Henry Ford is credited with stating “If I could be guaranteed a monopoly on selling the replacement parts for my vehicles I would give those vehicle away at no charge” This is not a word for word quote but the meaning is clear.
"Cost of manufacture doesn’t matter at all to the final owner."
Huh ? Where does that logic come from ? "
Pick a car that you think is a piece of poop and a car that you think is pretty good. For purposes of this experiment, their cost from the dealer to you the customer is exactly the same. But the piece of poop cost the manufacturer twice as much to make as the good car did. Which would you buy?
I’m astonished that I had to spell that out.
You are making this up…the poop mobile. Granted, some manufacturers do finance more expensive models with profits from high volume large profit models. But, in general car makers have for years tried to minimize their manufacturing cost by moving production elsewhere. Dealer cost to manufacturer does reflect often manufacturing cost giving consumer valued information which is often available through CR for example.
I guess you’ll have to tell me what cars cost twice that of others and sell for half as much. Everyone has sales to clear inventory but cars are no different than any other commodity. Over time, more costly cars to make, cost more. Even supply and demand settles these differences out over time.
Yes, I am making it up, as illustrated by the phrase “For purposes of this experiment”.
you: "I guess you’ll have to tell me what cars cost twice that of others and sell for half as much."
Not my problem. I was asking you to imagine that the imaginary cars cost the same amount.
Here’s the question you asked that got us here:
me: "Cost of manufacture doesn’t matter at all to the final owner."
you: "Huh ? Where does that logic come from ? "
If you think cost of manufacture matters to the final owner, then you must think the final owner somehow knows the cost of manufacture.
Huh? Where does that knowledge come from?
I remain astonished.
Guess you didn’t read my entire post. It always matters to the subsequent purchaser what the previous person in the chain paid for a car. That’s called negotiations and that price always includes the cost of manufacturing. If you don’t think that’s relevant, I guess my successful dealer relatives should be working in the dark too when they negotiate the purchase of their cars too. No need to know anything I guess…
whitey, if its such an easy question why not answer it instead of chiding everyone else who has pointed out the difficulties in doing so? do you think it matters which car were talking about? or the level of subassy of the parts? someone already pointed out it typically will cost you more to buy the parts and assy yourself.
man this edit box sux on mobile app. cant even use alt button to get apostrophes.cant see any cursor either to know where youre editing. not fun to contribute anymore…
@dagosa: I did in fact read your entire post. It simply was not written clearly. Now I see that you intended to talk about screening and information asymmetry.
"That’s called negotiations and that price always includes the cost of manufacturing."
It’s always called negotiations, and the price always includes the cost of manufacturing. It’s the least important factor because it is fixed. Even if both parties have equal information (unlikely) the dealer can always say “why should I sell this Corvette for a bare bones price when I can wait a couple of weeks and make a big profit from another buyer?” It’s not like the car is going to spoil.
"I guess my successful dealer relatives should be working in the dark too when they negotiate the purchase of their cars too."
The dealers are by definition not the people at the end of the sales chain. Of course the manufacturers are nothing but honest with them. How would being less than honest benefit the manufacturer? But how nice for you that your relatives are successful. Most car dealers are. Very impressed. How many relatives do you have who are car dealers? (“dealer” and “salesman” aren’t the same thing).
Astonishment is now my constant companion. You’re just being obstinate. Asta la nunca.
TwinTurbo: "whitey, if its such an easy question why not answer it instead of chiding everyone else who has pointed out the difficulties in doing so?"
I thought I did, above. I mentioned the cost would probably be close to that of an unassembled kit car.
The easiest way to think about is this: manufacturer's will price items as high as the market will bear.
What that means is just that. If my widget costs me $10 to make, can sell OK at $100, very well at $75, and not well at all at $125, I'll go with the $100.
If people will pay for it, that's where the price will sit. The only way to force them down is simply not to buy. Not very practical for items we need to survive, such as food. Cars are a different matter, but we always seem to pay it...
"Astonishment is now my constant companion. You’re just being obstinate. "
Deal with it. I’ve learned to deal with your “poopy car analogies” instead of real examples. The general rule that cars that are more expensive to build, over time cost more. Are there exceptions ? Obviously, but those models have a limited life. Manufacturing costs are nebulous as Whitey and others have pointed out but are important for the consumer to know in general as the cost for the previous link in the chain. You want to know how much profit you are paying that previous link. The difference in our opinion stems more from our difference in definition of manufacturing cost then from you feeling that the consumer should remain ignorant. I don’t believe you do, but CR agrees with me and supplies for a price, that which the dealer payed for a car.
