Chevy losing up to $20k on each new Corvette
Been toying with the idea of buying a C8? Better get in now before prices start to rise...
We may have been a little slow to the punch on this one but, for those that haven’t seen it yet, there was interesting news out of America late last week. Following a conversation with a seemingly well informed source, our counterparts at MotorTrend reported that Chevrolet is losing as much as $20,000 on every C8 Corvette it sells.
With its 6.2-litre V8 mounted amidships for the first time, the C8 has caused quite a stir. Not just because it’s the first Corvette to offer such an exotic layout and comes with a standard 8-speed dual-clutch transmission, but because it is available for a starting price of just $59,995.
When Mike drove the new ‘Vette back in October, he even noted that: “A senior engineer working on another sportscar project recently told me he had absolutely no idea how GM had been able to do such an advanced double-clutch for the cost.” Well, it turns out that it can’t.
According to MotorTrend’s source, the Corvette was developed with an $80,000 starting price in mind, a figure which was subsequently deemed too steep an increase over the circa $55,000 entry point of the previous C7. This means that Chevy is probably making a pretty serious loss on each base C8 it sells - although, with a smorgasbord of enticing trim levels and option packs to add on, it’s hard to say how many buyers are opting for such low-spec cars.
Regardless, prices will almost certainly have to rise soon, with the source telling MotorTrend that the climb will probably begin by the end of next year. Of course it’s highly unlikely that we’ll ever see an $80k price tag on an entry-level C8, but the increase will have to be significant if the manufacturer is to avoid a long term problem with its bottom line.
If you’re thinking of buying a new Corvette in the not-too-distant future, then, better make it sooner rather than later.
A very different proposition to the C8 but I just think the C7 looks better 😎
If this was the truth the car would have been cancelled
They might not be making the profit they'd like (10~15%) and they may need to reduce the cost of the DCT to acheive that and the base spec cars are always low profit (<5%) but no OEM launches a car with a price point that looses something like 25% per car
If this was the truth the car would have been cancelled
If this was the truth the car would have been cancelled
They might not be making the profit they'd like (10~15%) and they may need to reduce the cost of the DCT to acheive that and the base spec cars are always low profit (<5%) but no OEM launches a car with a price point that looses something like 25% per car
“British Leyland are selling the Mini at a loss despite the latest price increase and the fact that after 14 years it is still their top export model. Mr John Barber, BLMC's deputy chairman and managing director said yesterday: "The Mini is a wonderful car though I think insufficient attention was paid during the design stage to the inherent problems of production costs. Even though we have increased the price it is still not a profitable model."
He added that because of the profitable replacement parts business generated by Mini sales it was "more in the nature of a break-even operation."
Didn’t Ford (?) buy a Mini, rip it apart, and then declare how they couldn’t find how BL (Austin Morris) made a profit on them?
Some vehicles are ‘halo’ models, the manufacturer hoping that the effect of such cars cascades down the range and increase sales? Not saying that is the case with this of course.
I wonder if VAG regret the Veyron with the amount it apparently lost on each one in light of the fines over the emissions scandal..
If this was the truth the car would have been cancelled
They might not be making the profit they'd like (10~15%) and they may need to reduce the cost of the DCT to acheive that and the base spec cars are always low profit (<5%) but no OEM launches a car with a price point that looses something like 25% per car
2005-2013: Bugatti Veyron – £3,887,051 per unit
2001- : Volkswagen Phaeton – £23,655 per unit
2001-2009: Renault Vel Satis – £15,751 per unit.
2004-2009: Peugeot 1007 – £12,947 per unit
2000 – 2005: Audi A2 – £6340 per unit
2001 – 2009: Jaguar X-type – £3945 per unit
1997-2006: Smart Fortwo – £3762 per unit
2006 – 2012: Renault Laguna – £2986 per unit
2001-2009: Fiat Stilo - £2297 per unit
1997-2004: Mercedes A-class - £1214 per unit
The list goes on.
2005-2013: Bugatti Veyron – £3,887,051 per unit
2001- : Volkswagen Phaeton – £23,655 per unit
2001-2009: Renault Vel Satis – £15,751 per unit.
2004-2009: Peugeot 1007 – £12,947 per unit
2000 – 2005: Audi A2 – £6340 per unit
2001 – 2009: Jaguar X-type – £3945 per unit
1997-2006: Smart Fortwo – £3762 per unit
2006 – 2012: Renault Laguna – £2986 per unit
2001-2009: Fiat Stilo - £2297 per unit
1997-2004: Mercedes A-class - £1214 per unit
The list goes on.
If this was the truth the car would have been cancelled
They might not be making the profit they'd like (10~15%) and they may need to reduce the cost of the DCT to acheive that and the base spec cars are always low profit (<5%) but no OEM launches a car with a price point that looses something like 25% per car
GM, will be rolling out more extras and special models on this than any other super car ever made, which is great, as UK and other RHD markets will get it. With car production they will not be making "profit" on the units until all the capex is recouped, this may take a 2 or 3 years. So arguably with any new car you make a loss, but over production life span a profit will be made (unless you are a british or Italian car company!!)
A couple of thoughts FWiW:
- I believe (so also unsubstantiated) that almost nobody buys the standard car with no options, which are obviously profitable, and thus reduce the 'loss'
- As mentioned by somebody earlier, some of the development expenses will be apportioned across other models, so the DCT will probably appear in the next Camaro etc, reducing the 'loss' per Corvette.
- If true, basic maths suggests that they never would have achieved the target price profitably anyway! USD60k retail might be (assuming USD15k for distribution, dealer margin, and taxes for simplicity) USD45k selling price to Chevrolet. Add the USD20k 'loss' gives a 'breakeven' price of USD65k. Add back one-third to arrive at USD87k base retail price, which is above the USD80k target price mentioned in the article.
- There is no mention of this potentially costly situation in the most recent form 10-Q, which is used to share price-sensitive news with the regulator and investment community. It actually contains a statement telling shareholders "There have been no material changes to the Risk Factors disclosed in our 2018 Form 10-K" If GM really discovered a significant loss on its halo model, they would be telling shareholders.
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