Do we really need all that safety stuff?

[RedDevil]

The problem with kei cars is the size.

Any car needs to move the driver, in reasonable comfort.
Most cars need to move a family, even kei cars.
Due to their small outer size there is little excess space to work with.
They need to be very cleverly designed and built to be able to meet the requirements in reasonable comfort and safety (yes, the Japanese do think you really need at least a basic level of safety).

It would be much easier and cheaper to build the same car slightly bigger.
Just letting it bulge out at certain points makes for better aero and crash safety without even adding weight.

The only reason why the Japanese build kei cars is their severe lack of parking space in the cities, which they try to solve by making minute parking spots only fit for kei cars and tax reductions for kei cars.

So, kei cars are relatively expensive despite their size.
Without the parking woes even the Japanese would not buy them.

[niky]

Yeah, that's the other thing. Global A-Class...errh... Micro... whatever... cars are bigger for around the same amount of money as Keis. And possibly could be made safer, while still being the same amount of money.

[duncan]

Originally Posted by niky

Yeah, that's the other thing. Global A-Class...errh... Micro... whatever... cars are bigger for around the same amount of money as Keis. And possibly could be made safer, while still being the same amount of money.

Niky

You are still missing the point

It really does not matter what a car can be "made for" the price is determined by what it can be sold for
There is no linkage between the two

[niky]

Originally Posted by duncan

Niky

You are still missing the point

It really does not matter what a car can be "made for" the price is determined by what it can be sold for
There is no linkage between the two

Of course there is.

If the margins between sales price and cost price are too thin and volumes are low, the car simply won't be made.

If the manufacturer can expect reasonably large volumes, even with low margins, the car will be made.

-

And then the dealerships will simply jack up the transaction price beyond all belief by loading those cheap cars down with expensive options.

Still, to convince people to pay more, you have to add more to a cheap car. Not less. Same goes with Keis... for higher profit margins, you have to load them down with $2k - $4k of options. The higher the price, the higher the percentage of the price that goes to profits.

-

Of course, there are the cars that never turn a profits but are still produced, simply to offset the losses. Like the Audi A2, the Smart ForTwo or the Phaeton...

Ironically... the ForTwo is, IMHO, too expensive for what it is, and it's still a $6.5k loss on every car.

Europe’s biggest loss-making cars revealed

I wonder, actually, what the balance sheet on the Nano is. It is creating huge losses for Tata, but I don't know of anyone who's done the breakdown to see what they're losing per car. I imagine it to be somewhere in the $2k - $4k range...

[duncan]

Nope - no relationship at all

Why is a bigger car more expensive? - pennies in materials in the cost

But it's more expensive because we expect it to be more expensive

So people simply won't buy small cars at the same price

The manufacturers know this
Why build and sell a micro car when it will have lower margins?

It's NOT the cost - its our expectations and the PRICE we are willing to pay

As far as "loss leaders" go
These are like hen's teeth or rocking horse **** - mythical beasts

[RedDevil]

Originally Posted by duncan

It really does not matter what a car can be "made for" the price is determined by what it can be sold for
There is no linkage between the two

No?

The Art of Underengineering

On average, 70 percent of the cost of any new product is fixed by the specifications and design. In other words, more than two-thirds of the total cost is designed into the product. By identifying what is integral to an automobile’s appeal and what is an expensive waste, manufacturers can modify the product design to dramatically reduce unit costs and give consumers the products they want at competitive prices.

In practice, realizing savings through design is extremely challenging. Most cost-reduction initiatives that attack the design process don’t stick, no matter whether the ideas come from a “value analysis” (taking out cost without compromising value) of an existing product or a “value engineering” approach to designing a new product. Resistance to new ideas also keeps design changes from being implemented.

Only 30% of vehicle cost is not related to the design and production.
All the housing, staffing, shipping and marketing costs still have to come off that 30%.
The possible profit margin is not that big.

When you have to design and engineer parts for a car you have to take the cost for that in account, not just the bare assembly cost of that part.

When it comes to standardized parts that get used in millions of cars, the design and engineering costs per unit will have dwindled.

[cRiPpLe_rOoStEr]

Originally Posted by niky

the ForTwo is, IMHO, too expensive for what it is, and it's still a $6.5k loss on every car

Gotta agree with you that the ForTwo is too expensive, but actually it's kinda surprising to me that it's not profitable at all.

[niky]

Originally Posted by cRiPpLe_rOoStEr

Gotta agree with you that the ForTwo is too expensive, but actually it's kinda surprising to me that it's not profitable at all.

When you have to literally reinvent the wheel (wheel hub, lugs, model specific PCD, lug count and all) just to make a small car... don't expect to see much in terms fo economies of scale versus the guys who simply use the same wheels everyone else is using.

Originally Posted by duncan

Nope - no relationship at all

Why is a bigger car more expensive? - pennies in materials in the cost

But it's more expensive because we expect it to be more expensive

So people simply won't buy small cars at the same price

The manufacturers know this
Why build and sell a micro car when it will have lower margins?

It's NOT the cost - its our expectations and the PRICE we are willing to pay

As far as "loss leaders" go
These are like hen's teeth or rocking horse **** - mythical beasts

I feel like there really is no point in arguing, because I don't see any contradiction there? I've never disputed that the market sets the basement and ceiling prices for automobiles.

That doesn't change the need to balance cost against selling price. Especially in a competitive market, where your competitors will sometimes be willing to spend more on each car (sometimes selling at a slight loss) to steal market share away from you. That's actually the whole point of model changeovers... while some manufacturers hedge their bets on simply selling old cars over multiple model years, other manufacturers spend extra updating their cars more vigorously (whether engineering-side or cosmetically only) in order to increase sales.

It's worth noting that competition makes the profit margin for most automakers is relatively flat.

Intense competition leads to low profit margins for automakers - Market Realist
(I'm actually surprised it's that high... but this is before taxes, loan interest and depreciation... so in real terms... everyone is still under 10% or so...)

Carmakers with bigger profit margins earn them by trading on name value... a name value built on the back of extra spending on engineering, product-planning and marketing. (In BMW's case... a whole lot on the last factor)

American manufacturers got those huge margins on their truck lines on the back of government policies that purposely exempted those trucks from many of the regulatory requirements facing cars. If regulatory requirements and taxes were more proportional, I'd expect profit margins to go down, accordingly. Given how much Ford, Dodge and GM are spending on their new trucks... that's probably happening already.

-

Loss leaders are, indeed, unicorns (in America... outside, lots of people actually do buy strippers), but are often important marketing tools for getting people to walk into showrooms.

-

Speaking of which, rough calculations put the loss per Nano for Tata at about $3k per car. Of course, that loss could go down if sales improve... how much it goes down depends on how much extra margin they're making with the new Twist and the amount of capital they had to burn over the past few years in order to keep up with loan payments due to massive underproduction, and how much of the capital tied up in the production facility can be recovered by repurposing the plant for a different product line if the whole thing collapses.

[user removed]

Remember the cars sold in the US that were going for significantly more than the sticker price. In the case of the 1st 240Zs made in Nov 1969, the selling price was 20% over the window sticker, AND you got whatever color they had!

regards
mech

[cRiPpLe_rOoStEr]

Originally Posted by niky

When you have to literally reinvent the wheel (wheel hub, lugs, model specific PCD, lug count and all) just to make a small car... don't expect to see much in terms fo economies of scale versus the guys who simply use the same wheels everyone else is using.

I have already seen many French cars with 3-lug wheels