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Why Will Apple's New iPhone 7 Cost so Much More in India?

The Wall Street Journal. logo The Wall Street Journal. 08-09-2016 WSJ Staff

Apple Inc.'s new iPhone 7 smartphones go on sale Friday in the U.S. at a starting price of $649. They won’t be available in India until next month, and when they do land their base price will be close to $250 more expensive.

Apple has been trying to grab a bigger slice of the growing Indian market by allowing financing for consumers, offering older models for lower prices, and has even petitioned to sell refurbished phones in India, according to government officials.

So why is it squeezing India’s value-for-money conscious consumers on the price of its flagship phones?

In India Apple has set a maximum retail price of about 60,000 rupees, or around $900, for the iPhone 7 phone when it starts selling in India Oct. 7. That’s more than 35% more than the sticker price of the phones in America.

Why the difference? One contributor is taxes. The Indian base price already has sales taxes blended in while the U.S. price is before sales tax. Another contributor is distribution networks. Apple relies on third-party companies to sell phones in India, which work in their own profit margins. Apple also has to set a price containing a buffer for movements in the value of the rupee.

The comparatively high price of the new device underscores challenges the Cupertino, Calif. company faces in the world's second-most-populous country: It is attempting to sell its high-end devices in a nation where most consumers can only afford smartphones that cost less than $150.

Even Apple's older models, such as the iPhone 5s, which costs about $300, are relatively expensive and haven't proven to be big hits.

Apple Chief Executive Tim Cook, however, is keen to boost sales in India as demand weakens in China.

Apple is seeking government permission to open its own stores and sell goods online in India in order to supplement Indian-owned distribution firms and retailers.

But a senior government official says Apple is still mulling whether or not it would be able to comply with local-sourcing requirements that would be part of such a deal.

For now, fans of Apple's flagship devices will just have to pay a little more.

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