Cost of building a Commodore?

[PepeLePew]

Curious as hell...I've seen the comments on this forum re how much Holden have paid for various bits on the Commodore...

But how much does it actually COST THEM to build one? Or Ford for that matter?

[Grant]

Curious as hell...I've seen the comments on this forum re how much Holden have paid for various bits on the Commodore...

But how much does it actually COST THEM to build one? Or Ford for that matter?

Anyone who actually does have that information can't share it, so all you will get is speculation.

You may be thinking primarily of the raw material cost, which is, as with every other product on the market, not as significant as you may think.

Some things you may not have considered:

* R&D cost - This is huge. Not only internal at Holden, but also the 3rd parties developing components for Holden. Holden don't make much of the cars internally, they are an integrator. They source most components from 3rd parties and efficiently assemble them on the production line. Developing even simple components takes a suprising amount of time, effort and therefore money.

* Cost of running a business - buildings, sales, marketing, engineering, finance and all other staff and stakeholders need to get paid. I assume Holdens primary profit stream is cars. I doubt its merchandise or finance. All of these costs are amortised over the volume of vehicles sold.

etc... you get the point.

If you think you can build and maintain a car cheaper, show me the numbers.

[clixanup]

Curious as hell...I've seen the comments on this forum re how much Holden have paid for various bits on the Commodore...

But how much does it actually COST THEM to build one? Or Ford for that matter?

You could work it out from their Annual report - take the cost of sales figure and divide it by the number of cars sold for the year. That would give you the average cost per car sold. While not 100% accurate, at least it would give you some idea.

Anyone have access to a copy?

[rhoads56]

Research and development accounts for $8,000 of the price of a Monaro alone. Thats just for the monaro specific bits, R+D for generic bits (dashes, etc) goes on top of theat...

[Smitty]

[QUOTE=PepeLePew] Curious as hell...I've seen the comments on this forum re how much Holden have paid for various bits on the Commodore...
But how much does it actually COST THEM to build one? [QUOTE]

Having spent 8 years at Holdens doing exactly that (amongst other things)
you have to realise that the cost to build one includes....
R&D..from Engineering ppl to Lang Lang costs
ADR compliance costs and design and the engineering attached...
cost of tooling (for the life of the model)
the cost of the VAP factory (Elizabeth if you like) and running it
the cost of HO...Denis (and previously Peter H and me) have to get their wages from somewhere...
the marketing and advertising costs (Holden spend BIGtime here)
Transport..to Darwin or Adelaide..costs $$$
all has to be included...

so
you can't just add the cost of the metal and the paint and trim etc etc
and assembly wages and say that is how much it costs....


cheers

[JamesAXR6T]

I read in BRW magazine about 2 years ago that a typical base Falcon/Commodore costs around the ~$12-13k mark.

By cost I remember the article referred to direct materials, wages, marketing, and an opportioned cost of R&D, tooling for the life of the platform.

The incremental cost of higher models (ie..Acclaims, Berlina's, Calais..etc) was just the added sum of the cost of the extra's, and slighty variation in manufacturing process.

hmm..pretty good margin.

[Ghia351]

[QUOTE=PepeLePew] Curious as hell...I've seen the comments on this forum re how much Holden have paid for various bits on the Commodore...
But how much does it actually COST THEM to build one? [QUOTE]

Having spent 8 years at Holdens doing exactly that (amongst other things)
you have to realise that the cost to build one includes....
R&D..from Engineering ppl to Lang Lang costs
ADR compliance costs and design and the engineering attached...
cost of tooling (for the life of the model)
the cost of the VAP factory (Elizabeth if you like) and running it
the cost of HO...Denis (and previously Peter H and me) have to get their wages from somewhere...
the marketing and advertising costs (Holden spend BIGtime here)
Transport..to Darwin or Adelaide..costs $$$
all has to be included...

so
you can't just add the cost of the metal and the paint and trim etc etc
and assembly wages and say that is how much it costs....


cheers

O/T: How's it going..that wasn't you abusing the big 4WD for doing a U-turn in Hampton St just under the No-U turn sign?

