Breakdown of a cars actual cost?
Discussion
It would appear that you can get some pretty heavy discounts on a new 6 series BMW, circa £20k. Which begs the question what does the car actually cost to make? I seem to remember when the A8 was first launched they spent something crazy like £14k per car on advertising. So what is the breakdown? I am guessing something like the following.
40% actual cost of building, materials, wages
15% profit margin for importer
10% profit margin Dealer
15% Design and development
10% warranty etc
10% advertising, marketing etc
I realise manufacturers like Pagani will be quite different but has anyone any idea?
40% actual cost of building, materials, wages
15% profit margin for importer
10% profit margin Dealer
15% Design and development
10% warranty etc
10% advertising, marketing etc
I realise manufacturers like Pagani will be quite different but has anyone any idea?
the parts cost of building a car is around 12-15k for a 3 series BMW. the development cost is around £2bn , dealer margin is around 14% with some additional volume bonuses that might take it to 25%, - but will mostly be given away, importer margins are around 30% as are the manufacturer margins.
The ford fiesta on sale since 1979 did not make profit until 2008.
the biggest issue is that the cost of developing a car is similar whichever manufacturer it is, but bmw can charge 10k more per car than ford can for a mondeo. If BMW sell 40k 3 series and Ford 40k mondeos, bmw will have additional revenues of £400,000,000 which is a lot of extra money to reinvest into the product.
The ford fiesta on sale since 1979 did not make profit until 2008.
the biggest issue is that the cost of developing a car is similar whichever manufacturer it is, but bmw can charge 10k more per car than ford can for a mondeo. If BMW sell 40k 3 series and Ford 40k mondeos, bmw will have additional revenues of £400,000,000 which is a lot of extra money to reinvest into the product.
Edited by Jerry Can on Wednesday 9th April 17:03
Jerry Can said:
the parts cost of building a car is around 12-15k for a 3 series BMW. the development cost is around £2bn , dealer margin is around 14% with some additional volume bonuses that might take it to 25%, - but will mostly be given away, importer margins are around 30% as are the manufacturer margins.
The ford fiesta on sale since 1979 did not make profit until 2008.
Thats remarkable about the fiesta?The ford fiesta on sale since 1979 did not make profit until 2008.
Small cars are almost never profitable for the manufacturer - they're there mainly to offer an 'entry vehicle' to the brand in the hope that owners will stick with the brand when they 'trade-up'.
They also typically offer a lot of extra volume to offset shared-component development and tooling costs, particularly in the current era (VAG I'm looking at you). Oh, and to improve the corporate average fuel economy, let's not forget that...
Conversely there's a HUGE margin on the list-price of a big exec machine or sub-supercar sports car - Porsche was the most profitable car mfr for a good few years prior to the VAG deal, remember...
They also typically offer a lot of extra volume to offset shared-component development and tooling costs, particularly in the current era (VAG I'm looking at you). Oh, and to improve the corporate average fuel economy, let's not forget that...
Conversely there's a HUGE margin on the list-price of a big exec machine or sub-supercar sports car - Porsche was the most profitable car mfr for a good few years prior to the VAG deal, remember...
havoc said:
Small cars are almost never profitable for the manufacturer - they're there mainly to offer an 'entry vehicle' to the brand in the hope that owners will stick with the brand when they 'trade-up'.
They also typically offer a lot of extra volume to offset shared-component development and tooling costs, particularly in the current era (VAG I'm looking at you). Oh, and to improve the corporate average fuel economy, let's not forget that...
Conversely there's a HUGE margin on the list-price of a big exec machine or sub-supercar sports car - Porsche was the most profitable car mfr for a good few years prior to the VAG deal, remember...
Could well believe that.They also typically offer a lot of extra volume to offset shared-component development and tooling costs, particularly in the current era (VAG I'm looking at you). Oh, and to improve the corporate average fuel economy, let's not forget that...
