Depression in the UK. Is it really that bad?

[Dieselman]

That is very true, I know that on some Ford models the dealer makes nothing on the car, it is all done by bonuses, sell xx amount and get a kick back.

So they did make money then, whether it's on invoice or retro doesn't matter.

 

[Dieselman]

I'm here. And what is happening to residuals shows how PCP's with a good GFV can be very beneficial. I'd rather be the customer than Mercedes on the deals that have been offered in the last twelve months. MB and BMW will lose huge amounts when many of the cars are handed back after two or three years.

BTW people keep saying it costs 5p to make a car. Don't they notice that most car makers are losing money -even Toyota. Even in the good years the profit margin on most makes was tiny. If they make a few hundred pounds per car -net of all costs- they are lucky.

And dealers make very small margins too. That is why many are going out of business even before the recession. Very competitive market with high overheads and lots of discounting.

You raise some good points here, dealers are defiantely having problems but that's nothing to do with the factory price of the car, it's because their overheads are high and the concessionare is holding out on price to the dealer.

As far as losing money on the manufacture and cost price being close to sale price that just can't be so for the UK, otherwise how can a manufacturer sell cars much cheaper in other countries and not be running at a massive loss on each one.

Certainly the finance arms of manufacturers have been well and trully caught with their pants down over the return values, but that's just typical of any finance sales arena.
PCP rates won't stay low for long unless the manufacturer reduces the front end cost. Isn't that what they are already doing now.?

 

[st4]

Certainly the finance arms of manufacturers have been well and trully caught with their pants down over the return values, but that's just typical of any finance sales arena.

So much so that due to BMW's high exposure to the PCP and leasing markets it was elidigible for a bail out from the german government (which it took) due to a black hole in its finances - cars it is getting back from PCP/lease are worth much less than they predicted. I dread to think what my old 4.4i is worth now.

 

[gIzzE]

So they did make money then, whether it's on invoice or retro doesn't matter.

No, because their target was 12 of that model for the quarter and in their small dealership they only sold 9, so they sold 9 cars and made no money.

 

[hawk20]

CAR PROFITS
Porsche makes an astounding £14,173 average profit on every car it sells, according to a study carried out by B&D Forecast and printed in German newspaper Welt am Sonntag. The study shows that Porsche's per-car profits dwarf those of any other major manufacturer. BMW, for example, earns £1,619 average profit per car; although it should be remembered that BMW manufactures in much higher volumes than Porsche. Audi nets a comparatively small £800 profit per car, whilst very high-volume manufacturers like Volkswagen and Chrysler make £202 and £455 respectively.

 

[st4]

CAR PROFITS
Porsche makes an astounding £14,173 average profit on every car it sells, according to a study carried out by B&D Forecast and printed in German newspaper Welt am Sonntag. The study shows that Porsche's per-car profits dwarf those of any other major manufacturer. BMW, for example, earns £1,619 average profit per car; although it should be remembered that BMW manufactures in much higher volumes than Porsche. Audi nets a comparatively small £800 profit per car, whilst very high-volume manufacturers like Volkswagen and Chrysler make £202 and £455 respectively.

Right, if I am off to buy a Beemer I know what I need to haggle off

 

[RoseTattoo]

CAR PROFITS
Porsche makes an astounding £14,173 average profit on every car it sells, according to a study carried out by B&D Forecast and printed in German newspaper Welt am Sonntag. The study shows that Porsche's per-car profits dwarf those of any other major manufacturer. BMW, for example, earns £1,619 average profit per car; although it should be remembered that BMW manufactures in much higher volumes than Porsche. Audi nets a comparatively small £800 profit per car, whilst very high-volume manufacturers like Volkswagen and Chrysler make £202 and £455 respectively.

If that was purely based on Porsche's profit, it needs to be understood that most of this was achieved by the options it was holding and nothing to do with its efficiency as a car maker. I suspect that if you take this figure out, it will be as dismal as everybody else.

 

[Dieselman]

CAR PROFITS
Porsche makes an astounding £14,173 average profit on every car it sells, according to a study carried out by B&D Forecast and printed in German newspaper Welt am Sonntag. The study shows that Porsche's per-car profits dwarf those of any other major manufacturer. BMW, for example, earns £1,619 average profit per car; although it should be remembered that BMW manufactures in much higher volumes than Porsche. Audi nets a comparatively small £800 profit per car, whilst very high-volume manufacturers like Volkswagen and Chrysler make £202 and £455 respectively.

Are these based on sale values or factory gate prices.? For this exercises we really need the total manufactured cost as all other costs can be manipulated with creative accounting and unnecessary expense.
As the values are shown in £ does that indicate they are for the cars sold in the UK via the UK concessionaire, if so that's not a true picture as they pay a profitable price for the cars from the manufacturing plants.
Add in that there will be loads of sales bonuses and incentives then the figure is distorted.
Most sales businesses are not expected to show a profit, so don't and money is paid out too easily.
Even the factory gate price is distorted by expenses above and beyond what is necessary, such as high wages, good pensions, additional healthcare, etc.
This might be a wake up call for the manufacturers.

We need the cost of manufacture only against sale price. An allowance can then be made for admin costs to determine a reasonable figure.

 

[crockers]

Surely an allowance needs to be made for R&D..

 

[Dieselman]

Surely an allowance needs to be made for R&D..

That could be lumped into the admin cost.

I was trying to differentiate between the actual cost of a produced unit, including the R&D to design it, and the actual sale price.

It's no good using UK concessionaire figures for this as they aren't connected to factory gate prices.

This would be an interesting site for anyone thinking of buying a new car. It covers USA spec vehicles but the price could be compared to their sale price and options and a generic factory price could be established.
http://www.fightingchance.com/pricing.php?js=y

 

[hawk20]

Profit per car - not just UK sales.