True, chaissos, but this ignores the other side of the equation - if I see you selling widgets at much more than I could, I’ll start selling widgets for, say $90. You’ll lower your price, I’ll lower mine, 4 more makers will enter the market, and the price will settle at some value where somebody’s making just enough. So huge profit margins are quickly destroyed by competition.
When I read about the cost of cars, it gets interesting. If it didn't, I would stop reading. Just one article about Hyundai buying a steel plant to save on high strength steel for certain structural components makes me believe that the cost issue is complex.
The manufacturing of today makes the 1960s look like the Iron Age gone wrong. "Throw more metal at the problem" was probably the engineering slogan of the age.
Every part made today would have cost a fortune back then if making the part were even possible.
We pay at the dealer to save gallons at the pump. I won't say to save money, but a 72 Sedan DeVille would cost $100 to fill up. 6200 pounds empty.
Feel free to use any of these statements where they might make sense.
So huge profit margins are quickly destroyed by competition.
Not necessarily. In addition to trademarks and patents (also known as “Why you’ll never see a Kia Corvette”) car companies that try to win price wars often end up pricing themselves right out of consideration. The Yugo was cheap, but to be that cheap, it had to be cheaply made. Once people figured out that the cheap car was a steaming pile of crap, they stopped buying it, and paid more to buy the competition’s car.
Same reason people are willing to pay more for Honda/Toyota. They think they’re getting better quality.
The widget price war argument only works if everyone’s building identical widgets.
"Once people figured out that the cheap car was a steaming pile of crap,
they stopped buying it, and paid more to buy the competition’s car."
Bingo!
Did he ever return, no he never returned, the OP never returned,
But his thread will run beneath the streets of Boston waiting for the OP to return…
“Cost of manufacture doesn’t matter at all to the final owner.”
It does matter, but only in an emotional sense.
Let’s say Ford was able to cut all their cost by 50% but they don’t tell anyone. Will car buyer who pays the same amount for the same car be more or less happy with the exactly the same car for the same price, with no one knowing the real cost was 50% different?
Well, technically Whitey you didn't provide an answer, you provided some direction to AN answer. If someone asks "what's 2+2"? The answer is 4 not "go get a calculator and figure it out".
Regardless, the direction was misguided IMO based on the original inquiry. To the best of my knowledge, they do not make kit cars for ones normally produced on a current production line. They are always some special version or custom variant of a desirable post-production car. So how do you establish a cost differential?
Secondly, the parts selection for drivetrain components vary widely based on your desires. As an example you could spend $5000 to $20000 on the engine alone for some of the kits I am familiar with. This makes an apples-apples comparison difficult as well.
GM does offer a program where you can work alongside as your Corvette is being built. It costs many thousands of dollars EXTRA if you help.
As mentioned, the parts will cost more if you buy them yourself.
The examples you are using only include the final assembly time of large sub-assemblies. It only takes an hour or two to do the entire final assembly on the line. If you neglect to include the assembly time for all those complex sub-assemblies, the view is seriously skewed in the wrong direction.
So you provided some direction for the OP. Others, like myself, advised that it was a waste to do any of those type of comparisons since they had no basis on which to compare.
Caddyman, who cares if the OP ever returns? Does that mean the ongoing discussions are not useful or entertaining for the remaining participants?
I like to help people as much as anybody but if they drop a discussion bomb and then never come back to see the result, no skin off my nose. It's still fun to discuss among ourselves, eh?
<div class="Message">
<span class="Apple-style-span" style="font-family: Arial,Helvetica,sans-serif; line-height: 18px;"><b>"</b><i><b>Cost of manufacture doesn't matter at all to the final owner." </b></i></span><div><span class="Apple-style-span" style="font-family: Arial,Helvetica,sans-serif; line-height: 18px;"><i><b><br></b></i></span></div><div><span class="Apple-style-span" style="font-family: Arial,Helvetica,sans-serif; line-height: 18px;"><i><b> </b><span class="Apple-style-span" style="font-style: normal;">It does matter, but only in an emotional sense. </span></i></span></div><div><span class="Apple-style-span" style="font-family: Arial,Helvetica,sans-serif; line-height: 18px;"><i><span class="Apple-style-span" style="font-style: normal;"><br></span></i></span></div><div><span class="Apple-style-span" style="font-family: Arial,Helvetica,sans-serif; line-height: 18px;"><i><span class="Apple-style-span" style="font-style: normal;">
Let’s say Ford was able to cut all their cost by 50% but they don’t
tell anyone. Will car buyer who pays the same amount for the same car
be more or less happy with the exactly the same car for the same price,
with no one knowing the real cost was 50% different? "
Again, bingo!
"Others, like myself, advised that it was a waste to do any of those
type of comparisons since they had no basis on which to compare."
Another bingo!