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India has a really high import tax on electronic items. Even if Apple charges a slight premium over its US prices, it's still going to be significantly cheaper

India has a really high import tax on electronic items. Even if Apple charges a slight premium over its US prices, it's still going to be significantly cheaper than what it currently is. For example: a 64 GB iPhone X is currently selling for around 1100 dollars.

arcticbull 7y ago
Or they keep them the same price and make even more impressive margins. There's a reason they have 87% of the world smartphone profit share [1] and it's not because they're giving them away or passing on the cost savings to their customers. Import duty on iPhones is 18% and 28% on iPads as of 2015. [2] Wealth inequality in India is pretty high (not as high as in the US, though, GINI 35.6 vs 40.4), and it's GDP per capita is just $1,939. Per your data, they're currently charging $1,100 which is a whopping 57% of GDP per capita. My gut tells me reducing the price of a super-luxury good by 18% won't increase demand enough to make up for pocketing the 18% savings. That would be like pricing an iPhone at $33,000 in America. I can't imagine reducing the price to $27,000 would dramatically increase the number of buyers. Or a Rolex from $100K to $82K. I guess we'll see! [1] https://www.forbes.com/sites/chuckjones/2018/03/02/apple-continues-to-dominate-the-smartphone-profit-pool/#1b332c1b61bb https://www.forbes.com/sites/chuckjones/2018/03/02/apple-con... [2] https://www.labnol.org/india/custom-import-duties/19306/ https://www.labnol.org/india/custom-import-duties/19306/
- iguy 7y ago
  Or else the cost of producing a relatively small number of phones inside India won't be as cheap as the global HQ operation. If import taxes were the only consideration, you might expect them to open a new small factory when the extra cost of running it was about equal to the taxes. Quite a few countries have car industries which work roughly like this -- the local VW plant will cost twice as much to run (per car) as the mothership, roughy matching a 100% import tax. (Although in reality there is often more to the story, like producing exactly one model there & exporting those for credit against imports...)
- seanmcdirmid 7y ago
  India raised it to 20% in 2018. https://money.cnn.com/2018/02/01/technology/india-iphone-tariffs-increase/index.html https://money.cnn.com/2018/02/01/technology/india-iphone-tar... Then there is 12% tax on top of that.
  - deleted 7y ago
    [deleted]
- simonh 7y ago
  Apple's market share in India is about 2% while in China it's about 7 percent. Apple's profit margin is generally about 30%. The import tax in India is now 20%. Lets suppose Apple could increase market share in India to match that in China by reducing prices by the 20% tax, and compare that to keeping the 20% as extra profit but not increasing market share. 2% market share on 50% profit margin (existing 30% margin plus tax margin of 20%) sounds pretty good. However 30% profits on 7% market share yields more than double the overall profits. Finally, all the arguments you make for charging more apply equally well anywhere in the world. So why doesn't Apple charge India prices everywhere in the world already? A simple argument that increased profit margin always beats higher sales implies that the perfect price point is infinity. At some point this strategy must yield diminishing returns.
  - glogla 7y ago
    > Finally, all the arguments you make for charging more apply equally well anywhere in the world. So why doesn't Apple charge India prices everywhere in the world already? They kind of do, except they're slowly easing into it. First iPhone was 499 USD for the base model. iPhone X was 999 USD for the base model. So over 10 years, they slowly raised their prices 100 %.
- vbezhenar 7y ago
  Sales might even reduce, because some people might not consider them luxury enough anymore.
Alterlife 7y ago
> a 64 GB iPhone X is currently selling for around 1100 dollars. That isn't right. The iPhone X costs (just under) 1,00,000 INR retail in India, which is over 1400 usd. This includes taxes. For reference: https://www.flipkart.com/mobiles/apple~brand/pr?sid=tyy,4io& https://www.flipkart.com/mobiles/apple~brand/pr?sid=tyy,4io&
- dmitriid 7y ago
  That’s what Apple usually does: they keep roughly the same digits, and change the currency. And it usually makes their products significantly more expensive outside of the US. I live in Sweden, and the pricing will go like this: - The US: $999 - The EU: €999 - Sweden: 9900 SEK Depending on currency rates, it can become up to 30% more expensive. My favorite discovery was around the time of the trashcan MacPro. It was cheaper to fly to New York, buy the Mac, and fly back than to buy one in Sweden. And you would still have money left over.
  - jrockway 7y ago
    Canada: $1379. (On the $999-in-the-US iPhone XS.) They do not always use the round numbers.
    - ido 7y ago
      Seeing as most Canadians live near the US border maybe they go closer to American prices there as there's a lower barrier for Canadians to cut the fat margins by crossing the border and buying in the US?
      - gruez 7y ago
        Considering that 1000 USD is 1340 CAD, you're only saving around 40 CAD for your troubles. That doesn't seem worth it if you value your time.
        ido 7y ago

