Why a price of Rs 20,000 for Xiaomi Mi4 in India is highly unlikely

With Xiaomi confirming that the Mi4 will be launched in India on Jan 28, there is a lot of speculation about the price, with a leading daily claiming the price will be around Rs 20,000.


While the phone is not exactly a bad buy even at Rs 20,000, here’s why the Xiaomi Mi4’s price will be lower than Rs 20,000 and closer to around Rs 16,000.

1) Xiaomi has built up a huge fan base in India by pricing its phones cheaper (much cheaper) than its competition in India. The Mi3, which could easily have fetched a price of Rs 23,000, was sold in India for just Rs 13,999.

2) Xiaomi’s business model is not to sell its phones with a decent profit. In fact, the company sells its phones largely at cost. There are unconfirmed reports that in case of Mi3, it was actually sold below cost. Xiaomi makes its money through content and app partnerships and by leveraging its eco-system of users.

3) Xiaomi Mi4, though it is being sold for $370 (Rs 22,900) on its official Chinese webportal, is actually a pretty old model. The company is likely to unveil the phone on January 28 and the first flash sales are likely to happen in early February. Most users are likely to get hold of their Mi4 by March or April. That is about 7 months from when the phone was actually unveiled in China in July last year. In the tech world, a 7-month old product is almost halfway into its lifecycle.

4) Xiaomi’s trackrecord with Mi3 shows that they price their flagship model lower in India than in China. For example, Mi3 was launched in China at a price of 1,999 Yuan (Rs 19,999) in October 2013. The price was cut to 1,500 Yuan (Rs 15,000) in June 2014. In July — nine months after the model was launched in China — Xiaomi launched the Mi3 in India for Rs 13,999. It is notable that at the time, it was selling the phone at Rs 15,000 in China.

Xiaomi’s business model is to launch only a few models, sell as cheap as possible by increasing the volume as much as possible and finally capture as much market share and profit as possible through this high volume. As such, pricing the Mi4 at Rs 20,000 is unlikely to give the company the kind of volumes that the Mi3 did. In fact, in preparation for the launch of the Mi4, Huawei has cut the price of its Honor 6 phone, which looks almost the same as the Mi4 and has almost exactly the same specifications, to Rs 17,999. We expect the price to be around Rs 16,000 for the LTE version and Rs 14,000 for the 3G version.
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