OnePlus raised more than a few eyebrows when it announced the pricing of the OnePlus 8 series, especially the Pro variant. Starting at $899 and touching the ‘bonafide premium’ price tag of $1000 was a move no one had anticipated. After all, this is OnePlus we’re talking about, a brand that has garnered a solid fanbase by offering ‘flagship killers’ at half the price of your average flagships.
But this was just the beginning, as the brouhaha truly intensified when OnePlus revealed the price of OnePlus 8 series for the Indian market. And believe me, I would be genuinely irked if I was a US-based customer. But wait! Isn’t that’s an all too familiar feeling for Indian customers when it comes to iPhones? And not just this year, but ever since the first iPhone made its way to the Indian market.
Why OnePlus is elephant in the room in 2020?
But let’s keep the focus on OnePlus first, and understand why the huge price disparity between the US and Indian market has stirred a furor. Just look at the price void and try to wrap your head around what happened here:
|OnePlus 8 Pro (8GB + 128GB)||Rs. 54,999 (~$720)||$899||$180|
|OnePlus 8 Pro (12GB + 256GB)||Rs. 59,999 (~$790)||$999||$210|
|OnePlus 8 (6GB + 128GB)||Rs. 41,999||Not available|
|OnePlus 8 (8GB + 128GB)||Rs. 44,999 (~$590)||$699||$110|
|OnePlus 8 (12GB + 256GB)||Rs. 49,999 (~$650)||$799||$150|
As you can see in the table above, the gap between the OnePlus 8 Pro’s asking price in India and the US eclipses the $200 mark. To put that into context, you’ll get a decent phone like Realme 6 for less than $200 in India. At that ‘dirt cheap’ price, it gives you specs such as a 90Hz display (no kidding), quad rear cameras with a 64MP main sensor (again, not being sarcastic here), and a fairly large 4,300mAh battery with 30W fast charging support.
Of course, $200 is a price difference large enough for US customers to be genuinely vexed about. But for India, where the largest share of smartphones sold in the country falls around the $200 price bracket, the magnitude of that price gap is exponentially higher.
OnePlus 8 in the US today is iPhones in India every year
And now that we are talking about price disparity, let’s talk about Apple and the historically high pricing of iPhones in India. But before we go into comparisons, do keep in mind that even Apple recognizes the fact that iPhones are indeed expensive in India. Back in 2016, Tim Cook admitted on his visit to India that the prices are high and reasoned that it is due to duties and the taxes that compound and raise the price bar.
Take for example the iPhone X, which started at $999 and went up to $1,149 for the top-end storage model in the US. But in India, the iPhone X started at Rs. 89,000, which translates to roughly $1,400 by the conversion rate back then. And following a few price hikes owing to the increase in import duties and taxes, the 256GB iPhone X was selling at Rs.109,000 (~$1,700) in early 2018.
“Imagine paying $1,700 for an iPhone in 2018, and try to relate that with the outrage Samsung courted for the $1,500 Galaxy S20 Ultra in 2020!”
Now, let’s talk about the pricing of Apple’s phones in 2020 for the two markets. It’s worth mentioning here that Apple hiked prices of its products in India again in 2020 after the Indian government raised customs duty this year. Here’s how much the iPhone 11 lineup costs in India vs the US right now:
The price gap
|iPhone 11 (64GB)||Rs. 68,300 (~$900)||$699||$200|
|iPhone 11 (128GB)||Rs. 73,600 (~$970)||$749||$220|
|iPhone 11 (256GB)||Rs. 84,100 (~$1,100)||$849||$250|
|iPhone 11 Pro (64GB)||Rs. 1,06,600 (~$1,400)||$999||$400|
|iPhone 11 Pro (256GB)||Rs. 1,21,300 (~$1,600)||$1,149||$450|
|iPhone 11 Pro (512GB)||Rs. 1,40,300 (~$1,840)||$1,349||$500|
|iPhone 11 Pro Max (64GB)||Rs. 1,17,100 (~$1,540)||$1,099||$440|
|iPhone 11 Pro Max (256GB)||Rs. 1,31,900 (~$1,730)||$1,249||$480|
|iPhone 11 Pro Max (512GB)||Rs, 1,50,800 (~$1,980)||$1,449||$530|
Compared to the OnePlus 8 series, the top-end iPhone 11 Pro Max costs $530 more in India than it does in the US. In fact, you can buy two unlocked iPhone 11 Pro (64GB) units in the US for the price of one iPhone 11 Pro Max (512GB) in India. To say that the price gap is huge would be an understatement. $1,980 for a phone?
“Tell me more how bad it feels to pay an extra $200 for the OnePlus 8 Pro in the US.”
And this begs the all too important – Why the preferential treatment? There are many reasons behind the controversial pricing scheme that OnePlus has adopted in 2020, and Apple, ever since it launched its first iPhone in India. And the clearest explanation for that is apparently market prioritization.
Market priorities differ for OnePlus and Apple
India has become the largest smartphone market for OnePlus in the world, ahead of China and US. OnePlus alone accounts for over a third of India’s smartphone shipments in the premium segment as of 2020. That figure is way ahead of Apple and Samsung, and continues to grow at an impressive pace.
