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Xiaomi India says can’t make losses while pricing aggressively

Xiaomi India head Manu Jain took to social media to justify the pricing of its new models Redmi K20 and Redmi K20 Pro compared to its previous models, saying the Chinese smartphone maker can’t be making losses and had kept its net profit margin below 5% as committed.

Jain’s open letter to fans came after a number of consumers expressed their displeasure – mainly on social media – and questioned the company’s changed strategy to seek premium pricing.

“We realized while millions have shown interest in the product series, but there are few who are critical of the pricing,” Jain said in the letter to fans on Thursday evening.

The previous day Xiaomi launched Redmi K20 for Rs 21,999 and Redmi K20 Pro for Rs 27,999, aimed at disrupting the premium segment of the Indian market, which typically is upwards of Rs 30,000.

“We could have used older generation processor to save money or waited six months for the component costs to come down, hence further reduce the price of Redmi K20, but that would have gone against our philosophy of bringing the latest innovation to you,” Jain added, explaining the decision to choose the latest Qualcomm Snapdragon 855 and 730 processors.

He added that the features on the models including the pop up camera on Redmi K20 Pro were comparable to models that would typically be priced in the Rs 40,000-50,000 range.

“We could have reduced prices by using cheaper materials like plastic or by compromising on quality, but we chose not to do it,” Jain added.

He said further that the company has stuck to its commitment of honest pricing, which is why the Redmi K20 series has less than 5% net profit. “While we respect everyone’s opinion, it is not correct to assume that we as a company will incur losses in order to make our products more aggressively priced.”

However, besides ardent Mi fans who trolled the brand for the high prices, rival smartphone brand Realme also took jibes at Xiaomi on social media saying that its latest model Realme X priced at Rs 16,999 was a better product at a much more competitive price. The new entrant in the smartphone space has been consistently taking potshots at Xiaomi and its CEO and has criticized its rival on several occasions.

On the issue of India pricing being higher than China, Jain added that the models came with internal storage of 128 GB – owing to usage patterns of Indians – compared to 64 GB available in the Chinese models. He explained that manufacturing costs have also gone up since the entire manufacturing technology had to be upgraded to make the highly complex flagship models completely in India, as opposed to other brands, which is why the pricing goes up by 20-40% compared to international prices.

Yet, the price difference between Chinese and Indian models with 256 GB storage was only 3%.

Source: Economic Times