a quote. Insurance also depends on the car you drive. A fast, performance-oriented car, for example, attracts huge sums of money. Sedate family cars, a little less.

[julupani]

Originally Posted by ajay0612

That is where ethics come into play. The pricing is fairly simple. One should not charge as much as possible, but as much as is fairly possible. For many of such thugs/looters/easy money makers, it is fair to give fat margin to these luxury good makers, but they will lunge forward to grab/kill a rickshaw puller if he asks for a few bucks extra!

I dont think its is unethical in anyway at all to make a lot of money, especially on luxury items like the cars we are talking about here.

You charge exorbitant margins on medicines, true that is unethical. But here you are trying to charge money for high luxury items.

By your argument, sports car manufacturers are the most unethical out there.

It's completely different driving a hard bargain with a guy who barely making subsistence money, and making extra money off somebody who has lots to throw around.

Your statement is correct, that one should charge what is fairly possible. But the definition of "fair" is not exactly something rigid.

Even in the UK the prices of all those cars listed are higher than the per capita GDP of the UK. In India, even the cheapest of the cars you have taken costs more than 30times our per capita GDP.

If you look at it another way, I thank those companies, if at all they are pricing it on the high side. Due to the higher prices the govt gets a bigger tax amount, which will be put to use by the govt for the betterment of the nation.

[xingamazon]

Hi Sridhar,

Great Stats I would say an eye opener.

Few suggestions to improve the readability of the data.
1. Make sure you put both the stats in same magnitude for better comparison to be done by Layman. Like for examples OTR rates in INR and INR equalent rates of MRP of UK. If both are in one currency people can relate to the difference equally.
2. Is it possible to add cars which are fully manufactured here to understand how much price increase the same manufacturer charges for same car if manufactured in India.


Note: one factor you have left out in your data is the frieght cost, dont forget the car makers have to pay shipping charges for importing CBUs this might easily cost around USD 300-500 per car (my guess).

[skyline_r34]

I think all markets are different and pricing in one may not be comparable to another.

If you look at Honda's pricing in US the Civic starts at $16,375 while the Fit(Jazz) starts at 15,870. The Civic in India starts at more than 2x Jazz price. My guess is it has to do with volumes.

Profitability is a function of volumes and margins. So if a manufacturer expects high volume for a model his margin should be lower and vice versus. Manufacturers generally look at return on investment while pricing. Margins isn't an absolute metric they consider.

All CKD,s CBU's in India are large/premium cars. The market in India is quite small for them hence manufacturers will require a higher margin for selling the same.

[ajay0612]

Originally Posted by julupani

I dont think its is unethical in anyway at all to make a lot of money, especially on luxury items like the cars we are talking about here.

Unreasonable margin on the part of seller will encourge unreasonable earnings on the part of buyer. Higher the degree, more the loot!

You charge exorbitant margins on medicines, true that is unethical. But here you are trying to charge money for high luxury items.
By your argument, sports car manufacturers are the most unethical out there.

Well. Not so simple. Higher margins for drug manufacturers are easier to justify as that leaves them enough for future R&D which might result in better drugs and new discoveries! But on the part od sports car, it is not so easy to justify unless one resorts to 'Brand" value, exclusivity, blah blah.

It's completely different driving a hard bargain with a guy who barely making subsistence money, and making extra money off somebody who has lots to throw around.

I was talking about the same person with 'extra money to throw around', who tries a hard bargain with a guy who barely making subsistence money.

Your statement is correct, that one should charge what is fairly possible. But the definition of "fair" is not exactly something rigid.

So is the definition of luxury. For one 4x4 maybe luxury, for other it may be a need. So is with GPS, AC, Tough build, SUV, etc. That is why one should price its product based on independent analysis, and not based on how much extra 'select few' people are ready to pay. That in the end encourages corruption, moral as well as materialitic.

Even in the UK the prices of all those cars listed are higher than the per capita GDP of the UK. In India, even the cheapest of the cars you have taken costs more than 30times our per capita GDP.

And you are OK with that ratio going further up!

If you look at it another way, I thank those companies, if at all they are pricing it on the high side. Due to the higher prices the govt gets a bigger tax amount, which will be put to use by the govt for the betterment of the nation.

Now that is quite hilarious. You have more trust on those swindlers of public money than on yourself! On a serious note, the duty collection may remain same (or increase, as volume will be higher) if the product is priced competitively. The one thing competitive pricing helps in is 'reducing corruption' as the product is than affordable to larger number of people with legal income. Afterall who does not want to have few extra features if they don't cost a bomb?

[chinkara]

Originally Posted by ajay0612

Well. Not so simple. Higher margins for drug manufacturers are easier to justify as that leaves them enough for future R&D which might result in better drugs and new discoveries! But on the part od sports car, it is not so easy to justify unless one resorts to 'Brand" value, exclusivity, blah blah.

Cars also need R&D, no?

See margin is ultimately a function of bargaining to arrive at a price. I haggle with the sabzi-wala directly, I haggle with the car maker indirectly. I won't buy a Grand Vitara at 18 L, but I might at 13 L. So it depends on how many people are there like me and can we offer enough value to MSIL to slash its prices.

[Crank]

I am not sure why this discussion goes in circles. We are again just comparing the prices and trying to find out why there is a variance - is it to do with tax, customer demand etc. (forgetting the localization advantage due to cheap labour and distribution costs). Anyway, we can hereby conclude that we are being ripped off. What is the solution? How do we demand the manufacturers to price their cars fairly? How do we ask the government to tax lightly for day-to-day cars?