In last Wednesday’s Question of the Day post, we asked you to build the perfect manufacturer lineup. As you responded and built your hodgepodge lists of desirable present day cars from various manufacturers, capitalist and commenter Dal20402 had something else on his mind: profitability.
Propulsion, platforms, and product planning are on the agenda today. What combination is the most profitable?
The basis of all vehicles is, of course, the platform residing underneath all the pretty (or ugly, if it’s a Toyota) metal. Companies like Volkswagen have perfected the art of the modular platform, which is easily scalable up or down depending on the required usage. How many platforms does a full-line manufacturer need these days?
With platforms established, thoughts turn to the metal rectangle under the hood; whether that means battery or engine is up to you. In this age of EVs, small displacements and turbocharging, how many different types of propulsion do you need? Or perhaps, what are the fewest number of engines a company can attach to the widest number of vehicles?
The final concern in today’s discussion is how the power established above gets to the road. Are CVTs worth the trouble, or should manufacturers stick to the established conventional automatic? For profit’s sake, is it necessary to offer a manual at all? Is all-wheel drive (or 4×4 real-quad-track whatever) the best way to add a couple grand to each and every vehicle on the lot?
Before we turn you loose in the comments, remember that today we’re talking maximum profits, which is very different to Internet Car Enthusiast appeal or reliability.
Thanks to Dal20402 for suggesting today’s question. If you’ve got your own QOTD to send me, forward it via electronic telegram to editors@ttac.com.
[Image: Shutterstock]
A Porsche Cayenne and an F-150.
You want margins or gross profit? A lineup like (as in equal to) Ferrari gets almost 20% margin, but the volume is somewhat limited compared to the big boys. TMC only gets 8% margin but with revenue of 250B they still win on my idea of “most profitable”.
Well that the question is it easier to sell 100,000 vehicle swith a 8grand profit or sell 20,000 vehicles with a 40grand profit?
A car company should build a lineup of three cars; a RWD,400HP+ pillarless hardtop with six speed manual transmission. A RWD,400HP+ shooting brake with a six speed manual transmission. And finally,a four door sedan with 400HP + and a six speed manual transmission.
Screw profit. Build what’s right.
The optimal mix would be 100% Chevy Tahoes and Suburbans.
These are probably the most profitable vehicles made today.
Their transaction price is high. The cost of manufacturing them (in terms of hours required, cost/size of facility) is comparable to the cost of building Malibus, Camrys, Accords, Fusions, or Sonatas. They cost a little more to make than P/U trucks, their price differential makes it MORE than worthwhile.
With their pushrod V8s, solid axles, they are easy to build. THey are on the same platform.
GM’s marketing costs are higher, since they must be spread among Chevy, GMC, and Cadillac. Still, this is a huge gravy train.
It’s all about transaction price and volume.
High volume allows you to spread out your fixed costs. You need so many engineers and stylist to create.
Even variable costs…those Superbowl TV ads, spread out over more units, cost less per unit.
Chasing warranty claims is a largely fixed cost.
A Chevy Trax and a Chevy Sonic cost virtually the same to make, yet Chevy can get thousands more for a Trax, because people will pay more.
Of course, styles change. Detroit’s personal luxury cars of the 1970s, the Cutlass Supremes, Monte Carlos, T-Birds, Cordobas, sold for a lot more money than their plebeian 2-door counterparts (Cutlass Sedans, Malibus, Torinos, Monaco/Furies), same principle.
Today no one buys them.
And if the market changes, and full-size SUVs become politically incorrect, or gas is too expensive, they will go the way of the Monte Carlos and T-Birds.
I’ve never liked the Suburban/Tahoe/Yukon. They’re ugly and wasteful the way I usually see them used. I’ve given them a fair shake and test driven several of them and I honestly just don’t like them very much. Their main redeeming quality is their tow rating — a Honda Odyssey does everything else I care about better.
My family has expanded to the size (3 kids) where these vehicles’ imposing size could be more benefit than liability, but the price GM charges for them is excessive. I’m not paying $60k+ for a pickup truck with a station wagon body. A $45k minivan (or a Mercedes Metris passenger van) is a much better deal, as is the $20k Mazda5 that I actually use to haul the kids.
