[GTO]

Originally Posted by scooby05

now out of this 6.00 that the company gets, companies like maruti/tata/hyundai make 50000 or 7/8%.

Bingo! Small car manufacturers make about 8% net profit per car sold. And we're talking about the Master of cost cutting + market share (i.e. Maruti). Their annual financial report for 2009-2010 revealed a net profit of approx Rs. 25,000 per car sold.

Of course, if we look at the "factory price" less "actual cost of production", the margins will be much greater. But bring in administrative costs (primarily salaries) and marketing budgets (H-U-G-E), you are looking at about 8%.

The higher the car segment, the greater the profits. B segment hatches = easily 10%. C segment sedans fetch 60,000 - 75,000 for most manufacturers, while the C+ is over a 1 lakh rupees. Expectedly, luxo car manufacturers make a killing, yet their volumes are very low (4,000 a year for Mercedes & BMW).

Further, profit margins also depend on volumes (duh?), how old the model is (directly proportional to the profits), what price the brand is able to command and other factors. Note that the selling price of a car is no longer a "cost + profit" approach. Independent of the cost, the manufacturer gauges (atleast tries to) the maximum price that the market is willing to pay.

[quattroa4]

frankly the manufacturing industry runs on profit margins in the rigion of 7 to 10 % on an avg . anything above that is considered good . PORSCHE is the world's most profitable car manufacturer with margins of approx 14 to 15%.
its the same for componants industry also.

[SPARKled]

So How much is GM making on a Chevy Spark which saw almost 50-70K reduction from its original launch price. Does the dealer take a hit when rates are slashed so much or is it that the manufacturer compensates the dealer?

[echo77]

Maruti also gets some money from service centers - they need to pay some monthly/annual amount to Maruti to be called a Maruti Service Center and charge the slightly hiked standard Maruti rates and use Maruti Genuine Parts.

They must be taking some cut out of the MGP as well, which are usually sourced from product manufactures from small-scale industry.

Doesn't the govt also make money on fuel taxes? Of course all of it must be going back to feed the subsidy.

[discoverwild]

I was once told by a friend's friend who worked at the Hyundai plant that the manufacturing cost of the i20 was 1.75L. This was when the i20 was just launched. This is production costs alone.

You have to factor in administrative expenses and then the advertising costs to this as well.

[prince_pervez]

Also when the assembly line/infrastructure cost for a particular model is covered up by sales, that adds up to the profit as well. Someone mentioned on this forum on some other thread that the manufacturing cost of a M 800 and the selling price is overwhelmingly profitable to MUL, now. Then there are others like Toyota that re introduce the Qualis in the Indian markets using used assembly lines in Japan and make huge sales in India and mocked by other world automobile manufacturers for their lack of business ethics.

[arin_12]

Originally Posted by discoverwild

I was once told by a friend's friend who worked at the Hyundai plant that the manufacturing cost of the i20 was 1.75L. This was when the i20 was just launched. This is production costs alone.

You have to factor in administrative expenses and then the advertising costs to this as well.

But do u think that 2 times of the original cost will add up for all kind of administrative work and marketing work. Their is also a concept called Break Even point. Maruti has not yet learned this term after selling so much of SWIFT.
Basically what I feel is that, being a growing Indian market all company wanna make use of it most. All Automobile company in India do a high margin profit compare to rest of the world. Its not only for restricted to Automobile comp, all other sector also.
Jai Ho Hamara Indian Customer.

[avishar]

Maruti also stands to gain from the depreciated cost of machinery from cars like alto,800,wagon on which they make a larger profit.
For mercedes i dont think they make that huge a profit because they have to import most of the components which attract a fair amount of duty.
Honda though imports sheet metal,engine and gearboxes from Thailand which attracts no duty.

[aargee]

I've a basic question & pardon my ignorance. For a small car, is it the manufacturer (Maruti/Hyundai/Tata etc) are making about 8% profit is it? So how much will the dealer make? Another 8%; so on an average, as customers are we paying 16% more? Is that all?

