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Old 22nd November 2005, 14:25   #1
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Default How much profit do they make on each new car sold?

Do you have any idea of how much profit everyone makes (ie. Central & State Governmenet, manufacturer, dealer etc.) on sale of each new car? What % of selling price is the actual manufacturing cost?

Thanks for all replies.
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Old 22nd November 2005, 14:39   #2
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I can almost hear accountants in the forum falling out of their seat. What a simple question...

Anyway, you are asking one of the most complicated questions in accountancy. Let's take only the manufacturer, they maintain an army of cost accountants just to answer that question.

Many smaller product companies don't even bother finding the answer to that question, if they can pay their bills they will be happy. Finding the exact cost of an item being manufactured is very difficult, it depends on too many parameters like volume, inflation, interest rates, R&D, wages, etc, etc, etc....
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Old 22nd November 2005, 15:06   #3
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all cost accountants and chartered accountants--!!!
the truth is---
take a Rs. 10 lac on road car, and the breakup works out---broadly--
6.00 lacs the company gets.
2.00 lacs are the excise/st/vat/other levies
2.00 lacs dealer margins/registration/octroi/publicity/transportation/insurance
------
10.00 lacs COMPLETE.
now out of this 6.00 that the company gets, companies like maruti/tata/hyundai make 50000 or 7/8%. give or take 15/20% of this. while the not so successful sometimes put in upto 50000 from their pockets!!
dealer margins vary and are not constant, from 1.5% to 5%.
exact figures only an analyist can frame.
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Old 22nd November 2005, 15:21   #4
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Quote:
Originally Posted by scooby05
now out of this 6.00 that the company gets, companies like maruti/tata/hyundai make 50000 or 7/8%. give or take 15/20% of this.
Just like that! I guess simple question deserves simple answer.
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Old 22nd November 2005, 15:37   #5
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Quote:
Originally Posted by scooby05
50000 or 7/8%. give or take 15/20% of this. while the not so successful sometimes put in upto 50000 from their pockets!!
dealer margins vary and are not constant, from 1.5% to 5%.
exact figures only an analyist can frame.
...and so the manufacturer makes money from the parts and the dealer makes money from accessories, financing, insurance, second hand exchanges etc.
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Old 22nd November 2005, 16:01   #6
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I don't think anybody would be manufacturing cars, if there were no profits involved.. I mean look at all the cost of equipment, raw material, labour, quality, etc. Certainly, no manufacturer is going to do a charity by paying all the costs and than incurring losses.. I doubt, if the cost of a 6-lac car to the manufacturer would be more than 4 lacs considering the economies of scale..

But i do know that the majority of their earnings is from the After Sales Servicing. Look at companies like Maruti, Tata and Hyundai, they can sell their cars cheaper, coz the ASS guys will make money for them after the car is sold..
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Old 22nd November 2005, 16:15   #7
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It all depends on the company strategy. For example, HP sells their color inkjet printer below cost, incurring losses. Why? Because the money is in the repeat sales of inkjet cartridges and not in one time sale of printer.

After buying color inkjet printers, most people will start printing color pages and exhaust the cartridge in a month. One pair of cartridge (BW&CO) can cost as much as half the price of a low-end printer. This repeat purchase will ensure steady inflow of revenue.

Therefore, you must understand the earning model adopted by a company. If a company plans to make steady revenue via spare parts and service, they may sell the car at lower profits. Companies with huge market share like Maruti and Hyundai can use this strategy, but not Fiat.
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Old 22nd November 2005, 16:23   #8
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Well all I "Heard" is that all Maruti Dealers earn a constant amount of Rs. 500 - 1000/- for every Maruti 800 sold.

This is not confirmed but just heard of it somewhere.
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Old 22nd November 2005, 16:29   #9
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Quote:
Originally Posted by Samurai
It all depends on the company strategy. For example, HP sells their color inkjet printer below cost, incurring losses. Why? Because the money is in the repeat sales of inkjet cartridges and not in one time sale of printer.

After buying color inkjet printers, most people will start printing color pages and exhaust the cartridge in a month. One pair of cartridge (BW&CO) can cost as much as half the price of a low-end printer. This repeat purchase will ensure steady inflow of revenue.

