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Reservations over pricing of Daewoo's new cars

NetScribes/Mahesh Shetty

Delhi-based Daewoo Motors India's comeback project may just start off on the wrong foot. Analysts and industry observers say that DMIL's new range, which includes the Nubira, Lanos and Tacuma, may be overpriced.

The consensus among experts watching the sector is that a Lanos II at Rs 700,000-800,000 and a Nubira II at Rs 900,000-1 million could suffer the same fate as the Maruti Baleno (in the same luxury market), which is perceived as poor value for money.

Earlier this week, DMIL announced these prices for both models and said they would be launched around November 2001 to coincide with the Diwali season.

Analysts are of the opinion that both the Nubira and the Lanos stand the best chance if they are positioned in the Rs 550,000-650,000 range (the Esteem, Ikon and Accent fall into this category).

They believe this is the only range where any decent volumes can be accessed for the Lanos/Nubira class of products.

The centre of the argument is the perceived value of these products.

"Anybody with Rs 800,000 to spare is going to plump for a star badge like the Honda over a Korean label called Daewoo," says an analyst at a leading brokerage in Bombay.

"The obvious question is - if you have that much money, why shouldn't you put in some Rs 50,000 more and buy a City or a Opel Astra (GM)?" he adds.

"Both are fairly strong products, but that still won't justify a sticker price as high as Rs 700,000," says a senior sales manager at a South-based auto MNC.

"Take away the hype and they remain average mid-size saloons that will compete in the Esteem class - they simply cannot aspire to taking customers away from the likes of Honda or General Motors (Opel Astra)," he adds.

The Baleno case study is fairly indicative. This product debuted in January 2000 and, after a positive start selling 600-700 cars a month by the third month of sales, the car rapidly slid down to the under-200 cars level by the end of that year.

The year 2001 has been a shift from bad to worse. The car sold a miserable 100 cars in April and has now settled at 150-200 cars a month.

It is now acknowledged that the Baleno's weak spot is its pricing. The car, retailing at more than Rs 850,000 is priced in the no man's land between the Ikon/Esteem range and the City/Astra range.

Mid-March this year, DMIL announced its intention to launch the Lanos and the Nubira for the mid- size market, the larger Magnus Eagle in the Honda Accord segment and the Tacuma in the sports utility range.

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