arcticbull 7y ago

Or they keep them the same price and make even more impressive margins. There's a reason they have 87% of the world smartphone profit share [1] and it's not because they're giving them away or passing on the cost savings to their customers. Import duty on iPhones is 18% and 28% on iPads as of 2015. [2] Wealth inequality in India is pretty high (not as high as in the US, though, GINI 35.6 vs 40.4), and it's GDP per capita is just $1,939. Per your data, they're currently charging $1,100 which is a whopping 57% of GDP per capita. My gut tells me reducing the price of a super-luxury good by 18% won't increase demand enough to make up for pocketing the 18% savings. That would be like pricing an iPhone at $33,000 in America. I can't imagine reducing the price to $27,000 would dramatically increase the number of buyers. Or a Rolex from $100K to $82K. I guess we'll see! [1] https://www.forbes.com/sites/chuckjones/2018/03/02/apple-continues-to-dominate-the-smartphone-profit-pool/#1b332c1b61bb https://www.forbes.com/sites/chuckjones/2018/03/02/apple-con... [2] https://www.labnol.org/india/custom-import-duties/19306/ https://www.labnol.org/india/custom-import-duties/19306/

iguy 7y ago
Or else the cost of producing a relatively small number of phones inside India won't be as cheap as the global HQ operation. If import taxes were the only consideration, you might expect them to open a new small factory when the extra cost of running it was about equal to the taxes. Quite a few countries have car industries which work roughly like this -- the local VW plant will cost twice as much to run (per car) as the mothership, roughy matching a 100% import tax. (Although in reality there is often more to the story, like producing exactly one model there & exporting those for credit against imports...)
seanmcdirmid 7y ago
India raised it to 20% in 2018. https://money.cnn.com/2018/02/01/technology/india-iphone-tariffs-increase/index.html https://money.cnn.com/2018/02/01/technology/india-iphone-tar... Then there is 12% tax on top of that.
- deleted 7y ago
  [deleted]
simonh 7y ago
Apple's market share in India is about 2% while in China it's about 7 percent. Apple's profit margin is generally about 30%. The import tax in India is now 20%. Lets suppose Apple could increase market share in India to match that in China by reducing prices by the 20% tax, and compare that to keeping the 20% as extra profit but not increasing market share. 2% market share on 50% profit margin (existing 30% margin plus tax margin of 20%) sounds pretty good. However 30% profits on 7% market share yields more than double the overall profits. Finally, all the arguments you make for charging more apply equally well anywhere in the world. So why doesn't Apple charge India prices everywhere in the world already? A simple argument that increased profit margin always beats higher sales implies that the perfect price point is infinity. At some point this strategy must yield diminishing returns.
- glogla 7y ago
  > Finally, all the arguments you make for charging more apply equally well anywhere in the world. So why doesn't Apple charge India prices everywhere in the world already? They kind of do, except they're slowly easing into it. First iPhone was 499 USD for the base model. iPhone X was 999 USD for the base model. So over 10 years, they slowly raised their prices 100 %.
vbezhenar 7y ago
Sales might even reduce, because some people might not consider them luxury enough anymore.

Alterlife 7y ago

> a 64 GB iPhone X is currently selling for around 1100 dollars. That isn't right. The iPhone X costs (just under) 1,00,000 INR retail in India, which is over 1400 usd. This includes taxes. For reference: https://www.flipkart.com/mobiles/apple~brand/pr?sid=tyy,4io& https://www.flipkart.com/mobiles/apple~brand/pr?sid=tyy,4io&

dmitriid 7y ago
That’s what Apple usually does: they keep roughly the same digits, and change the currency. And it usually makes their products significantly more expensive outside of the US. I live in Sweden, and the pricing will go like this: - The US: $999 - The EU: €999 - Sweden: 9900 SEK Depending on currency rates, it can become up to 30% more expensive. My favorite discovery was around the time of the trashcan MacPro. It was cheaper to fly to New York, buy the Mac, and fly back than to buy one in Sweden. And you would still have money left over.
- jrockway 7y ago
  Canada: $1379. (On the $999-in-the-US iPhone XS.) They do not always use the round numbers.
  - ido 7y ago
    Seeing as most Canadians live near the US border maybe they go closer to American prices there as there's a lower barrier for Canadians to cut the fat margins by crossing the border and buying in the US?
    - gruez 7y ago
      Considering that 1000 USD is 1340 CAD, you're only saving around 40 CAD for your troubles. That doesn't seem worth it if you value your time.
      - ido 7y ago