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Old 4th September 2008, 15:37   #1
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Question Indian car manufacturers/dealer margins?

I have always wondered what the actual cost of production vis-a-vis the ex-showroom prices are? Certainly these are trade secrets but let's speculate on what the manufacturer and the dealerships earn in %

India seems to be a high profit margin market, as even after local assembly/production of models happen, the prices don't go down as much as it should.

Defiantly our duties are on the higher side but we still are surely being ripped off.

Lets throw some figures out there based on the each manufacturer and it's dealership margins too. (I'm sure the Germans will top the highest numbers)
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Old 4th September 2008, 15:46   #2
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Yeah ! I am curious to know too !

Recently, just before launch of the New Fiesta, a friend of mine got an offer for Ford Employees, under which he bought the Fiesta ZXi for Rs 5.5L on the road in Bangalore.
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Old 4th September 2008, 16:17   #3
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Quote:
Originally Posted by Sahil View Post
I have always wondered what the actual cost of production vis-a-vis the ex-showroom prices are? Certainly these are trade secrets but let's speculate on what the manufacturer and the dealerships earn in %

India seems to be a high profit margin market, as even after local assembly/production of models happen, the prices don't go down as much as it should.

Defiantly our duties are on the higher side but we still are surely being ripped off.

Lets throw some figures out there based on the each manufacturer and it's dealership margins too. (I'm sure the Germans will top the highest numbers)
There are two kinds of pricing strategies: Market Minus and Cost Plus. Market Minus is what you think the market can bear, and price is accordingly. Cost plus means you add up all your costs, add a margin and price the product accordingly.

Indian car market is definitely market minus. It will be VERY difficult to ascertain the real cost of developing a car because of two reasons
  1. It actually is difficult keeping in mind the cost of the plant, cost of R&D, cost of raw materials, people, depreciation, yap yap marketing, CEO's trip to barbados etc
  2. The car manufacturers don't want you or their competitors to know this. This is highly prized information. I bet only a select few know this.
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Old 4th September 2008, 17:16   #4
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http://www.team-bhp.com/forum/indian...r-sales-2.html (Profit on car sales)

A similar thread
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Old 4th September 2008, 18:20   #5
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I don't know the exact figures, but a friendly Maruti Workshop Manager once told me that it comes to an average 3-5% on ex-showroom prices. This is including all sorts of benefits and schemes and package offers that manufacturers offer to them from time to time. Just my two cents.
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Old 4th September 2008, 18:38   #6
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A friend of mine deals in Indian new 2-wheelers and have a showroom in Mumbai suburbs,the x-showroom % per bike is not more than 8-12% including schemes like free side stand,helmets or some sitckering or a full tank petrol.

The main monies come from the servicing/accidental repairs area's
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Old 5th September 2008, 00:43   #7
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usually the dealer commission is around 10-12 % of the ex-showroom pricedepending on the segment. I know for sure about tata and Maruti,Tata gives 80,000 per safari to the dealer than the dealer discount comes and we are given 30,000 off on the vehicle and still the dealer is left with 50,000 on a safari the comssion on Indica is 15-20 grand depending on the model,same is the case with maruti, Honda gives a little higher commsion so the dealer .
When a employee of the manufacturer buys a car the dealer commission is cut so the taxes on the vehile go go down in that percentage. so the price difference at the end is huge and also, since the car is delivered directly from the factory theres a difference in price in the first palce[transporttaion which is around 5000 to 10,000 per car depending on the loaction of the shworoom fromthe factory and other stuff].
Oh and the manufacturers earns around 15-18% of the ex showroom price the indian manufacturers,the likes honda , toyota ,hyundia,ford, etc with thier midsize car have even higher profits as much as 25%.This info is from a MBA project done resently [by a friend] so ture, I think.
The dealer comission and transprotation rate are conformed as know this thru friends who have dealerships.
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Old 5th September 2008, 08:31   #8
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There is just abt no profit made in selling a car. Trust me, you are not getting ripped off. The main money as someone said in this thread is got through the Service.
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Old 5th September 2008, 10:57   #9
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The gross margins that any dealer might have depends on the segment the car is in in the smaller cars they barely retain 1-2% while in d- segments and upwards they retain something between 3-5%
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Old 5th September 2008, 18:32   #10
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Great topic, Sahil. The A & B segments have manufacturers pulling in anywhere between 8 - 15% per car. A car like the 800, surprisingly, has a healthy profit margin because its a 20 year old design, and the dies / manufacturing equipment are way beyond full-depreciation today. Maruti can sell it much cheaper if they want to. The absolute profit number may be relatively low for the Indica / Santro / i10, but remember they are working on volumes.

Volume higher-end hatches are rare, but when they click = BIG Moolah (more than most C segmenters too). For instance, Maruti sold 9,000 Swifts last month. Multiply that into Rs. 50,000 (at the least) = 45 crores! One of Maruti's largest earning members without a doubt.

Most C-segmenters rake in the region of Rs. 70,000 - 85,000 for their makers. In the C+ segment (Civic, Octavia, Corolla), count on an average margin of atleast 1.25 lakhs per car sold. On cars like the Accord & Laura, the profit margins are easily in the range of 2.5 lakhs per car sold. The reason is lowered differential costs : It won't cost that much more to build an Accord engine compared to a Civic engine. The Laura's margins may not be that high due to the number of features + expensive Euro parts.

Mercedes & BMW pull in about 5 - 6 lakhs per car on each E / 5 series sold.

However, we must also understand that the profit per car doesn't necessarily mean money in the hand. For instance, a newer plant (like VW's potential) will take a couple of years before it even breaks even.

P.S. Porsche is the most profitable car maker in the world. I remember a thread last year about their $28,000 profit per car!
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Old 5th September 2008, 19:14   #11
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For a Ford Fiesta/Fusion, I heard the end-dealer margin is 18K - so that is 2-3% of car price.

Note from Mod : Please continue the discussion in this thread (How much profit do they make on each new car sold?). Thread closed

Last edited by GTO : 3rd June 2010 at 13:51. Reason: Adding closure note
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