Conversely there's a HUGE margin on the list-price of a big exec machine or sub-supercar sports car - Porsche was the most profitable car mfr for a good few years prior to the VAG deal, remember...
If you think about it the cost of producing a car whether that's a Fiesta or Mondeo wouldn't be that different. Similar development costs, not that much more raw materials and similar promotional and after build costs. But the Fiesta can be had for around £10k and a Mondeo around £17k.
Jerry Can said:
the parts cost of building a car is around 12-15k for a 3 series BMW. the development cost is around £2bn , dealer margin is around 14% with some additional volume bonuses that might take it to 25%, - but will mostly be given away, importer margins are around 30% as are the manufacturer margins.
The ford fiesta on sale since 1979 did not make profit until 2008.
the biggest issue is that the cost of developing a car is similar whichever manufacturer it is, but bmw can charge 10k more per car than ford can for a mondeo. If BMW sell 40k 3 series and Ford 40k mondeos, bmw will have additional revenues of £400,000,000 which is a lot of extra money to reinvest into the product.
14%? Reeeeeeally? Fairly sure I've seen on here somewhere it's less than that, more like sub 10%.The ford fiesta on sale since 1979 did not make profit until 2008.
the biggest issue is that the cost of developing a car is similar whichever manufacturer it is, but bmw can charge 10k more per car than ford can for a mondeo. If BMW sell 40k 3 series and Ford 40k mondeos, bmw will have additional revenues of £400,000,000 which is a lot of extra money to reinvest into the product.
Edited by Jerry Can on Wednesday 9th April 17:03
As for the Fiesta fact....since the Fiesta on sale in 2008 bore absolutely no resemblance, visual or otherwise to the one on sale in 1979, how can anyone say they are somehow related in terms of profitability? Even if they were, I still call BS!
ETA I did a bit of temping at an injection moulding company a little while back, they were doing the seals for the rear quarter windows for the new Jag (XF I think) and I remember the engineer that looked after the machine said the 2 halves of the mould to produce this rubber seal were around £20K!
Each one was about 18" square, so god knows what the costs for everything else were!Edited by Centurion07 on Wednesday 9th April 17:46
Shambler said:
40% actual cost of building, materials, wages
15% profit margin for importer
10% profit margin Dealer
15% Design and development
10% warranty etc
10% advertising, marketing etc
You missed out profit margin for the manufacturer.15% profit margin for importer
10% profit margin Dealer
15% Design and development
10% warranty etc
10% advertising, marketing etc
The build cost is typically around 45% (of the pre-tax price).
Centurion07 said:
As for the Fiesta fact....since the Fiesta on sale in 2008 bore absolutely no resemblance, visual or otherwise to the one on sale in 1979, how can anyone say they are somehow related in terms of profitability? Even if they were, I still call BS!
I think he means the model line in all iterations was loss-making until '08...which I CAN believe...havoc said:
Centurion07 said:
As for the Fiesta fact....since the Fiesta on sale in 2008 bore absolutely no resemblance, visual or otherwise to the one on sale in 1979, how can anyone say they are somehow related in terms of profitability? Even if they were, I still call BS!
I think he means the model line in all iterations was loss-making until '08...which I CAN believe...Centurion07 said:
I still can't envisage a company like Ford continuing with a loss-making car for 29 years?! I know about loss-leaders and all but still.
Loss making perhaps if you attribute average costs of development - e.g., say 1 in 6 cars using a CVH engine was a Fiesta, therefore you attribute 1/6 of the development and tooling costs to the Fiesta. But if you hadn't had the Fiesta, your development costs might have been 99% of what they would have been and therefore the development cost per engine would have been ~20% higher in the Escort, etc.Plus every Fiesta sold was someone who didn't buy a Polo, etc. and therefore be in a prime position to trade up to a Golf rather than an Escort or Focus.
