Random Thoughts – Prius making money in India
The update is that Toyota will not be making a loss on the Prius in India. This is not exactly a “breaking news”, but rather a no brainer. After all, every car maker wants to introduce models that make good money for them.
Strategically speaking, the question is important as the Prius is coming to India under an limited order of 200 vehicles. The pricing is above Rs. 25 lakh and Toyota already have orders for 54 vehicles. That is a good order booked in a short time for this car.
Mr. Sandeep Singh, Deputy Managing Director, Toyota Kirloskar Motors had this to say in an interview for Forbes India –
Priced at over Rs. 25 lakh, isn’t the car very expensive?
We always knew that we are going to be very expensive and that’s primarily because of the custom duty levied on the car. We did approach Toyota Motor Corporation for subsidies but we were advised to speak to the Government of India. That’s how it works in most other countries where we have launched the Prius. Most governments have a subsidy or concession plan in place. So for the last six months we have been talking to the government, but we realised that it will take time to get any special concessions. The question was whether we should wait to work with the government, or go ahead and launch it. So, we decided to be selfish and launched the Prius which has all the features of any luxury car and I think it will connect with a limited, select group of people.
That means you lose money on the Prius?
No, even though the price is high and we might not be able to get huge orders, we took a decision not to take a loss on the product. Otherwise it would be very difficult for us to convince Toyota Motor Corporation to sell the vehicle here. But then, we are also not making any money if you factor in the advertising and promotion cost that we are incurring on the vehicle.
This is very interesting. We have a precedence in the Hybrid market with the Honda Civic Hybrid. The pricing of the Civic hybrid at launch was Rs. 21.50 lakhs. The car received an overwhelming response from the customers, but at that price, Honda acknowledged that it was overpriced and inaccessible to the Indian customer. The company then slashed the prices by 40% for a limited period and offered the car at an discounted price of Rs. 13.4 lakhs.
If Toyota receive a good response for the Prius, then the possibility of a fresh consignment (other than the first batch of 200) of vehicles for the Indian market is very real. The question on my mind is, will Toyota go the Honda way with the Prius pricing? If at Rs 25 lakh a piece, Toyota does not make a loss on the Prius, then it is indeed an overpriced car for the Indian market.
If I were to buy a Prius, I would wait for two events. First, wait for the second consignment of vehicles (these may incorporate some improvements for the Indian conditions). Second, wait for any price reductions. What happens to the price, if the government of India provides the customs concessions? Will Toyota pass it on the customer?
If neither comes by, you can give a pass to the Prius and consider other hybrids that are on the way to the Indian market. Its worth the wait.
Source – Forbes India