Thread: Motorcycle Global pricing.
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#1 Motorcycle Global pricing.08-21-2013, 12:59 PM
How come it cost more here or less there?
I admit it; I am a geek, but not that interested in why your Big Mac cost more then my Big Mac or less for that matter.
However pricing parity is very interesting to a geek like me, particularly with respects to motorcycles.
Where they are made and where they are sold, the prices at retail and the differences and why.
If it is not taxed to death then below is what the prices would look like, as a percentage around a dollar more(+) or less(-).
Country Price level (% relative to the US) India −63 South Africa −54 Hong Kong −50 Ukraine −47 Egypt −45 Russia −45 Taiwan −42 China −41 Malaysia −41 Sri Lanka −37 Indonesia −35 Mexico −34 Philippines −33 Poland −33 Saudi Arabia −33 Thailand −33 Pakistan −32 Lithuania −30 Latvia −25 UAE −25 South Korea −22 Japan −20 Singapore −17 Estonia −16 Czech Republic −15 Argentina −13 Hungary −13 Peru −11 Israel −8 Portugal −8 Britain −3 New Zealand −1 Chile 0 United States 0 Costa Rica 1 Greece 3 Austria 5 Netherlands 7 Ireland 8 Spain 9 Turkey 10 Colombia 11 Australia 12 Euro area 12 France 12 Germany 13 Finland 17 Belgium 18 Denmark 19 Italy 20 Canada 24 Uruguay 25 Brazil 29 Switzerland 63 Sweden 75 Norway 80 Venezuela 108
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#2 Re: Motorcycle Global pricing.08-21-2013, 01:37 PM
A bajillion reasons, to the bajillionth power.
The basic premise behind pure market economic theory (i.e., where a pricing structure exists) is that all goods and services are priced in perfect equilibrium in all locations. Further, all currency exchanges are simultaneously in perfect balance. This basic premise is behind conventional economic theory, and is most simply exemplified in David Ricardo's theory of Competitive Advantage, the fundamental argument for Free Trade.
Unfortunately, not all people (or societies) are created equally. Further, all societies require taxation (if they want any public goods, such as highways, schools, defence, etc) and some societies require more public goods than others (i.e., the demand for public services is higher in some locations).
Bottom line, though, I sure wish motorcycles were 41% less expensive in China than in the USA. But that is the the fundamental problem with economics ... great in theory, not so great in implementation.
Doc LJH, Piled High & Deep (Finance)
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#3 Re: Motorcycle Global pricing.08-21-2013, 11:39 PM
The price of a Harley would never be 41% less then it cost here, unless it was made there. Then it would be a matter of material and manufacturing costs in China. There is nothing that keeps prices grounded other then purchasing behavior. There is no baseline, no break even model, well actually most of the low end production in china is close, actually bet allot of it looses capital. (-) zero (+) as in losses, break-even, profits. The break-even grounds the market. They have that we do not, we subsidize incomes and cost of living.
Its all based on resources, basically raw materials and operating costs, is or are most things half the price.
The middle class is 10-60K, some of them are below the US poverty line, would a person earning 10K per year be comparable to a 20k income in the USA, I suspect that would be yes.
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#4 Re: Motorcycle Global pricing.08-22-2013, 01:30 AM
You raise several interesting (and complicated) issues.
Certainly one would never see that with US companies/products, as the USA has strict anti-dumping legislation (both directions)
I am guessing we will see off-shore Harleys one day (well, maybe not me, but some of you yungins probably will). Many HD components are already Made in China (and Mexico), but final bike assembly is restricted to the USA (and, very recently & to a limited degree, India).
Related story:
I am helping a friend research/buy the new Ducati 795 Monster in Beijing. This particular model is only available inside selected Asian countries (China, Vietnam, Phillipines, Indonesia, India, etc.). It is assembled in Thailand, a country with FTAs with most Asian countries, including China. It does have some components manufactured in Thailand (mainly electronic).
We researched the MSRPs of the 2013 Ducati Monster 795 in some of these countries (ranked lowest to highest, and expressed in Chinese rmb):
India
599,000 Rupees = 58,000 rmb
Thailand
409,900 Baht = 80,000 rmb
Phillipines
570,000 Pesos = 80,000 rmb
Vietnam
350,000 VND = 100,000 rmb
China
119,000 rmb
Malaysia
66,888 Ringgit = 125,000 rmb
Indonesia
225,000,000 Rupiah = 131,000 rmb
The most obvious question she (the potential Chinese buyer) has is ... why is India half the price of China?
