What are the economics of building a car?
#1
What are the economics of building a car?
Thinking about the $30K upcoming Genesis and wondering about the pricing, does anyone know how (very roughly) how the sticker price of a car breaks down?
Say for a "typical" sedan, roughly what is the relative percentage cost of the engine, body, transmission, decor etc. Obviously R+D, profit margins, distribution and marketing costs are added to this but I wondered if there are any studies on the relative value of the major components of a physical car?
Obviously it depends on the vehicle, and manufacturers would not disclose their specific costs, but are there any general "rule of thumb" principles that apply? (ie: engine should be 20%, body is 30%, etc, etc) Luxury sedans for example are usually more expensive because they have larger engines which must account for a significant portion of the price - but how much of the car is it?
Chris
Say for a "typical" sedan, roughly what is the relative percentage cost of the engine, body, transmission, decor etc. Obviously R+D, profit margins, distribution and marketing costs are added to this but I wondered if there are any studies on the relative value of the major components of a physical car?
Obviously it depends on the vehicle, and manufacturers would not disclose their specific costs, but are there any general "rule of thumb" principles that apply? (ie: engine should be 20%, body is 30%, etc, etc) Luxury sedans for example are usually more expensive because they have larger engines which must account for a significant portion of the price - but how much of the car is it?
Chris
#2
i dont think so - but manufacturers do have their own rules on what class of cars get what kind treatment in everything - from production to materials used.
p.s. when talking about 30k Genesis keepi in mind that Azera is 30k already.
p.s. when talking about 30k Genesis keepi in mind that Azera is 30k already.
#3
Better try Google and see what you get. I doubt anyone here has this type of info. Don't be surprised if you don't find as big a spread in costs as you imagine. As for engines, regardless of size, they all require electronic controls, fuel injection systems, etc. And the cost of labor in building a V8 won't be much different from building a 6 or a 4. Suspensions and interiors will have very similar assembly costs and only minor differences in material costs. Other costs, like the US automakers costs for benefits for retired employees can make significant differences as well. Most of the foreign assembly plants in the US have not been here long enough to have significant costs in this area. Of course, accurate data will be highly confidential.
#4
You have to take into account the numbers of units being sold to work off the R&D.
I mean an engine from a S2000 would cost a lot more than an engine from a Civic if they make 1 million CIvic engines in 3-4 years but they make 20,000 S2000 engines in that same time.
That would be an example of R&D etc. spread over 1 million engines vs spread over 20,000 engines.
Now I do not know how much generic R&D there is, Honda works on some technology which may cover all their engines but some would be engine specific.
I believe there is discussion how much a specific engine costs or you can work around to see how much a maker charges for an engine.
A Z06 crate engine is something like $15K while an AMG V8 (I read somewhere) costs something like $35K.
There should be some way to find out what an engine costs or what a maker charges for an angine ie. if MB makes a E-Class V8 (non-amg) costs xyz dollars and the AMG V8 costs abc more dollars you can figure what MB is charging for an engine but can not tell what it costs to make.
Back to the Z06 engine if they sell it for $15K can't tell what it costs them to make just figure it has to be something less than that.
I used to try to figure what a car costs, it was easier with a cheap car. For example I bought a VW Fox (20 years ago now) it cost ~$8K (new)
the salesman and dealership make some money (?) IDK what could be $800 could be more could be less for an $8K car.
What's left $7200 , it has 5 wheels and 5 tires (full size spare) figure that would cost $400 (?). It had Brakes figure (?) what $300 for that. It had an engine and tranny (?) has to be something like $3K for both, battery(?) $50, starter (?) $50, body, seats, R&D and Profit etc.. etc..
I can only go by what I think something costs like a battery or tires something we can buy. But that does not mean how much it would cost an auto maker to buy or if they make the part like the engine that's another matter.
I mean an engine from a S2000 would cost a lot more than an engine from a Civic if they make 1 million CIvic engines in 3-4 years but they make 20,000 S2000 engines in that same time.
That would be an example of R&D etc. spread over 1 million engines vs spread over 20,000 engines.
Now I do not know how much generic R&D there is, Honda works on some technology which may cover all their engines but some would be engine specific.
I believe there is discussion how much a specific engine costs or you can work around to see how much a maker charges for an engine.
A Z06 crate engine is something like $15K while an AMG V8 (I read somewhere) costs something like $35K.
There should be some way to find out what an engine costs or what a maker charges for an angine ie. if MB makes a E-Class V8 (non-amg) costs xyz dollars and the AMG V8 costs abc more dollars you can figure what MB is charging for an engine but can not tell what it costs to make.
Back to the Z06 engine if they sell it for $15K can't tell what it costs them to make just figure it has to be something less than that.
I used to try to figure what a car costs, it was easier with a cheap car. For example I bought a VW Fox (20 years ago now) it cost ~$8K (new)
the salesman and dealership make some money (?) IDK what could be $800 could be more could be less for an $8K car.
What's left $7200 , it has 5 wheels and 5 tires (full size spare) figure that would cost $400 (?). It had Brakes figure (?) what $300 for that. It had an engine and tranny (?) has to be something like $3K for both, battery(?) $50, starter (?) $50, body, seats, R&D and Profit etc.. etc..