But the company is not just content with a solid market position. OnePlus currently has its largest R&D center located in India and plans to make it the hub of software development with huge expansion and investment plans for the future. More importantly, 100% of the phones sold by OnePlus in India are assembled locally.
Local manufacturing is the key here
And this one’s a no-brainer. Local manufacturing saves a lot of money and helps the company keep the prices in check. Even though OnePlus stills relies on importing certain components, the company is working to further localize the whole process.
“We are looking to improve scale via exports and expanding the local market. Once we reach a critical mass, we will probably look at setting up our own manufacturing unit,” OnePlus India General Manager, Vikas Agarwal, said in an interview with Quartz last year.
Above all that, OnePlus has carved a solid fan following among the new generation of smartphone users in India. This can mainly be attributed to its rather aggressive customer-first approach, frequently conducting community meetups to take feedback and creating the aura of an approachable brand, all over a cup of coffee.
“OnePlus cares more about India, Apple prioritizes the US market“
Apple, on the other hand, is a company that remains more dominant in the west due to less market competition. And this goes without saying that the US market is at the center of it all. As per Counterpoint data, 49% of all smartphones shipped in Q4 2019 in the US were from Apple, irrespective of any price segment or other such distinctions. Now, that is absolute dominance.
But aside from lower-than-rest-of-the-world pricing for iPhones, Apple also offers more features and services to its users in the US compared to Asian markets like India. While this can’t be called a neglectful treatment or an outright bias, it does send a clear message that Apple’s market focus is not evenly distributed.
Another key aspect called consumer behavior comes into play here, something that allows Apple to lock users to its ecosystem. The best example of this trend is iMessage, which keeps a lot of iPhone users from ever switching to the Android side of the smartphone ecosystem. But as you cross the US border and venture into the Asian market, iMessage is not a big deal.
And then you have an index called purchasing power. In India, purchasing power is still a fraction of what the US offers for Apple, and the same can be said about consumer services that go with Apple’s hardware. Be it in-app spending or subscription to services (which are now a bigger deal than ever), US offers greener pasture for Apple while India lags far behind.
Why are iPhones expensive in India?
From the Indian perspective, there are a lot of factors that lead to a disproportionately high price for iPhones in India. High import duty is the main culprit here. The Indian government recently increased the import duty on smartphones but made components destined for local assembly duty-free (or taxable at a lower rate).
This was done to push local manufacturing, an initiative that is now known as ‘Make in India.’ And yeah, having a ‘Made in India’ badge does help avoid additional taxes. Apple currently lags behind when it comes to domestic manufacturing facilities in India, and still relies on imports for selling its newer, higher-end iPhones in the country.
“To put it simply, imports mean a higher price tag”
The best example of this phenomenon is the iPhone XR. Apple started assembling the iPhone XR in India back in October last year, and since then, the price of iPhone XR has significantly come down. These days, the iPhone XR can be purchased for around Rs. 45,000 in India, down from its launch price of Rs. 76,900. For the likes of iPhone 11, they are imported and are therefore offered without any lucrative discounts.
In addition to import duties and taxation dues, there is also the problem of currency fluctuation rates. We’ve seen multiple brands absorb the forex loss that comes as a result of currency exchange rate fluctuations, but Apple has a strict policy of maintaining profits. So, any major upheaval in exchange rates directly translates to a price hike sooner or later. Also, the aggressive marketing in the uber-competitive Indian market comes at a cost, so that has to be factored in as well.
“Apple is not too keen to play the discount game“
Another factor that is often overlooked is Apple’s apprehension toward offering deep discounts. An iPhone has a huge aspirational value in a developing market like India and is still seen as a luxury commodity, which is something not many people associate with discounts and sale offers. Apple knows that all too well, and aside from the usual price cuts that come when a new generation iPhone is launched, there is rarely a heavy discount on iPhones, especially the new ones.
The message is clear
OnePlus has sold limited edition phones in India in the past, but they were mostly for marketing hype. However, launching an altogether different version of the OnePlus 8 with less RAM (but still sufficient at 6GB) to keep the cost down especially for the Indian market. Similarly, the company has also tamed the Oneplus 8 Pro’s asking price in India by a significant margin compared to the US market.
All this sends a clear message. Even though OnePlus’ profit margin in India is not as high as the US, OnePlus won’t risk alienating buyers in its biggest market by going for a price tag beyond their reach. And that means OnePlus phones will continue to play in a pricing tier that easily falls below Apple’s comfort zone in the Indian market.
“OnePlus won’t risk alienating buyers in its biggest market by going for a price tag beyond their reach“
Yes, the prices have gone up, but they are still significantly lower than what a current-generation Apple device, say the iPhone 11, costs in India. This price gap is what separates the OnePlus brand identity at its core from Apple’s consumer perception in India.
OnePlus will continue to be the value champion in India irrespective of what the US customers have to pay for its phones, while an iPhone will thrive as a best-in-class luxury device that asks a huge premium for that shiny Apple logo in India. And this status quo will survive as long as OnePlus keeps its fans in India happy, and Apple continues charging a fortune for its phones in the country.