For most car makers these have long been small.

Jaguar, Land Rover, Volvo, Ford, Vauxhall, Saab, Fiat and various French makes have often had years when they make losses overall on all the cars they sell.

Porsche is the exception and has been described by some as a hedge fund that also makes cars.

 

[Dieselman]

Profit per car - not just UK sales.

Thanks, but that still doesn't separate extraneous costs out from production ones.

All those corporate golf days, holiday incentives and perks can really add up.

If we believe the price is so tight then how come the manufacturers sell the same cars in different markets at different pre-tax prices. The UK being one of the highest priced, of course.

 

[crockers]

Porsche is the exception and has been described by some as a hedge fund that also makes cars.

Didn't Maddof own one??

 

[hawk20]

Thanks, but that still doesn't separate extraneous costs out from production ones.

All those corporate golf days, holiday incentives and perks can really add up.

If we believe the price is so tight then how come the manufacturers sell the same cars in different markets at different pre-tax prices. The UK being one of the highest priced, of course.

I doubt if those costs total even 1% of turnover.
Manufacturers will always choose different prices in different markets if that is possible and if it helps profitability. Why not?

UK used to be dear but I really doubt that it is now. Pound has nose-dived so far I seriously fear MB will have to raise prices in UK and by a lot. Pound has dropped 25% against Euro in under a year. So price would need to go up by 100/75 for MB to get the same number of Euros per car as before.

Don't forget we are all allowed to buy cars anywhere in Europe and there has been a thriving trade in the past when UK prices were high. But they came down and importing is not what it was.

Anyone know the price in Euros of an E220cdi, for example, in Germany or France (ex vat) and what it would be here to be the same? Differences in spec make comparisons a bit difficult but should be possible to get close enough to get a rough idea.

What we don't know, of course, is the average discount. Lot of it about in the UK at the moment!

Worth a look at the MB International website. Shows prices in France and Germany etc etc. I configured my E220cdi Avantgarde estate, automatic, with parktronic, leather, tinted windows, memory seats etc which has a list price of around £40k in the UK and in France the list came to 55,800 euros (and very similar in Germany). At close to one euro to the pound that looks a lot more than we are paying.

 

[Dieselman]

I doubt if those costs total even 1% of turnover.
Manufacturers will always choose different prices in different markets if that is possible and if it helps profitability. Why not?

I was being a bit tongue in cheek regarding the sales incentive costs, but that was just an example of how the cost accounting can be made to show low profits regardless.

Manufacturers usually vary the list price to take into account varying tax levels so a consistent sale price is determined.
In itself that indicates they have room to maneuver and are making profit on the cars being manufactured.

I'm trying to establish whether anyone can come up with a reasonable figure for how much it costs to actually build the car. All other costs are variable depending on efficiency, perks and accounting.

Whilst this may not be a prestige car such as Mercedes, Renault and Tata appear to be able to design and build completely new models for seriously cheap money. These are not old models rehashed but ground up designs which meet crash regulation standards.
It's long been known that upmarket cars are more profitable for manufacturers but with a sale price of $2500 and still making money it demonstrates that a car can be made for low money.
They still have most things a more expensive car has, wheels, body, glass, seats...etc, etc.

Well worth reading:

http://www.businessweek.com/magazine/content/07_17/b4031064.htm

The shift to cut-rate wheels is jarring for an industry that has fixated for at least a decade on premium cars and their fat margins. BMW earns an estimated $3,300 per car on average, vs. Logan's $400 per car

 

[neilrr]

Anyhoo, back to the original question.

Yes it is that bad & there is worse to come IMHO.
http://www.independent.co.uk/news/b...astest-pace-since-the-1940rsquos-1212877.html

 

[hawk20]

I'm trying to establish whether anyone can come up with a reasonable figure for how much it costs to actually build the car. All other costs are variable depending on efficiency, perks and accounting.

.

If you really want to do that, then the German article I linked to is doing just that.

Also, you can go to the company accounts, see their total audited profits and divide by the number of cars they make. But you really don't need all this. Ford, GM and Chrysler are on the verge of bankruptcy. Jaguar and Land Rover lose money. Saab loses money. Toyota will lose 1.1 billion dollars this year.

Endless evidence abounds for all prepared to believe what they don't really want to hear: we are buying cars at close to, and sometimes below, what they cost to produce, market and sell.

It is a hugely competitive market and few if any are making much out of it.

 

[hawk20]

Anyhoo, back to the original question.

Yes it is that bad & there is worse to come IMHO.
http://www.independent.co.uk/news/b...astest-pace-since-the-1940rsquos-1212877.html

Well done neillrr; get us back to the thread. Excellent link.

Odd thing about recessions is they are horrible for some and very good for others.
The average motorist can now buy a year's fuel for about £400 less than it cost at the peak in July.
The mortgage rate for many is coming down from well over 7% to under 5% and likely to fall further.
Huge discounts on cars and in most shops.
Food getting cheaper.
Gas and electricity may drop up to 30% next year.

Looks good for someone who keeps their job and has to take no pay cut.

But lousy for those like my daughter - made redundant on Xmas Eve.
Lousy for those whose business goes under
Lousy for those who live on income from savings (6-7 savers for every borrower)
Lousy for all who will be around to repay all the debt being racked up to boost the flagging economy.

But really good for some in the short run.

 

[crockers]

A bit like a play on Einstein's theory but instead of matter substitute money.....it can't be created or destroyed just transfered .....

 

[Robbo]

I know what you are saying, but I thought that is exactly what banks do: create money through debt.

That's what got us into this mess in the first place!