[Smitty]

O/T: How's it going..that wasn't you abusing the big 4WD for doing a U-turn in Hampton St just under the No-U turn sign?

still o/t......NO...hahahaha :lol:
probably my next door neighbour (just bought a big black Mitsubishi 4WD)
and I know she disobeys traffic signs (and so do the local plod...
who booked her....)
me?? I still have the SS..
mate
cheers..

[seldo]

I read in BRW magazine about 2 years ago that a typical base Falcon/Commodore costs around the ~$12-13k mark.

By cost I remember the article referred to direct materials, wages, marketing, and an opportioned cost of R&D, tooling for the life of the platform.

The incremental cost of higher models (ie..Acclaims, Berlina's, Calais..etc) was just the added sum of the cost of the extra's, and slighty variation in manufacturing process.

hmm..pretty good margin.

Sorry,.. in your dreams - or in Holdens' dreams. Really, the cost per unit is Holdens net profit divided by the number of units sold. As others have said, all the fixed costs as well as the variable costs, R&D, advertising, spare parts back-up, dealer support, warranty claims, potential interest on the billions of dollars of capital tied-up etc. You might be surprised how little it really is for the risk and effort involved. And that isn't just Holden - any car maker. A mate of mine who was one of Sydney's biggest dealers with multiple outlets once said to me that "most people think that we sell cars to make a profit. That's not so - at the end of the day when it's all washed up with the profits and the losses and costs involved, the only profit we make is the commission we make out of the finance".

[PepeLePew]

Good Lord. I posted this and nicked off to lunch.

Some seem to think I have some sort of attitude or twist ingrained in my question. There is none. My question is simple, and doesnt include any R&D etc etc etc....I'm just curious, nothing else, as to how much it costs them to slap together a car (call it the sum total of the parts, Im not even talking about labour)....

By Grant:
If you think you can build and maintain a car cheaper, show me the numbers.

No idea where that came from! I dont want to build cars, I'd just like to satisfy my (and others) curiosity. I could admittedly have framed my question more carefully :D

It actually stemmed from my rereading a post the other day about the $5 Holden purportedly pay for their HSV/Monroe shocks, I was wondering how it all translates into the total product.

[Smitty]

Good Lord. I posted this and nicked off to lunch...snip..
It actually stemmed from my rereading a post the other day about the $5 Holden purportedly pay for their HSV/Monroe shocks, I was wondering how it all translates into the total product.

I can tell you Holden pay more than $5 for a shocker..
oh
and one other fairy tale....dead...
the cost of metallic paint is the SAME as solids...

cheers

[clixanup]

and one other fairy tale....dead...
the cost of metallic paint is the SAME as solids...

Then why do dealers charge $300 extra???

[seldo]

Then why do dealers charge $300 extra???
Beacuse you are happy to pay it..!

[Smitty]

Then why do dealers charge $300 extra???

coz Holdens (and the dealers) sales and marketing guys have done their job and convinced you that metallic paint is ...
more luxurious, more upmarket and ...etc etc ....blah blah....
and besides ...
you think the car looks better...

[HOWQUICK]

One thing for sure when you look at the outlay at your local dealer.....they are sure as hell making more than 1k on a car...some would be better developing the land for residential if they are only making a couple of grand per car as they so often claim...and please don't tell me they are making it out of the service departments. ;)

[seldo]

One thing for sure when you look at the outlay at your local dealer.....they are sure as hell making more than 1k on a car...some would be better developing the land for residential if they are only making a couple of grand per car as they so often claim...and please don't tell me they are making it out of the service departments. ;)
You might be surprised! Many would only be making that or less, and, as a matter of interest, the financial model for a successful well-run dealership states that the combined profits from sales and service departments should, in a perfect world, cover the entire overheads of the business. That is not often the case, but that's what they aim for.

[john0]

Quite a bit of the profit manufacturers make also comes from the sale of spare parts. ;) I've seen numerous articles on what it would cost to build a car if you bought the parts directly from the manufacturer and its huge!

[the mooch]

Food for thought. Holdens Spare Parts Operation (HSPO) posts profits almost as large as what the manufacturing business does (ie dollar per dollar). You'll actually find the manufacturing of cars is (sic) there to support the profit making business of spare parts! So when you take Holdens annual after tax profit and divide it by the no. of car sets produced (pretty rough considering model price variation, imported vehicle revenue, export engine sales, HSPO etc..), you don't really get a true indication of what it cost to build a Holden. If you are talking strictly Commodore Exec V6 materials only, you would still have change from $10k, easily............

