How And Why Ringing Bells Can Price It At Rs.251..?

Nehru Park in New Delhi is a stone's throw away from the Prime Minister's residence. It's a place people usually go to jog. Or picnics. Although, on some occasions it has also hosted cultural events like the Jazz Festival and the Palate Festival. On Wednesday, the Park was the setting for the launch of the world's cheapest smartphone. In an atmosphere what most would describe as apt for a big fat Indian wedding, with senior politicians in tow, Ringing Bells unveiled the Freedom 251, a smartphone with a price tag of Rs.251.

The phone has been made by Ringing Bells, a company where Ashok Chadha is the president. He took to the stage to explain the mythical and mysterious Freedom 251, although after a delay of almost an hour and a half. Also on the stage was senior BJP leader Murli Manohar Joshi. Defence Minister Manohar Parrikkar was supposed to attend the event, but apparently he was stuck in a cabinet meeting.

Chadha revealed the secret behind the company's disruptive pricing for the Freedom 251. "Let me clarify one thing, there's no government subsidy," he said. "The Freedom 251 takes full advantage of the benefits provided by Make in India and Start Up India."

He said that the Freedom 251 was the first product to fully leverage the advantages of these programmes and that apparently was also the reason why the company can sell it at a price of Rs.251.

The Freedom 251 is essentially an Adcom Ikon 4. Chadha also admitted that the phone has a cost of around Rs.2,500 in reality, but he highlighted some of the crucial elements to the business model behind the Rs.251 pricing.

In a nutshell, though, Chadha is talking about economies of scale that no smartphone maker, apart from perhaps Apple has ever attempted. He claims only through such insane levels of economies of scale the price of Freedom 251 makes business sense.

"If you look at the Indian market it is at 2 crore units a month. If you take 30 per cent of that, then you achieve economies of scale," he said. Chadha revealed that the phone will be initially manufactured in its Noida and Uttrakhand plants. He also revealed that these plants had humongous capacities and the company was looking at a yield of 5 lakh units per month from each plant. Over the course of the year, the company also wants to open at least three more plants around the country. "Because of the economies of scale we save reduce the cost of the phone by around Rs.500," revealed Chadha.

Although, the economies of scale doesn't explain how a company would be able to absorb loses when it will sell a phone with around Rs.2,000 manufacturing cost at a price of Rs.251. So Chadha tried harder to explain.

"First, we lose about Rs.400 on the Rs.2,500 price by getting a duty exemption," he added. The phone which is assembled mostly in India takes advantage of duty exemptions that amount to 13.8 per cent. The main cost that the company incurs is for the import of the system on chip (SoC).

The company also plans on selling the phone through its own online e-commerce platform, which cuts out the distributor and middle man. That also helps it reduce the cost of the phone further. "We save Rs.480 this way," said Chadha.

Even with this, the phone costs around Rs.1000, but Chadha believes that his company has some marketing trump cards up their sleeve which will make it a viable business. "Many players want to use our e-commerce platform to sell their products, so we make up the remaining Rs.700-800," he said.

In 12 months, Chadha hopes to capture 30 per cent of the Indian smartphone market, which is a bold ambition especially with the presence of global players. The company is backed by one Goel Family, which according to Chadha, has been in the agri-commodities business for more than 36 years. Mohit Goel is the director of the company. At the event, Goel even indicated that going forward Ringing Bells would introduce its own SIM.

Ringing Bells also announced that the company would later launch a phone in the Rs.2,000 bracket.

All in all, the company's claims were interesting. But something felt amiss about the whole event. We later realised what it was: Freedom 251 was not a part of it. Yes, at the event where the Freedom 251 was launched, the phone was nowhere to be seen

SOURCE