Go Back   Team-BHP > BHP India > The Indian Car Scene


Reply
 
Thread Tools Search this Thread
Old 22nd November 2009, 17:24   #16
BHPian
 
harryskt's Avatar
 
Join Date: Nov 2009
Location: Bangalore
Posts: 63
Thanked: 20 Times
Default

This is an interesting topic to discuss. I think the manufacturing cost of a car like Swift, will not be more than 3 lakhs (Zxi), and an additional 1 lakh for the dealer, and the rest (2 lakhs, considering 6 lakhs on road for Swift Zxi OTR in Bangalore) is the profit for Maruti Suzuki. This is just a guess...What you say guys?

Then I wonder how much a Nano cost to Tata, maybe around 50 to 60 grands?! Again, just a guess

Note from the Team-BHP Support Team : Please use the "edit" button if posting within 20 minutes of the first post, instead of creating another back-to-back post.

Last edited by Dippy : 23rd November 2009 at 10:39. Reason: See note in post.
harryskt is offline   Reply With Quote
Old 22nd November 2009, 19:55   #17
BHPian
 
Join Date: Nov 2007
Location: Bangalore
Posts: 769
Thanked: 376 Times
Default

Quote:
Originally Posted by VEA View Post
how does the published figures reveal profit per car? i am confused here. dont we need the services of a cost accountant here
IMHO you need a cost accountant to know profits by various brands / variants / plants etc. But the overall profit per car (all segments put together) should remain the same whatever approach you take.
diffsoft is offline   Reply With Quote
Old 22nd November 2009, 21:55   #18
BHPian
 
himavanth_m's Avatar
 
Join Date: Oct 2009
Location: Hyderabad/Pune/Chennai
Posts: 582
Thanked: 266 Times
Default

In businesses (Most of the time) , people look at minimum of 10% to 20% profit margin. Some businesses even go upto 30% profit margin. If the Cost price of a car is say 7 lacs, the dealer might be getting the car for 8 lacs and finally when it reaches the consumer, it shoots up anything between 9 to 10 lacs, IMHO.(Also considering Transport costs etc)
himavanth_m is offline   Reply With Quote
Old 22nd November 2009, 22:43   #19
BHPian
 
Join Date: Jun 2009
Location: Lucknow
Posts: 171
Thanked: 13 Times
Default

Quote:
Originally Posted by harryskt View Post
Then I wonder how much a Nano cost to Tata, maybe around 50 to 60 grands?! Again, just a guess
My guess is Tata is probably working on a very thin profit margin at the moment on Nano, considering the price tag at which it has promised to sell it to the first 1 lac applicants.
rishab.k is online now   Reply With Quote
Old 22nd November 2009, 22:50   #20
Senior - BHPian
 
Join Date: Sep 2008
Location: Bangalore
Posts: 1,891
Thanked: 19 Times
Default

Let us look at what all constitute the price of a car at the consumer end or on road (minus accessoires fitted at dealer end)

On Road Price
- Insurance
- Road Tax
- Registration charges

= Ex Showroom price

- Octroi (if applicable)
- Transportation charges
- stock holding + wearhousing + financing charges
- Dealer Margin
- Dealer porvided Warrantee, Spares, Service provision
- Marketing support (different for different dealer)
- Loyalty / Relationship / Volume Incentive

= Dealer Price

- Sales Tax (different in different states)
- Excise Duty
- Misc Taxes/Duties (if any, including local taxes)
+ Excise Duty Concessions (due to excise already paid on input costs)

= Ex Factory Price

- Input Material Cost
- Input Consummables Cost
- Input Third Party Components
- Manufacturing Overheads (salary, electricity, water, food etc)
- Marketing / Branding Expenses
- Cost of Sales
- Depreciation of the Plant/ Machinary
- Insurance of Plant / Machinary / People
+ Export oriented benefits (where ever applicable only)
- adjustments if any (write offs, stock loss etc)
- factory margin (if any = retention of profits in different locations for tax reasons)

= Contribution margin

- R&D Expenses
- Certification, Qualification Expenses
- Technology Licensing / Transfer fees
+ Government Support for R&D, Technology Development (if any)

= Integral Profit

Net Profit = Integral Profit + Factory margins retained in different locations, repatriated to parent holding company + savings in operations where ever possible depends on operational managers (or cost innovations)

generally any high tech product company (wish to) introduce a product with a very high contribution margin (50%-60%) and as reduce the margins to a threshold (typ 20-25%) over period of time and discontinues/withdraws the product once contribution margins are less than the threshold by a new product which gives better margins.

this is called product life cycle. some times it so happens that every product is constribution margin positive, but overall company makes losses due to un-foreseen costs or adjustments, writeoffs, contingencies etc.

globally automotive market (or geneally all tech markets) faced such a situation over last 6-8 quarters due to down turn.