[HOWQUICK]

You might be surprised! Many would only be making that or less, and, as a matter of interest, the financial model for a successful well-run dealership states that the combined profits from sales and service departments should, in a perfect world, cover the entire overheads of the business. That is not often the case, but that's what they aim for.

yep...and I'm riding my unicorn home tonight :lol:

but seriously, if you were making so much from your core business- servicing cars- why would you have so much staff doing, so very little, not making you money? And the sales people....why aren't they out selling houses if the retainers is so low and the percentage of the sale so negligible? Comon the cost of cleaning the cars on the floor would take care of two techs so go figure..... :confused:

lets not believe in fairy tales now.

[Phido]

Im sure dealers costs add significantly to the price of a vechical. Sure, they might not make a stack of profits, but dealerships are generally not that well run and have a lot of overheads. Buildings, service centre, showroom, stock, mechanics, sales staff, managers, advertising etc etc..

I would say the material cost of a Australian made car is quite cheap. Holden stated that late in the VL's life, the engine cost more than the entire rest of the car. Im guessing Holden got them cheaper than we ever could, and you could buy them brand new for around $10k from a dealer.. Thats spare parts prices retail.

I think figures around $12-14k would be about right. Adding things like taxes, dealer stuff, profit margins, etc etc would add up about right.. Low end Commodores and Falcons go ~$23-4 new for governments fleets, and low spec utes are about that..

In the US car makers make very little money from cars. They make most of it from things like financing and investment. They do a lot of stupid things over there that defy belief, and they aren't all that efficent at manufacturing (thank god, or there would be none here).

I could certainly build a car cheaper. Infact people have build cars for $100.. However, to start a real car company, you need massive government backed investment. Very few car companies work with out that. Then you need staff, dealerships, etc etc etc..The build a volume (>1000 cars a year) manufacturer requires order of billions of $'s. Well the way current ones do it.

Making cars is not a very good way of making money.. Many car companies are in trouble and not all of those are run by idiots a few mistakes and cost you dearly.

[Plums]

I heard that a VY I SS Ute was $30,000 cost price to the dealer. This was from a fairly reliable source.

Plums...

[seldo]

yep...and I'm riding my unicorn home tonight :lol:

but seriously, if you were making so much from your core business- servicing cars- why would you have so much staff doing, so very little, not making you money? And the sales people....why aren't they out selling houses if the retainers is so low and the percentage of the sale so negligible? Comon the cost of cleaning the cars on the floor would take care of two techs so go figure..... :confused:

lets not believe in fairy tales now.
I know it sounds very easy - you just get rid of the blokes cleaning the cars etc but there is plenty of dead wood as far as productivity goes, in any business. And the car business is one of the most competitive businesses around. The buyers are very smart and the competition is fierce. If a buyer wants to buy a new Zeta or something (for those of you who remember the Lighburn Zeta, perish the thought) many of them will visit every Zeta dealer in the city in which they live and will screw the dealers down to more or less no profit at all, and then the dealer has to rely on trying to claw back some profit with add-ons. That's why they push so hard to sell you rust-proofing, finance, insurance and accessories, because that is often their entire profit out of the deal. True! And if there is a trade-in involved they are relying on the fact that their valuer has not made a mistake in his appraisal of the value because if he has, they are out the door backwards on the whole deal. It would be a rare occassion that a dealer was able to retain 40% or better of his potential margin! So, if he had a potential margin of $6000 he would think it a pretty good deal if he retained $2400! And when you consider the amount of capital tied up and the commitment ( you'll find he's probably got every cent he owns tied up including the house mortgaged to cover it) he's entitled to make a profit, just as you are in your business. But some will do it for almost zero on the basis that they already have the car in stock, or its been hard to sell because it's not a popular colour etc. I recall I was on loan to a rural Holden dealer many years ago to offset some sponsorship they had provided and in my week there I managed to sell a car off the floor that they had had in stock for 15 months! It was a "3 on the tree" bench-seat 6 cyl Monaro in a sort of lipstick pink colour. I didn't know it was almost unsaleable, but I sold it and at a profit, but they would have gladly taken a huge loss just to quit it. It happens a lot. So don't think your local dealer is making a fortune out of you just because he does the deal - it is much harder than you would imagine
I was involved in the business for almost 30 years and had several dealerships of my own so I do know a little about it.

