How much to make a car?

[bluenosewrx]

Ive always wondered in the actual cost of making a car and the profit margins involved.

It would i suppose have to be in % terms and must be loads of variables involved, projected prices, facelifts, demand etc

or do they just charge loads and if they have a shortfall the profit on cars sold covers it, and usually the odd special edition when they are coming to end of that model.

I realise that they are hundreds of differnt ways of costing but my guess is about 25% of cost to customer is pure profit or am i way off the mark??

Mac

[Ozzie Osmond]

Cost of building factory?
Cost of R&D?

There's really no answer to your question.

[Ozzie Osmond]

bluenosewrx said:

about 25% of cost to customer is pure profit or am i way off the mark??

Yup, about a million miles off target. Margins tend to be very tight in the motor industry, not least because it's highly competitive. Just because cars are expensive to buy doesn't mean they there's loads of profit.

It's probably fair to say that for mainstream car companies almost all the profit is made on "extras" rather than on the basic car.

[Shurv]

For a mainstream volume model, the actual cost of making the car is quite small, BUT, by the time you've added in the cost of distribution, cost of sales, marketing and promotion, this will add up and the manufacturer actually makes very little overall. The actual cost of making it is likely to be about a third of the pre vat price, then everything else comes in. Marketing costs can slurp up several thousand pounds on every car sold, it's quite scary.

[-Z-]

Total income of Volkwagen Group 2013 : €197billion

Profit : €9billion

So roughly 5% profit margin per item produced. Not much is it?

[Kozy]

-Z- said:

Total income of Volkwagen Group 2013 : €197billion

Profit : €9billion

So roughly 5% profit margin per item produced. Not much is it?

Pffft, wouldn't get out of bed for that.

[furtive]

Someone told me recently that 60% of cars sold in Europe are sold at a loss.

Don't most car companies make their money on finance these days?

[Cyder]

For a B-C segment hatchback you'd not be far off the mark if you assume the raw cost of the parts that the OEM pays is approximately 60% of the RRP of the car.

Then from the remaining 40% you've got the factory overheads, profit, R+D cost etc etc.

That part cost also generally doesn't include the tooling costs (except on small volume vehicles) which for some components can be into the £millions so that has to also be paid back from the 40%.

The profit margin is not high at all on new cars.

[bluenosewrx]

Wow, thought it would have been a bit more than the 5%, especially with the shared engine and platforms on multiple cars these days would re coup a lot of the costs.

[-Z-]

Kozy said:

-Z- said:

Total income of Volkwagen Group 2013 : €197billion

Profit : €9billion

So roughly 5% profit margin per item produced. Not much is it?

Pffft, wouldn't get out of bed for that.

Taking it further, 9 million cars made gives

£780 profit per car.

Actually lower than this, because this is dividing the profits of the whole group including spares, finance etc.

[rob.e]

As above, the "easy" way to work this out is to look at the manufacturer posted profits and divide by how many cars they sold.

I'll do lotus; £159m loss in 2013, sold 1,232 cars, so that's a loss of £129k per car i think?





lotus numbers from here: http://www.pistonheads.com/news/default.asp?storyI...

[Cyder]

bluenosewrx said:

Wow, thought it would have been a bit more than the 5%, especially with the shared engine and platforms on multiple cars these days would re coup a lot of the costs.

Even to get to that 5% involves beating the suppliers repeatedly over the head and analysing parts in microscopic detail to drive down costs along with making decisions that joe public looks at and thinks "WTF?" with regards to spec and toys that are or aren't fitted to his car.

It's a tough industry. But quite rewarding occasionally.

[marshalla]

rob.e said:

As above, the "easy" way to work this out is to look at the manufacturer posted profits and divide by how many cars they sold.

I'll do lotus; £159m loss in 2013, sold 1,232 cars, so that's a loss of £129k per car i think?





lotus numbers from here: http://www.pistonheads.com/news/default.asp?storyI...

Except that those figures are for the Group, not just the car manufacturing company.

[thinkofaname]

Ozzie Osmond said:

Yup, about a million miles off target. Margins tend to be very tight in the motor industry, not least because it's highly competitive. Just because cars are expensive to buy doesn't mean they there's loads of profit.

It's probably fair to say that almost all the profit is made on "extras" rather than on the basic car.

I agree. You only have to look at the "don't buy me" specs of some base models to work out that such models must make virtually no profit for the manufacturers. Who would buy a new car these days with no central locking, even as an option, never mind luxuries like painted bumpers and a radio? Hardly anybody. The mid-level trims are much more popular and presumably profitable. Therefore the break-even price is somewhere between the two, probably close to the price of the base model.

[zeppelin101]

Which is why platform and engine sharing across the industry (not just within an OEM) is very popular right now.

Look how many companies use the 1.6 PSA diesel in their range.

[0llie]

Ozzie Osmond said:

It's probably fair to say that for mainstream car companies almost all the profit is made on "extras" rather than on the basic car.

I was told by someone who worked on the development of the original 2001 MINI that at £10,300 list price of the One, they were breaking even to within a couple of pounds, hence almost everything being a chargeable extra and zero dealer discount No stats to back this up, just what the guy said to me.

ETA: I'd love to know what the markup is on optional extras, especially the really expensive stuff like Hi-Fi upgrades, sunroofs, radar cruise and such.

[valiant]

It seems that manufacturers are seen as finance houses that just happen to make cars. Certainly not a lot of money to be made for mainstream cars.

[Amirhussain]

-Z- said:

Total income of Volkwagen Group 2013 : €197billion

Profit : €9billion

So roughly 5% profit margin per item produced. Not much is it?

Wow.

[veevee]

0llie said:

I was told by someone who worked on the development of the original 2001 MINI that at £10,300 list price of the One, they were breaking even to within a couple of pounds, hence almost everything being a chargeable extra and zero dealer discount No stats to back this up, just what the guy said to me.

ETA: I'd love to know what the markup is on optional extras, especially the really expensive stuff like Hi-Fi upgrades, sunroofs, radar cruise and such.

Probably fairly easy to guestimate? Sat Nav has got to be the worst value option, surely? Vastly expensive, and outdated within a few years.

[Zoobeef]

You wonder how much gets cut out through the design to manufacture process. I assume prototypes are the ideal then, as cost are looked at, bit by bit things are cut and cheaper thing used etc.

I wonder what the ideal ones are like to drive though.