I doubt very much that it was ever cheaper for Ford to not bother selling you a Fiesta - but as an entry level car it would have generated economies of scale and grown lifetime customer value even if it didn't fully cover all the costs that *could* be attributed to the programme (rather than the marginal costs that were solely attributable to it).
havoc said:
Centurion07 said:
As for the Fiesta fact....since the Fiesta on sale in 2008 bore absolutely no resemblance, visual or otherwise to the one on sale in 1979, how can anyone say they are somehow related in terms of profitability? Even if they were, I still call BS!
I think he means the model line in all iterations was loss-making until '08...which I CAN believe...it could have lost an average £1m a year for the first 10 years, then made average £500k profit for the next 20, which could have been roughly within the business plan
or it could mean they constantly failed to turn a profit every year for 30 years, meaning that even the first year they made a profit, they'd still down 10s of millions
Shambler said:
I would of thought that smaller cars would tend to be the profit makers. Generally a lot sold and not big discounts. Quite surprising.
I think the problem is that smaller cars aren't actually much cheaper to make than big cars, but people expect to pay a lot less for them. The actual cost of the materials is pretty trivial and they tend to have roughly the same number and complexity of bits. I wouldn't be surprised if a 1-series is only 10% cheaper to make than a 5-series. The R&D costs wont be hugely different between the two, either.
Edited by kambites on Wednesday 9th April 17:59
Back in the day I used to analyse the financials of car companies so I can give you actual facts if you like.
This is old but true:
BMW in 2008: sold 1.4m cars at around EUR34k each.
That is money to BMW i.e. pre dealer margin, pre VAT, pre importer charges (who trust me do not charge 30% of the value of the car ha!!).
Now I don't have the full breakdown easily to hand but for BMW group (which includes the finance arm which screws it all up) they made a roughly 11% gross profit.
That means that materials and chaps putting it all together cost 89% of that EUR34k per car.
So call it roughly EUR30k.
They probably break out the labour further but it will be a big chunk of that because, you know, Germany.
(Warranty provisions are probably in there too.)
Now you have to consider that they advertise, distribute and develop new cars (as well as run their HQ).
They had about E5bn to do that in 2008 which is about EUR3,500 a car or 10%.
They didn't make much money that year (per car).
The Frogs and Italians generally lose money.
This is old but true:
BMW in 2008: sold 1.4m cars at around EUR34k each.
That is money to BMW i.e. pre dealer margin, pre VAT, pre importer charges (who trust me do not charge 30% of the value of the car ha!!).
Now I don't have the full breakdown easily to hand but for BMW group (which includes the finance arm which screws it all up) they made a roughly 11% gross profit.
That means that materials and chaps putting it all together cost 89% of that EUR34k per car.
So call it roughly EUR30k.
They probably break out the labour further but it will be a big chunk of that because, you know, Germany.
(Warranty provisions are probably in there too.)
Now you have to consider that they advertise, distribute and develop new cars (as well as run their HQ).
They had about E5bn to do that in 2008 which is about EUR3,500 a car or 10%.
They didn't make much money that year (per car).
The Frogs and Italians generally lose money.
Even different specs within a range can have price anomalies. I'm no expert in the industry however I do have little facts about certain cars I've had an interest in.
When Jaguar built the X-Type, for example, they designed it around the 3.0 V6. Someone decided they needed smaller engines in the range prior to going diesel so they produced the 2.5 and 2.1 V6. The 2.5 in particular was externally identical. Infact pretty much everything was identical except the cylinder bore size. The 2.5 engine cost exactly the same to produce as the 3.0, but Jaguar had to sell it £4~5k cheaper. Ironically for the buyers, it used pretty much exactly the same fuel as the 3.0 too and cost the same to service and tax, so other than saving a few k at initial purchase, they just got a 3.0 X-Type which didn't accelerate very quickly. The 2.1 was even worse.