[Smitty]

Quite a bit of the profit manufacturers make also comes from the sale of spare parts. ;) I've seen numerous articles on what it would cost to build a car if you bought the parts directly from the manufacturer and its huge!
unfair comparison..with spares
why..?
volumes and time factors
huh?
I will put my Holdens hat back on..I used to do parts costing for
GMP&A *as it was when I was there...
firstly ..
most spares are starting to be procured at the end of the model life...
(apart from fast moving lines like filters and plugs an' crash repair stuff
panels...how many suspensions bushes or indicator arms or console lids
break in the first 3 years?)
and they are bought using calculated demand figures for each part that says ...
for the next 10 years, each year, we need xxx of these widgets
and for the next 5 years after that, we need xxx- widgets
and
so GMP&A (HSPO) work with the supplier to continue
to produce say 1000 widgets each year for the next 15 years
now
the supplier is geared up to make 120,000 widgets for normal production
while the model is in production
and they cost $1.00 each
but it is going to cost a lot more to make only 1,000 a year, and
it might be $5.00 a part at the much reduced volume
and over time
Holdens can only store so many, like a 1000
and have to keep buying...
so the $1.00 part that becomes the $5.00 part at less volumes will by
year 5 now cost $8.00
and
Holdens have the problem of these cost increases and they still have to make a profit on the sale of parts...so the cost to us (Holden and Commodore drivers) goes up as well...


hth

cheers

[HOWQUICK]

I know it sounds very easy - you just get rid of the blokes cleaning the cars etc but there is plenty of dead wood as far as productivity goes, in any business. And the car business is one of the most competitive businesses around. The buyers are very smart and the competition is fierce. If a buyer wants to buy a new Zeta or something (for those of you who remember the Lighburn Zeta, perish the thought) many of them will visit every Zeta dealer in the city in which they live and will screw the dealers down to more or less no profit at all, and then the dealer has to rely on trying to claw back some profit with add-ons. That's why they push so hard to sell you rust-proofing, finance, insurance and accessories, because that is often their entire profit out of the deal. True! And if there is a trade-in involved they are relying on the fact that their valuer has not made a mistake in his appraisal of the value because if he has, they are out the door backwards on the whole deal. It would be a rare occassion that a dealer was able to retain 40% or better of his potential margin! So, if he had a potential margin of $6000 he would think it a pretty good deal if he retained $2400! And when you consider the amount of capital tied up and the commitment ( you'll find he's probably got every cent he owns tied up including the house mortgaged to cover it) he's entitled to make a profit, just as you are in your business. But some will do it for almost zero on the basis that they already have the car in stock, or its been hard to sell because it's not a popular colour etc. I recall I was on loan to a rural Holden dealer many years ago to offset some sponsorship they had provided and in my week there I managed to sell a car off the floor that they had had in stock for 15 months! It was a "3 on the tree" bench-seat 6 cyl Monaro in a sort of lipstick pink colour. I didn't know it was almost unsaleable, but I sold it and at a profit, but they would have gladly taken a huge loss just to quit it. It happens a lot. So don't think your local dealer is making a fortune out of you just because he does the deal - it is much harder than you would imagine
I was involved in the business for almost 30 years and had several dealerships of my own so I do know a little about it.

that is all fine but why are they bothering with a market that returns so low a margin then. Let's face it any business has to return a min of 25% GP to have any chance of getting over it's over heads. If at the end of the day there is 5% left for capital investment they are travelling forward. I know of businesses that have total market domination over there product such as Holden does that make in excess of 60% GP! :eek:

Sure the small volume dealers do it tough....you can see it when you walk into the joints by the size of their spare parts etc but there are multi million dollar dealerships around the joint that you can't tell me are etching out a subsistence type of living from selling cars. You only have to have a look at the capital investment they have tied up in plant and equipment, stock on the floor etc. Why would any top end of town business person invest millions of dollars in property etc to return 5% GP on a sale? It isn't happening. Turn over? Turn more cost you more...still the same margin just the $$$ left is nicer.

