Ringing Bells, an Indian company founded in 2015, shocked the mobile world when it announced that it would launch a smartphone called Freedom 251 that would only cost Rs 251! Within hours of the announcement, the whole tech world was abuzz with the news. The announcement gained mixed responses from critics and consumers alike. While some praised the company for coming up with the cheapest smartphone ever, others called it a marketing gimmick as the cost of production was estimated to be about 10 times the offer price. The company website recently started accepting online pre-orders for the phone and it has promised delivery in 4 months to customers.
Amid speculation as to how the company was planning to cover its costs, Ringing Bells president Ashok Chadha gave an interview to clear all doubts.
He agreed that the general assumption would be to sell such a phone at Rs 2,300 or Rs 2,500. The idea of selling the phone at Rs 251 came to him and his colleague Mohit Goel, a director at Ringing Bells, on a midnight stop at a dhaba on the highway. With the goal of achieving the Rs 251 goal, they went back to the drawing board and calculated that they could bring the price down to Rs 800. The company will pass on the 13.8 per cent duty protection (around Rs 450-Rs 470) for Make in India to the customer. And they will be saving an additional Rs 530 from the economies of scale (given that the company plans to mass produce the phone) which theoretically will bring down the costs. Another Rs 460 is said to be saved from marketing and selling costs (given that the company is largely opting for online sales). This still leaves a wide gap between the Rs 251 price tag and the costs that according to his calculations, is Rs 800. “I am selling at Rs 251. So I have to cover Rs 550,” says Chadha.
This balance, according to Chadha, will be recovered by the earnings from a marketplace that the company will be setting up. “So here is my marketplace, you want to sell something, come to me, pay me revenue for it, and I will pass the revenue on to my customer,” he says. That’s how, according to the company, the Freedom 251 can sell for Rs 251.
June 2016 will be a decisive month for the company as it is going to be the month in which the first shipments to customers are expected. If the phone clicks, Ringing Bells will be the new game changer in the industry.
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