COSTS

(of an object or action) require the payment of (a specified sum of money) before it can be acquired or done.

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No automaker reveals the actual figures. So, the final estimation depends on plenty of ‘ifs’ and ‘buts’. The general rule is the larger the car and the bigger the production volume, the more cost-effective they are to manufacture. Building a concept car or a limited number of exclusive versions is much more expensive than producing a big lot. When tens of thousands of similar models of a vehicle are produced in a factory, the pricing meter tends to go down. This is because it is both easier and cheaper to buy things in bulk, instead of sheets of metal that have specific sizes.

While these sports cars can cost upwards of $200,000 in the market, it has been revealed that the manufacturer makes only about $6,000 per car. This means that the cost of manufacturing could be as high as $195,000.

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Manufacturing cars involves two types of costs: fixed and variable costs. Fixed costs cover expenses such as the cost of maintaining facilities, finding suppliers, testing prototypes, among others. Variable costs, on the other hand, include the cost of labor, raw materials, and other related things. 

Even so, there is a general rule of pattern that is followed. However much is spent on making the car, the car is sold to dealers for five times as much. Then the dealers sell it to costumers for twice as much as they bought it for. For example, if Toyota make a car for $5,000, they sell it to a local dealership for $25,000, who then sells it to costumers for $50,000 dollars.

Manufacturing a new model means a few years of mandatory research and development. It includes the cost of maintaining the facilities, testing prototypes, paying the salaries of the staff, finding suppliers, and some other related things. It can cost hundreds of millions and it will increase if you decide to send the prototype into production.

Raw materials and auto parts – this is by far the biggest cost driver in the auto industry, accounting for up to 47% of the total price. Direct labor will take up 21% of the costs. Research and development – mandatory research and development must be done before any new vehicle model is manufactured. This takes up about 6% of the manufacturing costs. Then other smaller things like administration, marketing and logistics add up.

Below is a pie chart on the costs that go into making a car.

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According to B&D Forecast (Germany), this how much a company makes from selling a car.

  • Porsche: $36,257 AUD

  • BMW: $4,116 AUD

  • Toyota: $2,800 AUD

  • Audi: $2,627 AUD

  • Mercedes/Chrysler: $1,177 AUD

  • Volkswagen: $535 AUD

Obviously it would vary for the make of the car. A BMW M5/6 would make for profit than a BMW 3-series. These are just the averages. However, by just looking at these numbers, It is unusual that Toyota is making more that twice as much as Mercedes is. In addition, Toyota's are far more popular, much cheaper to buy and make. This means that Toyota is making much more money that Mercedes is. On the other hand, Porsche. They are making a lot of money per car, however they are less popular than cars like Toyota.