Xiaomi is all set to launch its latest Redmi Note 3 Pro smartphone in India in two days and there are several media reports that it will price the 32 GB version below Rs 15,000.
According to market sources, the Chinese player will have to sacrifice its margin, or even offer subsidies to deliver the 32 GB version below Rs 15,000.
Of course, it won’t be the first time that a player has decided to book losses on a model. LeTV has done the same too for its Le 1s model. Xiaomi too did it for its first model, the Mi3.
To figure out the quantum of subsidy, one can look at the prices at which these phones are selling via China-based e-commerce companies such as Aliexpress.
First, let’s look at LeTV’s Le 1s phone, which the company said costs it Rs 16,000 in terms of costs, but is being sold at Rs 11,000.
The lowest price for the Le 1s on Aliexpress is Rs 12,340. Add import duties of around 15% and you get Rs 14,200. Add value-added-tax of 8% and you get Rs 15,300. Yet, the company is selling the phone for Rs 10,999 in India.
Next, let’s look at Redmi Note 3 Pro.
The lowest price on Aliexpress for the 3 GB version is Rs 16,812. Adding 15% import charges takes the price to Rs 19,333, and adding 8% VAT takes it to Rs 20,880.
However, unlike LeTV, Xiaomi has the ability to manufacture in India. This could reduce the import duty by around Rs 1,000. In addition, the sourcing cost of the Note 3 GB version will be only around Rs 13,000 since the company is getting it from its own warehouse.
Redoing the calculations on a new base of Rs 13,000, we add a 12% excise duty (assuming it is manufacturing in India), taking the price to Rs 14,560. Adding 8% VAT takes the total to Rs 15,725.
Now add a small distributor commission and shipping charges, and it’s very difficult to see how the Redmi Note 3’s total price can be less than Rs 16,000 in India.
It should also be noted that the the company did not announce the price of the 32 GB variant of its Pro version when it revealed the model for the first time in China, indicating that it didn’t want users in India to compare the price with China prices.
The Pro version has been designed largely to get over the ban on the sale of non-Qualcomm Xiaomi models in China imposed after Ericsson filed a patent infringement suit against the Chinese company.
Of course, given that the brand has not had any significant hits in India since the first version of the Note was launched a year ago, it is likely that we could see some attempt to keep the final price-tag on the device to around Rs 15,000. But, going by industry sources, the chances of that happening are not that bright.
So, why is this important? LeTV is holding an open sale of the Le 1s today till stocks last, and according to our poll, for every person who has bought a Le 1s today, there are two who are still undecided or waiting to know the Note 3’s pricing.