[harryskt]

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.

[diffsoft]

Originally Posted by VEA

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.

[himavanth_m]

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)

[rishab.k]

Originally Posted by harryskt

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.

[StarVegabond]

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.

[diffsoft]

@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,

[alpha1]

P&L accounts do no give a true picture of actual profit or loss per vehicle.

[high_octane]

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 ?

[sushantr5]

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.

[vrprabhu]

Originally Posted by StarVegabond

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.