Therefore, you must understand the earning model adopted by a company. If a company plans to make steady revenue via spare parts and service, they may sell the car at lower profits. Companies with huge market share like Maruti and Hyundai can use this strategy, but not Fiat.
I agree with Samurai, You should probably get a copy of "Wheels" by Arthur Hailey to understand what all thought processes go behind the making of a car.

Besides, I've heard that in the US the oil companies in Texas pay a huge sum of amount to the auto manufacturers every year, since their profits depend on the total sale of oil (gas, petrol, diesel, etc) is sold to retail consumers every year.

So for every dollar of gas that you fill in your car, a small percentage of it may actually go to the car manufacturer himself..

Sounds like a conspiracy theory.. Check it out, it is indeed intriguing.. Why else do you think the auto-manufacturers in the US can afford to offer discounts as much as $5000 on pickup trucks and cars??
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Old 22nd November 2005, 16:29   #10
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People nowadays buy printer ink not from manufacturers, but from 3rd party vendors - similar quality, fraction of cost :-)

I "heard" that for expensive cars, dealers often make Rs 20-30,000 profit on each unit sold. That's why they can often offer discount of Rs 10-15,000 or so and still maintain their profit.
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Old 22nd November 2005, 16:47   #11
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@moralfibre; maruti dealers earn about 4-6,000 rs. on the ex-showroom price of the 800. they earn extra on the registration, insurance, etc.

with respect to the profit margin, the companies make about 8-10%, like scooby said. the highest amount of money goes to the govt; i once managed to see the actual costs of an optra 1.6, base, which costs about 8.3 on-road; the company price (manufacturing price) was a stunning 4.5 (approx)...!!! the rest was made up by sales tax, transportation, octroi,vat, and all other crap...!!! the govt. makes a killing off the auto industry, doing nothing...!!!

the govt. is already making a killing off the consumers with the high regn. and one-time taxes; the govt. is also squeezing out a wad of cash from the manufacturers as taxes. as it is, we pay the highest taxes on automotive fuels; after looking at the state of the roads in our country, one can only wonder...WHERE THE HECK DOES ALL THE MONEY GO..???!! sorry for getting a little carried away there, but thinking about stuff like these just booms your brain...
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Old 22nd November 2005, 17:23   #12
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Quote:
Originally Posted by man23ish
I agree with Samurai, You should probably get a copy of "Wheels" by Arthur Hailey to understand what all thought processes go behind the making of a car.

Besides, I've heard that in the US the oil companies in Texas pay a huge sum of amount to the auto manufacturers every year, since their profits depend on the total sale of oil (gas, petrol, diesel, etc) is sold to retail consumers every year.

So for every dollar of gas that you fill in your car, a small percentage of it may actually go to the car manufacturer himself..

Sounds like a conspiracy theory.. Check it out, it is indeed intriguing.. Why else do you think the auto-manufacturers in the US can afford to offer discounts as much as $5000 on pickup trucks and cars??
And some companies in the US even offer free gas for a year on select models ala Mitsubishi
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Old 22nd November 2005, 17:28   #13
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Operating
profit / number of cars sold, for a ballpark figure. These figures are available from annual reports, so any of you that are shareholders in one or more of our manufacturers can provide the figures for a rough percentage value.

Obviously this will be a good indicator only for single-model manufacturers, though it could also hold good for those that are present only in or predominantly in one segment (eg. Maruti).

Last edited by Steeroid : 22nd November 2005 at 17:34.
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Old 22nd November 2005, 18:00   #14
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hey i remember .... godre a couple of years back was looking to buy cars for its staff that it does after 3 yrs or sth ... so it was technically between an indica and ikon . so as far as i know tata was offring 1.5 - 1.75 (-) per car .. even though its corporate sales they still had some margin on every car though ultimately the deal was clicked of with ford but it does give a jist of the manufacturers margin ....
its like profits are earned by every company u really make money when your operating cost are low
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Old 23rd November 2005, 14:23   #15
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So, from the posts it comes out like this

Manufacturing cost - 50%
Manufacturer's profit - 10%
Taxes - 35%
Dealer - 5%
Total - 100%
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