I can only go by what I think something costs like a battery or tires something we can buy. But that does not mean how much it would cost an auto maker to buy or if they make the part like the engine that's another matter.
Last edited by rai; 01-20-08 at 02:01 PM.
#6
Actually, the M156 6.2 costs around US$60k. This is one example of why it's very difficult to come up with actual percentages due to the variation in cost of the engine. Obviously, luxury vehicles (and esp. luxury performance vehicles) are going to have higher engine costs relative to the overall cost of a vehicle. More reliable engines (read: stuff not made in America) are obviously also likely to cost more.
Last edited by gengar; 01-20-08 at 05:15 PM.
#7
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#8
That's why I said "likely"; you can always find exceptions to any trend. I also have no idea what the S54 or the Boxster engine costs so can't make a comment with regard to your perspective. Additionally, my opinion (as I implied in my post) is that quality is more a function of design limitations due to price target. And said price target is a big difference in the attitude and approach of American vs. foreign car makers.
#9
#10
I heard a while back that the 3UZ in the SC430/LS430 cost about $20K.
I don't think there's a specific rule to how much a company will spend a budget on the car (there would be a budget, but not specifically partitioned), especially when other companies are involved in the development of the car (e.g. Yamaha with Toyota)
I don't think there's a specific rule to how much a company will spend a budget on the car (there would be a budget, but not specifically partitioned), especially when other companies are involved in the development of the car (e.g. Yamaha with Toyota)
#11
Actually, the M156 6.2 costs around US$60k. This is one example of why it's very difficult to come up with actual percentages due to the variation in cost of the engine. Obviously, luxury vehicles (and esp. luxury performance vehicles) are going to have higher engine costs relative to the overall cost of a vehicle. More reliable engines (read: stuff not made in America) are obviously also likely to cost more.
..but that's why the Genesis got me thinking... It's V8 at least is a new engine.. not sure if the V6's are new or not but they certainly will need engineering adaptation for this specific model
As a thought experiment, say after the dealers margin is subtracted plus the "soft" marketing costs etc, the physical vehicle costs $24K to produce (I am sure it is less) including labor, R+D, various country certifications etc etc .. If the engine then accounts for say 25% of that price, then that leaves just $18K for everything else... body, transmission, wheels and tyres, all the electronics, interior, upholstery, and on and on...
I know little of auto manufacturing economics and this exercise is simplistic in the extreme... but I am trying to figure out how the numbers add up... this is being priced 1/3 to 1/2 the price of other luxury competitors, which if it is to be a viable proposition - has to at least make an attempt to match them in quality. Hyundai's labor costs may be cheaper, they may have access to cheaper raw materials, and they carry fewer "innovation" (and design/styling!) costs, but unless they have discovered a secret that has alluded every other manufacturer - there is surely a reason why all other luxury/premium cars cost what they do.... Where are Hyundai compromising? Something has to give.
Lexus when they first launched were somewhat cheaper but not that much cheaper...
Chris (I am a Product Manager - I get irritated not knowing how the numbers add up!)
Last edited by cjf_moraga; 01-20-08 at 06:38 PM.
#12
I know little of auto manufacturing economics and this exercise is simplistic in the extreme... but I am trying to figure out how the numbers add up... this is being priced 1/3 to 1/2 the price of other luxury competitors, which if it is to be a viable proposition - has to at least make an attempt to match them in quality. Hyundai's labor costs may be cheaper, they may have access to cheaper raw materials, and they carry fewer "innovation" (and design/styling!) costs, but unless they have discovered a secret that has alluded every other manufacturer - there is surely a reason why all other luxury/premium cars cost what they do.... Where are Hyundai compromising? Something has to give.
Lexus when they first launched were somewhat cheaper but not that much cheaper...
Chris (I am a Product Manager - I get irritated not knowing how the numbers add up!)
Lexus when they first launched were somewhat cheaper but not that much cheaper...
Chris (I am a Product Manager - I get irritated not knowing how the numbers add up!)
And when you also take in the account that Hyundai is probably benefiting from the lack of human rights and labor laws in Korea, and probably uses pirated copies of Photoshop and other software to rip off designs, it becomes very clear how Hyundai is able to undercut the prices of other manufacturers.
#13
The Mustang is built to be cheap because the whole point of a Mustang is to have a fast, good looking (of course this is a matter of opinion) car for a low price. It's not built to be cheap because it's American
#14
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For a car like the Genesis, I would say about 600-800 million. It has to many items brand new, new engines, suspension/platform, electronics, etc.
The original LS took over 1 billion to bring, mind you this is 1980s money, UNHEARD of at the time.
The NSX cost 800 million and Honda never made the money back.
The Bugatti cost what 1/2 a billion as well? Maybe more.
So as you can see, those were 3 cars at 3 different starting prices and the overall cost varies.
The original LS took over 1 billion to bring, mind you this is 1980s money, UNHEARD of at the time.
The NSX cost 800 million and Honda never made the money back.
The Bugatti cost what 1/2 a billion as well? Maybe more.
So as you can see, those were 3 cars at 3 different starting prices and the overall cost varies.
#15
Also, note that the C63 engine is detuned compared to the ones that go in the bigger models. It's 450/443 only.