cars like the hyundai equis make you wonder how much luxury cars cost to make. car makers charge between 40-110k for a similarly equipped car (genesis sedan, lexus ls, mercedes s class, etc)

anyone know how the numbers or how to find the cost of these to the companies?

 

Most companies require a gross margin of 30% (or more) to hit their profitability targets. That means a car would typically cost 2/3 of what they sell it to the dealer, which is typically 5-10% less than what we pay. That puts a car manufacturing cost at close to 50% of what we pay.

Manufacturers tend to have some pretty high overheads so the numbers may actually be worse (ie, we pay more than double the price of the original manufacturing cost).

 

Yes very high over head, R&D and advertising costs are probably close to equal production costs.

 

it's a complete guessing game unless you know someone that will tell you.
I'm sure the answer is that it varies dramatically from model to model, depending on the role of the model, the sales volume, and the cost to produce.
I had a buddy that used to work at ford and he said (this was a long time ago, obviously) that they made almost no money per vehicle on the base Explorer. But, sell the Eddie Bauer, and they made like $10,000 on it because of all of the goodies/options that cost nearly nothing to make but command huge retail prices.

So, I'd imagine that say a 328i probably brings small gross margins, but the cost of development and tooling and tuning is spread across a zillion units...so the margins don't have to be as high to become profitable. That is in contrast to say an X6M, which is low volume and has tons of performance parts hanging off of it that BMW can charge an arm and a leg for. That X6M is going to be substantially higher margin than the 328 to make up for fewer units to spread the fixed costs across, and the prices reflect that.

 

It's almost impossible for the actual cost of a single car to be determined if it's produced by a major manufacturer. It's all estimates. The number of factors that go into the production of automobiles is overwhelming. To calculate definitively the cost of just one major factor of the production of a single vehicle, say labor, is extremely difficult. Throw in R&D, raw materials, robotics and machinery purchased/used for manufacturing and assembly, cost sharing with other models, etc. and you are forced to estimate. For instance, how do you account for Toyota spending approximately 5 billion USD on the development of their first V8 engine for the Lexus line in the 1980's in the cost of a 98 lexus GS400?

For a small manufacturer with a limited production run of a single vehicle it would be feasible. With government regulations forcing average fuel mileage standards for each manufacturer's line of cars, it may make sense to sell economy cars at a loss in order to sell a large luxury SUV for a 40% profit. Even though most are public companies, it's still difficult to pinpoint a cost since they have many revenue streams i.e. parts, dealer networks, etc.

 

I can't speak on that, but can speak that it has to be higher than non luxo cars. Reason being is that any given company can tool up to sell higher volume cars like camrys and accords, but choose instead to market to a smaller market, so the opportunity cost is built into the price I would imagine, which is why Porsche sells at a higher margin than a VW golf, I mean considering the level of engineering, tooling, materials, warranty, etc etc, everyone would be better off making corolla type cars. If there was only a way we could compare a run of the mill car to a dressed up version luxo car... oh like the camry vs the ES. Too bad they dont make a corolla hybrid cuz then we could compare it to the most pretentious car ever made imo, the Lexus HS.

 

This has been a topic that always interests me. I have not ever worked to a dealership, and have never known what they pay for cars, or what their margins are. I have worked in several other forms a retail, and I can say that if they are only making 5-10% on cars that they are just about the only business that makes that little.

In my experience in several different fields, store/dealer cost in normally 50% of retail. (not selling price) However some items are only 40% off retail, and some are as much as 60-70% off. Not counting R&D, it normally takes 50% or less than what the dealer pays to make a product.

So when I hear that A car costs $30k and it cost the dealership $27K to buy it I am VERY skeptical. Especially when I know people who have bought current year, new cars for well under 10% off retail. Every place that I have worked at/managed had a minimum profit margin of 20%, and a goal of 35-40%. Perhaps with cars there really is that small of a margin, but it would really surprise me.

 

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Retail has high profit margins. They typically sell a low volume at low cost (like tens or hundreds of dollars), and some retailers have to fire sale some of their inventory each season.

I work as an engineer on government contracts. The government specifies a max profit, and I forget the number but it's less than 10%. The company can pad the numbers in a number of ways--mostly by managing work well and get direct non-financial benefits from the contract--but the profit margin is fixed and is not terribly high. But the 7% or whatever is taken from numbers on orders of millions to hundreds of millions. Likewise, insurance companies and health care make a very small percentage as well--I hear on the order of 3% but haven't ever verified. But even so, that 3% is taken from a huge number, so profits are still huge.

The percentage can be very low when the gross number is high.

At car dealerships we're talking $30k gross income for every sale, so the margin can be a small percentage of that $30k and they'll still make a bundle. Just move a lot of cars every month.

 

I know parts department markups are insane (1000% or 10x in one example I know well) but I only know the markup from I what we sell to an OEM to what it costs at a parts counter, not the inventory costs the manufacturer and/or dealers have to absorb. But on the other hand, it seems like every time I need a part more complicated than a nut or bolt I have to wait days-to-a-week for it to be shipped to the dealer. That suggests lower inventory costs than ever before.

I don't know the profit margin in the service departments but isn't that the biggest moneymaker for dealerships? I know their prices are always significantly higher than my local independent shops.

 

I understand that, and would say that there is probably a lot of truth to that, but how does it explain people getting a $30k car for $25k? I really doubt that many dealerships are going to take a $2k loss on anything that is still the current MY. Also I agree that 10% of $30k is a good profit, ($3000) however I look at it as the dealership having to sell 10 cars to have made enough money to pay for one. Another thing that I remember reading was that the Price difference between a vette interior and a Porsche interior was something silly like $100. I think that it probably costs a lot less to make mass produced cars than we are thinking.