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Gray market for iPhone 6S thrives in India

The high price tags for iPhones in India have triggered entrepreneurs to offer cheaper deals through the country's gray market.

The high price of the iPhone in India is triggering a surge in gray market sales. CNET

Apple's latest iPhones are selling fast in India, but not necessarily through official retailers.

The iPhone 6S and iPhone 6S Plus landed in India on Friday. Initial sales through authorized channels were mixed, according to the India-based Economic Times. Several stores reported sales 40 percent lower than those last year, the Economic Times reported, while gray market hubs across the country were selling out of the new smartphones.

The problem? India has the highest prices for iPhones of any country in the world, partly due to steep taxes and a weak rupee. As a result, the gray market has grown for iPhones purchased outside the country.

The iPhone 6S officially sells in India for a starting price of 62,000 rupees ($955), while the iPhone 6S Plus starts at 72,000 rupees ($1,110). That compares with $649 and $749, respectively, in the US. The prices in India have led gray market sellers to offer the phone at a lower cost, luring in buyers who otherwise couldn't afford the phone. Gray market sales are legal but unauthorized by manufacturers such as Apple.

The situation is a thorny one for Apple. High prices could alienate consumers in the nation of more than 1.2 billion people, which is the fastest growing smartphone market in the world. Apple needs sales in place like India because more established markets such as the US and China have become saturated, meaning fewer first-time buyers.

Gray market dealers typically buy products in locations where they are cheap and then resell them in a country like India at a price high enough to make a profit but lower than the full retail cost. Gray market prices seen for the iPhone have been around 5,000 rupees to 11,000 rupees less than the official price, the Economic Times noted.

The higher prices in India stem from at least a couple of issues. India has increased the import tax on smartphones to encourage consumers to buy from Indian companies. The Indian rupee has also softened against the dollar, so people in India need more of their currency to buy US products, the Economic Times said.

Can Apple do anything to stem the tide of gray market iPhone sales? One idea already discussed by Indian Prime Minister Narendra Modi and Apple CEO Tim Cook is to manufacture iPhones intended for India in the country itself. Local manufacturing could lower the overall cost of the phones and would eliminate the import tax.

Apple did not immediately respond to CNET's request for comment.