Profit isn't a dirty word by no means but please don't keep telling us they make nothing as it is crap....and sure they are entitled to return some decent GP on their sales...but anyone with half a business eye can walk into a dealer and get a pretty good indication on what it takes to operate one of the yards...just count the staff and multiply by $40k for a start....and it isn't coming from changing oil!

I respect your experience in the industry. I know from others what some parts of big business (car sales) count as acceptable GP....little tip it isn't 5%! I always find that talking to car sale people that there is some sort of protectionism and closely guarded secretism surrounding the $$$ on new sales....just ask them some of the obvious questions where they know you areon the right track and they go quiet..........hey it's your job to return the most for your boss. No problems. :) Of course everyone is going to shop a deal...what do you have that any other dealer doesn't have? You're all selling the same stuff. Even more reason to protect your margin and spread tales of 5% GP!!!! :lol: 40% protentional GP ($6000)? Show me where we find a Commodore for $15K.......let's run that over $40k- $16kGP. Now your getting real.

[HOWQUICK]

unfair comparison..with spares
why..?
volumes and time factors
huh?
I will put my Holdens hat back on..I used to do parts costing for
GMP&A *as it was when I was there...
firstly ..
most spares are starting to be procured at the end of the model life...
(apart from fast moving lines like filters and plugs an' crash repair stuff
panels...how many suspensions bushes or indicator arms or console lids
break in the first 3 years?)
and they are bought using calculated demand figures for each part that says ...
for the next 10 years, each year, we need xxx of these widgets
and for the next 5 years after that, we need xxx- widgets
and
so GMP&A (HSPO) work with the supplier to continue
to produce say 1000 widgets each year for the next 15 years
now
the supplier is geared up to make 120,000 widgets for normal production
while the model is in production
and they cost $1.00 each
but it is going to cost a lot more to make only 1,000 a year, and
it might be $5.00 a part at the much reduced volume
and over time
Holdens can only store so many, like a 1000
and have to keep buying...
so the $1.00 part that becomes the $5.00 part at less volumes will by
year 5 now cost $8.00
and
Holdens have the problem of these cost increases and they still have to make a profit on the sale of parts...so the cost to us (Holden and Commodore drivers) goes up as well...


hth

cheers
but what about when you over project the sales of widgets and end up with a bunch in stock at 1995 cost? They soon get brought up to 2004 value. ;)

[HOWQUICK]

that is all fine but why are they bothering with a market that returns so low a margin then. Let's face it any business has to return a min of 25% GP to have any chance of getting over it's over heads. If at the end of the day there is 5% left for capital investment they are travelling forward. I know of businesses that have total market domination over there product such as Holden does that make in excess of 60% GP! :eek:

Sure the small volume dealers do it tough....you can see it when you walk into the joints by the size of their spare parts etc but there are multi million dollar dealerships around the joint that you can't tell me are etching out a subsistence type of living from selling cars. You only have to have a look at the capital investment they have tied up in plant and equipment, stock on the floor etc. Why would any top end of town business person invest millions of dollars in property etc to return 5% GP on a sale? It isn't happening. Turn over? Turn more cost you more...still the same margin just the $$$ left is nicer.

Profit isn't a dirty word by no means but please don't keep telling us they make nothing as it is crap....and sure they are entitled to return some decent GP on their sales...but anyone with half a business eye can walk into a dealer and get a pretty good indication on what it takes to operate one of the yards...just count the staff and multiply by $40k for a start....and it isn't coming from changing oil!

