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Apple iPhones Sold in India Are 40% More Expensive (AAPL)

Investopedia logoInvestopedia 24-09-2016 Deborah DSouza
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Apple Inc. (AAPL) products sold in India are prohibitively expensive, not just by Indian standards, but by American standards, too.

According to Deutsche Bank’s 'Mapping The World’s Prices' 2016 study, India was ranked fourth on the list of countries with the most expensive iPhones. Before the launch of the iPhone 6s and iPhone 6s Plus in India last year, Mumbai airport customs authorities asked all fliers to voluntarily declare iPhones on arrival. The difference in pricing had fueled the grey market.

The iPhone 7 and iPhone 7 Plus will be no different. The phones will be launched in India on October 7 and Apple announced the prices they will be sold at on September 15. Buzzfeed India compiled reactions on social media:

How bad is it ? Here’s a look at the prices of unlocked phones compared to the price of their equivalent in the U.S.:

PhoneGBLaunch Price IndiaLaunch Price U.S.Premium
iPhone 732Rs. 60,000 ($897.33)$64938%
iPhone 7128Rs. 70,000 ($1046.89)$74939%
iPhone 7256Rs. 80,000 ($1196.44)$84940%
iPhone 7 Plus32Rs. 72,000 ($1076.80)$76940%
iPhone 7 Plus128Rs. 82,000 ($1226.35)$86941%
iPhone 7 Plus256Rs. 92,000 ($1375.91)$96942%
   
The number of smartphone owners in India reached 170 million in 2016. CEO Tim Cook has said that India is one of the company’s fastest growing markets. In the first three quarters of this fiscal year, even as global sales dipped, iPhone sales in India were up 51% year-on-year.Tim Cook has said that Apple will be in India for the next thousand years, but it's hard to predict what the future will look like. (See also, Apple to Launch 3 New iPhones in 2017)

The company currently has just over 2% of the smartphone market share in India.  Authorities in India have also prevented the sale of refurbished phones. Apple could plan to increase sales in other ways, but in a country where the average smartphone sold costs $158, price seems key. Especially when the most expensive Samsung phone available, the Galaxy 7 Edge, costs Rs. 50,900 ($762), which is cheaper than the least expensive iPhone 7 phone. However, the iPhone 6s and iPhone 6s Plus price in India has been slashed since the iPhone 7 was announced.

iPhone 5c, Anyone ?

Apple prides itself on bringing new technology to the masses every year, but it may be depending on older models to drive sales in India. "Apple has gained a strong market share in the premium segment owing to strong traction for older versions of iPhones which usually becomes affordable after few price cuts," said Jaipal Singh, a market analyst at research firm IDC India. He added, "Going ahead, Apple will continue to push its older versions of iPhones to gain the market share while bringing new models to engage its growing fan base in India." 

There's also the possibility that the opening of Apple retail stores and partnerships with online resellers will help the brand. Foreign companies looking to open retail stores in India must source 30% of their goods locally. In June, the Indian government decided to waive this requirement for three years, which leaves the door open for Apple. (See also, Apple Nears Pact With India For Retail Store)

Apple currently sells its products in India through third-party resellers it calls Apple Premium Resellers. Online shopping websites source their products from these resellers. This year, Apple has partnered with India’s largest online retailer Flipkart to increase the online availability of the iPhone 7. Flipkart will receive Apple products directly, along with marketing support. Until now Apple only had Infibeam as a registered online reseller. 

The Competition

The leaders in the Indian market are South Korea’s Samsung (25%), India’s Micromax  (12.9%) and China’s Lenovo Group (7.7%). All three have manufacturing facilities in India. Bloomberg reported on Friday that China-based Huawei Technologies Co. will also begin assembling phones in India with manufacturing partner Flextronics International Ltd.

Manufacturing or assembling in India clearly helps reduce prices. Apple pays an import duty of 12.5% on every phone it sells in India. When the Indian government tried to impose a 29% total import duty on phone parts and accessories like chargers and adaptors, firms like Samsung and Micromax fought back and won.  

During his visit to India in May, Tim Cook was asked about iPhone pricing in India by news channel NDTV. He said, "The duties and the taxes and the compounding of those takes the price and it makes it very high. Our profitability is less in India, it’s materially less — but still I recognize that prices are high."  

   

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