Apple hikes most India iPhone prices after tax hike, with iPhone X topping out at $1,647
Apple has raised the prices of several iPhone models in India, reacting to a recent increase of import taxes on electronics.
On average, prices have risen 3.5 percent, Reuters reported. A 256-gigabyte iPhone 8 is now 79,420 rupees, or about $1,237, while a 256-gigabyte iPhone X is 105,720 rupees -- roughly $1,647, which in the U.S. would be almost enough before tax to buy 64-gigabyte models of both the iPhone 8 and X.
The exception to the rule is the iPhone SE, which is assembled in Bangalore by Apple partner Wistron.
Last week the Indian government hiked import taxes on cellphones from 10 to 15 percent, hoping to encourage local manufacturing. While that could have little impact on companies like Samsung, which already rely heavily on local manufacturing, as many as 88 percent of iPhones are believed to be imported.
Even the iPhone SE is well beyond the price range of most Indians. This has translated into Apple holding less than three percent of the marketshare in the country, and Apple keeping models on sale that are considered outdated in other markets.
Apple has been looking to expand local manufacturing, but is requesting tax breaks and other handouts in exchange. The Indian government appears reluctant to concede to demands.
On average, prices have risen 3.5 percent, Reuters reported. A 256-gigabyte iPhone 8 is now 79,420 rupees, or about $1,237, while a 256-gigabyte iPhone X is 105,720 rupees -- roughly $1,647, which in the U.S. would be almost enough before tax to buy 64-gigabyte models of both the iPhone 8 and X.
The exception to the rule is the iPhone SE, which is assembled in Bangalore by Apple partner Wistron.
Last week the Indian government hiked import taxes on cellphones from 10 to 15 percent, hoping to encourage local manufacturing. While that could have little impact on companies like Samsung, which already rely heavily on local manufacturing, as many as 88 percent of iPhones are believed to be imported.
Even the iPhone SE is well beyond the price range of most Indians. This has translated into Apple holding less than three percent of the marketshare in the country, and Apple keeping models on sale that are considered outdated in other markets.
Apple has been looking to expand local manufacturing, but is requesting tax breaks and other handouts in exchange. The Indian government appears reluctant to concede to demands.
Comments
/s
In terms of growing the market this isnt good news for Apple.
I am not sure if it'll have a huge impact on Apple's local sales though, since I am assuming others, certainly Samsung, will follow with a similar increase (for their high-end models).
Btw, what does an iPhone X cost in the EU? Scandinavian countries? China? Australia? Is it all that much lower than these new Indian prices?
https://www.statista.com/statistics/262157/market-share-held-by-mobile-operating-systems-in-india/
India has nearly 300 million smartphone users, expected to rise to nearly 440+ million by 2022 (same source as you cited: https://www.statista.com/statistics/467163/forecast-of-smartphone-users-in-india/). 2.61% of 300M is 7.83 million iPhones. At an ASP of $600 (conservative), that's $4.7B in sales. At a 25% profit margin, that's $1.17B in profits for Apple currently. At its current PE ratio of ~19x (likely a massive underestimate for Apple in India, given its growth prospects there and the fact that it's a rapidly growing market), that is over $22B in market value.
Perhaps in your world that is a small number.
Anyway the Indian government want Apple to up prices and lose share unless they comply by sourcing components in India and/or build all their iPhones in India. Apple would be snubbing the government plan if they had swallowed the taxes.
No one said Apple needed India to survive. No one even implied that. They are at the mercy of the Indian government though... in India. It's plain to see that Apple wants a bigger foothold in India. Tim's visits, the Wistron plant, and the desire for Indian stores are evidence of that. The question now becomes how much is Apple willing to acquiesce to get that bigger foothold. The way it looks from the outside looking in, India says manufacturing is a must. They hold all the cards.
Apple wanting to do more business in India is no different than Apple warning to do more business in any other country so suggesting that such a desire means Apple has no leverage is also false.
Brasil is more direct comparison to India in that they have high tariffs for imported goods, wants Foxconn to produce x-quanity in order to get y-reduction in z-product, and has a poor exchange rate with the US with a very unbalanced economy, so you would you also claim that Apple holds no cards when doing business there? I sure hope not.
- Raise taxes and thus the price of the product rises too.
- Higher price means less product is sold at the margin
- those that do buy the product have less money to use to buy other goods
- strategies to get around the tax result in grey markets, smuggling and other types of corruption, encouraging other negative behaviours in other parts of the economy
- at the margin some local jobs are created to get around the tax. They are inefficient, divert the economy away from more productive uses, and last only as long as the tax is in place.
- other growing Indian industries that may benefit from cheaper smartphones, and iPhones in particular, are able to benefit and grow that little bit less as the cost of using them rises.
Again and again around the world this style of tariff protection is imposed and raises costs for domestic consumers, reduces availability of the best products, reduces the local economy overall, inferior product gets made locally at a higher cost than the equivalent import, and the jobs created are never compared with what could have been, the never created jobs in other parts of the economy. The irony is those jobs only last as long as the tariff/tax/other form of protection.As an example of the end result of this, see the Australian car industry. Seventy years of tariffs, taxes, subsidies, special design rules etc to bolster a domestic car manufacturing industry resulted in
- inferior local versions of global cars better built elsewhere
- locally designed and built cars inferior to cars built elsewhere. The best that can be said is that they weren’t built as bad as the cars built behind the iron curtain back in the day.
- wages for car factory workers higher than other factory workers due to ability to extract rent along with the foreign company with local production because of the tariff/tax applied to imports allows them to charge higher prices at greater profit
- people drive around in older, less safe, lower specification cars because they are less able to afford a replacement.
The kicker of course is once these protections were phased out the local industry and its jobs disappeared. This will be the same in India.The difference between India and China is stark. China gives tax breaks to export oriented products designed to grow exports, India raise taxes and tariffs on imports to promote import replacements. Result is India’s economy does not grow like China’s.
India holds the cards in that relationship. As of right now, Apple has two choices. 1. Apple can comply and manufacture in India. 2. Not comply and get taxed on their assembled goods and imported goods. That's it. Of course they will continue negotiating, but there is no doubt they aren't negotiating from an advantageous position.