Jeep is finally on sale in India, officially, after a long wait and lots of speculation. While the brand's entry is joyous for most enthusiasts and SUV buyers, the price of its model range has sprung a surprise for most. It's not hard to understand why. The Jeep Wrangler Unlimited is priced at Rs 71.59 lakh, while the Grand Cherokee Summit sells at Rs 1.03 crore and Grand Cherokee Limited at Rs 93.64 lakh. The high-performance SUV Grand Cherokee SRT carries a price tag of Rs 1.12 crore. All the prices are ex-showroom Delhi, and most of them are, quite frankly, high. While the SRT is priced at par or lower than competition , the other two models are priced quite high. Social media took on Jeep over these prices and people, including some journalists, have been quite creative in their criticism of the price.
At these prices, Jeep has positioned its products directly against the formidable competition of German SUVs, led by the Q7 and also the British Range Rover. If one looks at the Wrangler Unlimited price in the US, its place of manufacture, it's priced at about $ 27,000. Once converted, the price stands at about Rs 17 lakh, which then is subjected to about 187 % duty - since these Jeep models exceed all concessional limits (engine capacity, cost, height, length, etc) within our custom rules. In simpler terms, this means the Indian price would be almost three times of the ex-factory value in the US, along with some other charges/ tariffs. This translates into a price of about Rs 50 lakh. Now, while this price is just a rough calculation, it is subject to a few more additions before the final ex-showroom price. Of course, one also needs to add the company and dealer margins in this price tag. However, even when all of this is put together, Rs 71.59 lakh still looks too steep.
It is unlikely that the chaps at Jeep have gone in for a higher price-tag in favour of high-margins. The real reason for this pricing seems to be a part of a long-term strategy, which includes local production in 2017. Jeep India has already invested more than Rs 1,800 crore at its Ranjangaon plant near Pune to manufacture Jeep models starting 2017. The company has made it clear that they intend to target mass-consumers with their local products and the amount of investment too hints that the plant won't just assemble semi-knocked down units. The larger picture for Jeep in India involves development of low-cost models, not just for India but also for export markets. There are already some OEMs in the country who aren't doing great numbers in the local market but, are consistently growing in the exports segment.
The local focus for Jeep, it seems will be on competing against the likes of Renault Duster and Hyundai Creta with one of their local models, which is expected to be launched sometime around mid-2017. This and more low-cost models will drive the volumes and hopefully profitability for the company in the future. That brings us back to the question of the high-prices of the just-launched Jeep models in India.
As a strategy, Jeep might have decided to price these models higher than unusual in order to pitch them against established European brands and build a premium brand image. Jeep might be hoping that once the brand establishes a premium image for itself in the minds of consumers, low-cost models will be accepted more easily in a price conscious segment where a few thousand rupees can make a difference. The entire idea of launching the vehicles in Jodhpur in the presence of the royal family also indicates the company's desire to position the brand in the premium space.
But, this idea isn't risk-free. Since the price-tag is unrealistically high, consumers could simply laugh it off and lose seriousness in the brand. In this case, consumers in the lower-price segment too might not take Jeep seriously when it launches a vehicle within their budget. This possibility, however, seems a bit low since Jeep is a known brand with a strong recall in India.
If the company can design and deliver a good-looking, well-equipped and functionally smart vehicle sometime next year from the Ranjangaon plant, there's a good chance people will consider it. The company should also ensure its sales and after-sales network is expanded and maintained; customer experience is important in this segment. Fiat is a perfect example for them on how not to sell vehicles. Finally, Jeep India will need to ensure customers don't laugh at the price of their locally made models next year. Hopefully, the company realises this.