GM would have to drop the price dramatically in order to sell me a Suburban/Tahoe/Yukon — because I just don’t like them very much. Personally, I’d probably only pay $20k for a Suburban/Tahoe/Yukon new — and much less used (but the used ones under $20k are run-out). If I’m going to pay as much as $60k, I’d rather get something I actually want — like the Tesla Model X, or a fully loaded Mercedes Metris passenger van.
There’s only so much demand for the Suburban/Tahoe/Yukon at the $60k-$90k price range. I bet the number they sell now is pretty close to satiatiating that demand at that price-point. They’d have to drop the price (and reduce the profitability) dramstically in order to drive volume, if that were all they sold.
How DFUQ would I know? ;-)
Absent regulation etc max profit would be BOF pickups and BOF SUVs in mid-size/full-size with gas V6/V8 and diesel I-6 and ONE HD automatic transmission that you can use in all models.
Like someone above said, nothing but Yukon Denalis and Suburbans BOF ‘R US.
And if (ever)/when there’s a sea change and sales come crashing down and BOF buyers become largely commercial users, you, CEO honcho, have a nice little nest egg and enjoy life as you watch your kids grow into spoiled, helpless brats constantly nagging for a bigger allowance.
the American dream! :)
Everyone strives to attain and live their version of the American Dream.
And most will actually achieve it through diligent application of their work ethic.
Some may attain it by winning the lottery.
And some will always be losers no matter how much they try and try again, only to fail miserably over and over again.
That’s life. If at first you don’t succeed….. try something else.
It’s so brand dependent it’s almost not worth answering. I’m certain Ford makes more on its DOHC V8 full size pickups than Toyota, but we know Toyota makes enough on its compact car to keep investing in it rather than cancel it like FCA. Luxury is tricky as well because it’s inherently irrational and dependent on stuff like brand name.
So I can’t speak to what will be the most profitable but I’d say the safest way to profit is with a line up of crossovers… 2 row compact & midsize & 3 row midsize in the mainstream realm, and probably the same in the luxury realm, with a pointed focus on design (as regulations have made that the only knob manufacturers can turn).
CUVs and SUVS at incrementally different size/price points for every manufacturer. That’s it. Period. Wait…also full-sized pick ups. There ya go. Approval to print money granted.
Corey asked: “How many platforms does a full-line manufacturer need these days?”
I understand how he arrived at this question, as a follow-up to yesterday’s discussion; but it’s the wrong question. Of course it’s smart for manufacturers to use each platform for as many models as possible. The extent to which this can be done is a matter of the technology of building cars, which I know nothing about.
The real way to make money is to use each platform for as many brands as possible. This is the key to VW’s success. Everyone knows that a SEAT is built from VW’s parts bin. Everyone knows that a Skoda copies last year’s Audi technology. No doubt buyer see this as a good thing. If last year’s technology was good enough for Audi, it’s certainly good enough for a medium-priced Skoda. And VW doesn’t cheap out on sheet metal. They maintain a distinctive brand identity for each by making the cars look different.
I assume that PSA intends to follow the same pattern. They will use the same platforms for all their brands, but they will not build Peugeots in England and Germany. They will make a model that appears different to sell as a Vauxhall in England. They will build something *German* to sell as an Opel in Germany.
As I understand it, even Toyota does the same thing, at least in Japan. We tend to think of Toyota as equivalent to Chevy, but we should think of it as equivalent to GM. The different Toyota stores in Japan are like different brands. I don’t know how it works, but Toyota must feel they can sell more cars by appealing to different buyers in different ways.
The Chinese certainly understand this. An article just above this one explains that Lotus will build a CUV using the Volvo platform (that Geely paid for.) Will it be the same as the Volvo, but with different grill and tail lights? Of course not. They will use it to build the Lotus brand identity. And Geely will use the platform for one, or several, brands in China.
American manufacturers have had very few successes with this strategy. A rare example is the 1983 Ford Thunderbird/ Mercury Cougar. Using the same chassis and mostly the same body, they built two cars that did not cannibalize each other. People who liked the Thunderbird hated the Cougar; people who liked the Cougar didn’t like the Thunderbird.
But for the most part, American manufacturers have failed badly, trying to make a quick buck by skimping on the development of distinctive brands. One need only mention the Cadillac Cimarron for proof of this.
Like it or not, I think Ford’s decision to cut most of its car lineup and their insistence on Ecoboosting everything fits this question.