The most obvious economist's answer will be "because that is what the market will bare" based on relative incomes (related to PPP). Of course, if you ask an "expert" economist, you will get at least 2 more answers, most certainly including supply/demand, and probably also competitive pricing (although, in China, luxury pricing plays a prominent role).Last edited by Lao Jia Hou; 08-22-2013 at 02:18 AM. Reason: typo
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#5 Re: Motorcycle Global pricing.08-22-2013, 02:44 AM
I was talking to a good friend about something similar recently: car pricing in China, but I'd imagine the same arguments apply with pricing of motorcycles. The apparently inflated pricing of imported, luxury cars in causing a bit of a stir at the moment in social media, the press and with the government. Long story short: even accounting for additional taxes and import duties, imported, luxury cars are still priced significantly higher here in China than they would be in other parts of the world.
Here are a couple of my theories on why manufacturers price things at a premium here in China:
1) The cost of doing business in China is higher than elsewhere in the world. Additional layers of bureaucracy, additional costs serving customers (say for example, perhaps "warranty claims" are for whatever reason, significantly higher here than elsewhere in the world) etc.
2) The risks of doing business in China is higher than elsewhere in the world, and the economic rewards need to be commensurate to those risks for manufacturers to justify opening and running a shop here.
3) What LJH said, because they can. Manufacturers will say that they don't force anyone to buy anything they sell, at whatever price it is they sell them at. So if you don't like the price, don't buy it.
I think no single explanation can account for the inflated pricing we get here in China, but rather a combination of all three of the above (and probably, mostly theory 3) and possibly other theories which I have yet to consider.
As much as I'm a consumer and would happily campaign for more 'reasonable' pricing of "things" here in China, I myself have to accept the fact that in a non-economically Marxist world, the pricing of "things" is dictated by what people are willing to pay for them. And enough people are willing to pay an inflated price for a product, then that will be the price of that product. -End of rant-
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#6 Re: Motorcycle Global pricing.08-22-2013, 04:15 AM
Baby food sells in China for ¥39.5, you can purchase them in America for $1.59 = ¥9.75. China is 4X as expensive.
20130527_094146.jpg
We just spent 2 months back in the USA, EVERYTHING in China is now more expensive by a huge magnitude.
Cheers!
ChinaV
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#7 Re: Motorcycle Global pricing.08-22-2013, 09:50 AM
So true!
A while back (maybe 8 or 9 years), I was interviewed (as a "foreign expert") by CCTV and a couple of news publications about the price of real estate in Beijing. At that time, it was around 7,000 rmb/sq meter. I took the Western view that, according to countless studies, over the long term Real Estate prices are related to the Affordability Index. I went on and on about the numbers, and the studies, and I ended up suggesting that Beijing real estate prices were likely nearing their peak.
Boy, was I wrong! Given that current Beijing prices are about 60,000 rmb/sq meter (inside the 3rd ring road), I have been relearning "Economics ... with Chinese characteristics." What I failed to realize back then was the virtually endless supply of rich people from other cities that want to move into Beijing - and buy black Audis, etc.
So, today, a typical 100 sq meter apartment costs about $1 million (US), yet the average annual net income in Beijing is about $5,000 (US), although some argue it is closer to $10,000 (US). Either is irrelevant, IMHO, once you do the math.
Wow, you are the third person I've heard say the exact same thing this week. Our gone (but not forgotten) TBR experienced the same in his recent trip stateside. Anecdotally, I met a riding buddy for lunch at the Kempinski (about a 4 star hotel in Beijing) and, feeling generous, I offered to pay. Two buffet lunches, one can of coke (48 rmb) ... total was 681 f'n RMB. WTF?!? Good thing I had my credit card with me!
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#8 Re: Motorcycle Global pricing.
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#9 Re: Motorcycle Global pricing.
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#10 Re: Motorcycle Global pricing.08-22-2013, 11:21 AM
This site has is at 25,000 for the median, for rent per Sq meter in the city center.
http://www.numbeo.com/cost-of-living...?country=China
Which is about 4,000 USD or about 400 a sq ft, which the site states is less then the median in NYC, that seems way off isn't it claiming that rent in Beijing is 60% less then in NYC.
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