news Chinese PC manufacturer Lenovo has sought to clarify the Australian pricing on the new ‘Carbon’ version of its popular ThinkPad X1 laptop, issuing a statement noting that Australian customers would only pay 22 percent more for the model instead of 60 percent as previously believed.
The ThinkPad X1 Carbon is the newest version of the ThinkPad X1, billed as one of Lenovo’s top-end machines and a popular device in Australia’s business market due to the long-standing build quality of Lenovo’s laptops and their suitability for hard-wearing corporate use. The new model has been constructed with carbon fibre to make it “the world’s lightest 14″ business-class” laptop in the Ultrabook class, according to Lenovo — coming in at 1.36kg.
When the company announced its Australian release last week, Lenovo said Australian pricing for the Carbon would start at AU$1,999, including GST. According to a US Lenovo media release, the Carbon was to sell in the US for prices starting from US$1,299 (AU$1,244) — a markup of about 60 percent. However, in a statement issued over the weekend, Lenovo said its media releases had been misconstrued.
“Lenovo ANZ is providing clarification on ThinkPad X1 Carbon pricing due to some inaccuracies in articles that have appeared following the launch on Thursday 23 August. The ThinkPad X1 Carbon is available in Australia with a 1 year warranty and a home edition operating system from an ‘AU on-line street price’ of AU$1,589,” the company said. “In several media reports, the pricing of two different models have been compared. A ThinkPad X1 Carbon with a 3 year warranty and a full Windows 7 professional operating system at ‘Full RRP’ of AU$1,999 has been compared with a ‘US on-line street price’ of US$1,299 for a product equipped with a 1 year warranty and a Windows 7 home edition operating system.”
Lenovo would like to emphasise the difference between the full ‘Recommended Retail Price’ versus ‘On-line street price’. The price listed on its press release (distributed on Thursday 23 August), AU$1,999, is the Australian ‘Recommended Retail Price’ based on a 3 year warranty and highest level operating system. This is a guide price only and local sellers and the website will decide an appropriate street price under normal market conditions. For example, by accessing the Australian website which reflects the on-line street price, one will find that the ThinkPad X1 Carbon that is available in the US for US$1,329 is available in Australia for AU$1,589.”
US$1,329 equates to AU$1,294.29 by today’s exchange rates, meaning the Australian Carbon price of AU$1,589 is about a 22 percent markup on the US price. Lenovo said the difference in street price in Australia vs the USA was because Lenovo provided its local customers with a “local warranty, local delivery and local service”.
However, another major manufacturer, Apple, has broadly harmonised the Australian prices of its MacBook laptop line with its US pricing. The laptops compete directly with Lenovo’s ThinkPad line and are increasingly popular in corporations. The news comes as Federal Parliament is currently holding an inquiry into pricing markups on technology goods and services sold by international suppliers in Australia, with Lenovo one company which has come under the spotlight in the process. Lenovo has not made a submission to the inquiry.
I wish to apologise to readers for our original coverage of this issue. I made two mistakes in Delimiter’s original article on this subject. Firstly I got the percentage figure wrong — we reported the Carbon had a 37 percent markup, when in fact the correct calculation would have been 60 percent. In addition, I didn’t go to Lenovo’s retail website to check that the two models being compared were accurate.
The first mistake was just poor maths, but I think the second one was pretty understandable, given that I merely took the same figure from two almost identical Lenovo ThinkPad Carbon media releases (the Australian and US ones) and compared them. And Lenovo was right to point out that journalists got this wrong (I wasn’t the only one).
However, moving on, there is a greater issue here. Why is it possible for Apple to achieve price parity for its laptops being sold in Australia, but not Lenovo?
To answer this question, I went to have a look at Lenovo’s Australian financial records. According to the company’s most recent filing with financial regulator the Australian Securities and Investments Commission, Lenovo made some $368.7 million from its Australia and New Zealand subsidiary for the year to 31 March 2012, a figure down substantially from 2011, when the company made $406.6 million. Of that figure, Lenovo only spent $29.8 million on marketing and distribution costs, and another $9.9 million on administration.
Neither of these figures obviously justifies Lenovo’s implication that the company is spending a lot of money in Australia supporting local customers. Of course, those support costs could be bundled into the overall cost of goods sold, which for Lenovo was $343.9 million this year. We just don’t know. In any case, Lenovo A/NZ disclosed that it made just $1.2 million in profits over the past year — and paid income tax of just $703,797. The company has 164 staff locally.
In comparison, of course, Apple Australia is much bigger — its own ASIC statements show it made $4.88 billion in the year to 24 September 2011, with some 1505 local staff. Apple made $190 million in local profits over that period, with $94 million being taken out for tax.
Does Apple’s much larger size than Lenovo mean it can afford to absorb extra local costs from operating in Australia? Or does Apple organically make enough margin on its MacBooks that the extra cost isn’t an issue? I’m not sure, although of course I believe a business-focused manufacturer like Lenovo is also making substantial margin on its gear. But as a consumer, I do know one thing: I just don’t believe a 22 percent markup on laptops sold in Australia is justified.
Image credit: Lenovo