[amitverma123]

we are missing a very important component here. Its the pre manufacturing cost. It includes two major factors - Setting up the assembly line and new platform development cost(or the RnD cost)
Now this is a flat number that the manufacturer knows before even starting the final car production. Post this they have a particular number of cars in mind where this cost will break even. So for example if the PreProd cost for BEAT is Rs 50 cr. and the company is expecting 1000 cars selling per month for the next 5 years during which time Beat will sell 60000 cars during its expected life. Hence, the company will have to add 50cr/60000 = 8333 Rs per car.
Alternatively, the car brand can keep a fixed margin for this cost on a per car basis and hope it gets over as fast as possible. So if GM charges INR 15000 per car as the pre pod cost then they will start making an extra profit of 15k as soon as they roll out the car number 33334. Post this number they can afford to give extra discounts or make extra profits, basis which way the cars are going. That should tell us how Maruti makes more and more profits on the Swift while Fiesta is able to give massive discounts on its older prices

[xingamazon]

There are two points here.
Dealer margins and the company's margins.

There are few companies who get good margins and squeeze the dealers out, and ther are few companies who squeeze themselves but the dealer margins are high.

Typically, I am guessing Maruti and Hyundai have more company margins with them as they have the pull to squeeze the supplieers owing to thier volumes. Moreover they can afford to slighly sell their car at a premium price owing to the public demand (e.g. the demand for dzire is not gonna come down owing to 5k increase). likewise they can squeeze the dealers forcing them to sell the cars with less dealer margins.

But companies like Ford, Fiat and Chevrolet the dealer margins are high as they dont have the substantial dealer volumes thus reducing thier bargaining power. Thus dealer margins on these cars are higher than the company margins.

Bottomline in companies having higher volume company margins are higher in lower volume companies dealer margins are higher than company margins.
And this Maruti and Hyundai makes more money than a same on-road priced product from say Fiat or Ford or Chevy.
And Vice-versa for the dealers of these branded cars.

[extreme_torque]

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. while the not so successful sometimes put in upto 50000 from their pockets!!

I can bet my life that Maruti makes a lot more than what you have suggested here. How difficult it is to import outdated unusable dies from Japan to India and then start manufacturing here? I for the life of me cannot believe that Maruti spends 2.75-3.0 lakhs to manufacture an Estilo or for that matter 3.5-4.5 lakh rupees for a Swift LXi. They make a huge killing on every car sold.

[n.devdath]

Originally Posted by extreme_torque

I can bet my life that Maruti makes a lot more than what you have suggested here. How difficult it is to import outdated unusable dies from Japan to India and then start manufacturing here? I for the life of me cannot believe that Maruti spends 2.75-3.0 lakhs to manufacture an Estilo or for that matter 3.5-4.5 lakh rupees for a Swift LXi. They make a huge killing on every car sold.

Having read and acquired knowledge about Maruti to a pretty decent level, I completely agree with the 7-8%a average profit margins that MSIL would typically make over most of its bread and butter models. Also, not all the models are outdated or out of production worldwide.

[GTO]

Originally Posted by quattroa4

PORSCHE is the world's most profitable car manufacturer with margins of approx 14 to 15%.
its the same for componants industry also.

There is a reason for that : Porsches are big ticket items, and don't compete in the (lower) price sensitive market segments. Then, in recent time, there has been a lot of platform / component sharing with other brands in the VW group.

Originally Posted by SPARKled

So How much is GM making on a Chevy Spark which saw almost 50-70K reduction from its original launch price.

The Spark is basically a spruced up Daewoo Matiz, a car that is over 10 years old. Even with the price cuts, profits should be reasonable.

Originally Posted by amitverma123

we are missing a very important component here. Its the pre manufacturing cost. It includes two major factors - Setting up the assembly line and new platform development cost(or the RnD cost)

Absolutely. IIRC, the cost of the same for the Indica was Rs. 1,800 crores. And that was considered cheap!

Originally Posted by extreme_torque

I can bet my life that Maruti makes a lot more than what you have suggested here.

For sure. Maruti makes a killing on selling older cars like the 800, Alto, Omni, Versa etc. Even the Dzire, which is basically a booted version of a very successful hatch, has got to have some profit margins.

[ajmat]

I read an article recently on why the BMW 5 is crucial for the company success although the 3 is the big seller. Apparently, it costs only 15% more to manufacture but the margins are twice that of the 3. Considering the 7 and 5 share similar components - BMW are out to cut costs through commonality. They did have profitability issues over the past year