When Jaguar built the X-Type, for example, they designed it around the 3.0 V6. Someone decided they needed smaller engines in the range prior to going diesel so they produced the 2.5 and 2.1 V6. The 2.5 in particular was externally identical. Infact pretty much everything was identical except the cylinder bore size. The 2.5 engine cost exactly the same to produce as the 3.0, but Jaguar had to sell it £4~5k cheaper. Ironically for the buyers, it used pretty much exactly the same fuel as the 3.0 too and cost the same to service and tax, so other than saving a few k at initial purchase, they just got a 3.0 X-Type which didn't accelerate very quickly. The 2.1 was even worse.
kambites said:
I wouldn't be surprised if a 1-series is only 10% cheaper to make than a 5-series. The R&D costs wont be hugely different between the two, either.
SUVs are massively profitable for the same reason. It was well publicised in the US that Ford was making $10,000 from every Explorer sold and they pretty well had the market to themselves for years. jamieduff1981 said:
Even different specs within a range can have price anomalies. I'm no expert in the industry however I do have little facts about certain cars I've had an interest in.
When Jaguar built the X-Type, for example, they designed it around the 3.0 V6. Someone decided they needed smaller engines in the range prior to going diesel so they produced the 2.5 and 2.1 V6. The 2.5 in particular was externally identical. Infact pretty much everything was identical except the cylinder bore size. The 2.5 engine cost exactly the same to produce as the 3.0, but Jaguar had to sell it £4~5k cheaper. Ironically for the buyers, it used pretty much exactly the same fuel as the 3.0 too and cost the same to service and tax, so other than saving a few k at initial purpose, they just got a 3.0 X-Type which didn't accelerate very quickly. The 2.1 was even worse.
There days they wouldn't change the internals at all, just install a different ECU map and maybe a smaller turbocharger if it's worth the effort. When Jaguar built the X-Type, for example, they designed it around the 3.0 V6. Someone decided they needed smaller engines in the range prior to going diesel so they produced the 2.5 and 2.1 V6. The 2.5 in particular was externally identical. Infact pretty much everything was identical except the cylinder bore size. The 2.5 engine cost exactly the same to produce as the 3.0, but Jaguar had to sell it £4~5k cheaper. Ironically for the buyers, it used pretty much exactly the same fuel as the 3.0 too and cost the same to service and tax, so other than saving a few k at initial purpose, they just got a 3.0 X-Type which didn't accelerate very quickly. The 2.1 was even worse.
kambites said:
jamieduff1981 said:
Even different specs within a range can have price anomalies. I'm no expert in the industry however I do have little facts about certain cars I've had an interest in.
When Jaguar built the X-Type, for example, they designed it around the 3.0 V6. Someone decided they needed smaller engines in the range prior to going diesel so they produced the 2.5 and 2.1 V6. The 2.5 in particular was externally identical. Infact pretty much everything was identical except the cylinder bore size. The 2.5 engine cost exactly the same to produce as the 3.0, but Jaguar had to sell it £4~5k cheaper. Ironically for the buyers, it used pretty much exactly the same fuel as the 3.0 too and cost the same to service and tax, so other than saving a few k at initial purpose, they just got a 3.0 X-Type which didn't accelerate very quickly. The 2.1 was even worse.
There days they wouldn't change the internals at all, just install a different ECU map. When Jaguar built the X-Type, for example, they designed it around the 3.0 V6. Someone decided they needed smaller engines in the range prior to going diesel so they produced the 2.5 and 2.1 V6. The 2.5 in particular was externally identical. Infact pretty much everything was identical except the cylinder bore size. The 2.5 engine cost exactly the same to produce as the 3.0, but Jaguar had to sell it £4~5k cheaper. Ironically for the buyers, it used pretty much exactly the same fuel as the 3.0 too and cost the same to service and tax, so other than saving a few k at initial purpose, they just got a 3.0 X-Type which didn't accelerate very quickly. The 2.1 was even worse.
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