I respect your experience in the industry. I know from others what some parts of big business (car sales) count as acceptable GP....little tip it isn't 5%! I always find that talking to car sale people that there is some sort of protectionism and closely guarded secretism surrounding the $$$ on new sales....just ask them some of the obvious questions where they know you areon the right track and they go quiet..........hey it's your job to return the most for your boss. No problems. :) Of course everyone is going to shop a deal...what do you have that any other dealer doesn't have? You're all selling the same stuff. Even more reason to protect your margin and spread tales of 5% GP!!!! :lol: 40% protentional GP ($6000)? Show me where we find a Commodore for $15K.......let's run that over $40k- $16kGP. Now your getting real.

just realised my math is messed on the GP thing...should of $11k GP on the $40K car...oops. $28600+ 40% :(

[Smitty]

but what about when you over project the sales of widgets and end up with a bunch in stock at 1995 cost? They soon get brought up to 2004 value. ;)
it gets flogged to the dealers...
to get rid of it...
and it ends up as NOS stock...on the dealers shelf..gathering dust
and they want an arm'n' a leg when they finally flog it....
either way...you (and me) lose....
coz it costs more....

and if they (HSPO) underestimate the demand
or the part demand 'has expired'
the dreaded NLA appears in all the parts books...


cheers

[heavychevy]

VXIISSM6er, as an OffTopic and seeing that you're in the know. Why is the commodore clutch in short supply? I had my second oil consumpton rebuild before Xmas and decided to do the clutch as well while the engine was out. Engine done in 1.5 days, but my car sat there for a week and a half and still no sign of a clutch. Anyways I found one, courtesy of Starr.
Had my diff repaired last week and while waiting for the car to be driven round to the delivery area, the Team Leader pointed to 2 HSV's and a Ute. He said 'They're waiting for clutches , there is no stock though'

[Smitty]

VXIISSM6er, as an OffTopic and seeing that you're in the know. Why is the commodore clutch in short supply? snip..'

Mate..still ot...but
good example of what can go wrong!
In answer...
from one of my previous posts -"most spares are starting to be procured at the end of the model life... (apart from fast moving lines like filters and plugs an' crash repair stuff panels...how many suspensions bushes or indicator arms or console lids break in the first 3 years?)
and they are bought using calculated demand figures for each part that says ..."
so
why are we short of clutches....?
well HSPO would say...during the PRODUCTION period.. as an example ..
100 clutches for every 10,000 cars we build and we build 150,000 cars so we need to procure (NOT ALL AT ONCE) 1500 clutches a year..get 500 clutches every 4 months (most likely)
so how do they work that out??
well
based on history (say VR/VS) our warranty replacement of clutches is 1% of all cars built (ignore the fact that autos are built!) and the supplier of LS1 clutches tells HSPO that their experience of clutch failure is the same...so HSPO expect to replace1500 clutches a year
except we all know...
that they have to replace 3000 (or MORE) clutches a year!
and coz the computer works off demand HISTORY
they are forever chasing their tail in fulfilling demand for replacement clutches...
Clutches would not be seen as a fast moving part
so we wait...
More clutches will come over time..because
the demand history will now be looking at VT Series II
and maybe VX...
all sounds a bit complicated, but that the way it works...
and btw
I got caught too...
I had to wait 6 weeks late last year...
with a clutch that wouldn't disengage properly....
4 weeks on a boat they reckoned....

hth

cheers

[Martin_D]

It actually stemmed from my rereading a post the other day about the $5 Holden purportedly pay for their HSV/Monroe shocks, I was wondering how it all translates into the total product.

Thats about their real world worth when you drive on them......

[The Griff]

The profit a dealership makes and the profit a car company make are two separate things. A bad dealer will loose money when the car company is successfull. A good dealer will be profitable when car company is making losses

Only Holden will really know how much it cost to manufacture a car, and it would be calculated using many factors already described. Also, the cost of sales divided by the number of cars sold will not give a good indication as it includes the cost of import sales, spare part sales and engine sales (assuming fully consolidated accounts).

Spoken like a true accountant !!

[Smitty]

..snip..
Only Holden will really know how much it cost to manufacture a car, and it would be calculated using many factors already described. ..snip..Spoken like a true accountant !!

Mate
having worked there..and having done exactly that job
(work out their cost of sales)...
...you are spot on...

cheers
oh and me?....yep a beancounter also... :D

[the mooch]

During last years strikes and what not that affected production at the Elizebeth plant (supplier strikes that is) the company reported losses of up to $20million dollars a day in revenue. They were building around 630 cars per day, roughly $32k per car. Might give you an idea what sort of money they are dealing with.