Last edited by StarVegabond : 22nd November 2009 at 23:06.
StarVegabond is offline   Reply With Quote
Old 23rd November 2009, 12:11   #21
BHPian
 
Join Date: Nov 2007
Location: Bangalore
Posts: 769
Thanked: 376 Times
Default

@starvegabond: Very useful break-up. Is it possible to get brand wise P&L - say how much of the HMIL profits can be attributed to i20 for instance? (broadly) from the published financial statements + broad data from industry?

Cheers,
diffsoft is offline   Reply With Quote
Old 23rd November 2009, 12:21   #22
Senior - BHPian
 
alpha1's Avatar
 
Join Date: Apr 2007
Location: P00NA
Posts: 1,626
Thanked: 967 Times
Default

P&L accounts do no give a true picture of actual profit or loss per vehicle.
alpha1 is offline   Reply With Quote
Old 23rd November 2009, 13:18   #23
BHPian
 
Join Date: Nov 2009
Location: Bangalore
Posts: 28
Thanked: Once
Default

Sorry for a real late reply.
From
I DON'T think anybody would be able to tell the profit marin unless ofcourse he/she knows somebody working at the top level of a particular automobile company

Someone pointed out about dividing the total car sales with the total revenue or something like that. That thought did pass my mind but there is a basic flaw in that calculation (there are many like someone pointed out about the accountants doing all sorts of manipulations) that the sales figures are for the whole year and in a given year, the price of each car gets changed so very often (sometimes during a month !) that one simply won't be able to find out how many cars actually got sold for what price in a given year.what do you guys think ?
high_octane is offline   Reply With Quote
Old 23rd November 2009, 15:42   #24
BHPian
 
Join Date: Dec 2008
Location: Pune
Posts: 553
Thanked: 214 Times
Default

Generally dealers get very less for selling a car. For example a Maruti dealer gets Rs.7000 for selling a Swift Vdi.
and in a bike, Selling a Honda splendor will bring Rs.900 only for dealer.

Dealers make money from Service/Maintenance side.
sushantr5 is offline   Reply With Quote
Old 23rd November 2009, 15:56   #25
BHPian
 
vrprabhu's Avatar
 
Join Date: Oct 2008
Location: Poona
Posts: 860
Thanked: 351 Times
Default

Quote:
Originally Posted by StarVegabond View Post
Net Profit = Integral Profit + Factory margins retained in different locations, repatriated to parent holding company + savings in operations where ever possible depends on operational managers (or cost innovations)
Wow, that is quite a list. I would like to add the interest cost (is it included in cost of sale?) and the dividend pay-out (the share/stake-holders will definitely expect a return for the money invest) to the overall cost.

However, there is a twist here.

Some items of expenses are amortised - for example, R&D cost, Software Development etc. - this simply means the amount expended is staggered over a period / life of the goods manufactured.

Then, there is cost towards transfer of technology / royalty.

Last but not the least, there is TPM = transfer pricing mechanism, where the (foreign) company investing in another country, expects compensation for the amount and know-how processes they have transferred for setting up operations!!

As Samurai said, only a "gaggle" of CA's and cost accountants will be able to decipher the exact amount!

For lay-man, I would say profit per car = Operating Profit (Before Tax, Dividend) / No. of units sold.
vrprabhu is online now   Reply With Quote
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search


Similar Threads
Thread Thread Starter Forum Replies Last Post
How much profit do they make on each new car sold? sbasak The Indian Car Scene 49 19th October 2011 09:30
2009 make car - Registered as 2010 make? MAS Indian Car Dealerships 16 5th November 2009 10:48
Profit on car sales Surprise The Indian Car Scene 15 9th August 2005 10:09


All times are GMT +5.5. The time now is 10:59.

Copyright 2000 - 2017, Team-BHP.com
Proudly powered by E2E Networks