blueSL

A couple of items of interest (to me at least).

Met someone at a dinner who is very much on the inside of the European motor industry, involved with a number of companies as a supplier. We got talking about build costs and he asked me the question "How much do you think it costs Mercedes to build a marginal SL?"

So, by "marginal", he means, discount all the R&D, plant infra-structure, overheads, all that stuff. Just the cost to Mercedes of the parts, processes and people to build one.

The answer: $16000.

The other item concerns US pricing of the car. All those of you without your heads buried in the sand will know the dollar is headed south against the euro; it's down 30%. Good news for the US economy because it makes US exports cheap; bad news for European economies because they cannot compete against those cheap US exports and exports to the US are expensive.

As the dollar weakens, Mercedes would like to increase the dollar price of the car to produce to give them a constant return in euros. An article in The Economist magazine this week looks at how much of a price increase US importers have been able to pass on to consumers as the result of an exchange rate fluctuation. Between, 1981-89, about 50% of the exchange rate effect could be reflected in the dollar price of the car, between 1990-99, only about 12%.

In other words, US importers have much less room for manoeuvre now than they used to which is good news for US SL buyers who might otherwise be seeing a big hike in the price.

From a company point of view, Mercedes can compensate by selling more US product elsewhere, like the M-Class. If only more of us here in Europe were foaming at the mouth at the prospect of buying a Chrysler...

dswildfire

that number doesn't surprise me much. i've heard most benzes cost in the $10-20k range to produce. a lot like the $7k it costs to produce the expedition. it is a money-making business.

internet_mafia

But the fact is, that MB has to initially front the $1+ Billion in R&D and infrastruture costs to even make the SL possible. Its only fair that they enjoy these huge markups.

Mustard

Incredible. Quite surprising.

I wonder what percentage they use to amortise production costs, dealer margins, overheads etc. Bet its not more than another 20% per car over its model life.

I used to feel bad about complaining but I'm not going to hold back on warranty problems any more....

blueSL

He also said that if you were to build an SL by buying spare parts, the cost would be £1m...

I accept what everyone is saying about their needing the margin to justify the investment and I'm not for one minute saying the SL is overpriced, but when you read about manufacturers trying to drive down manufacturing costs, this is the number they are playing with.

It also puts incredible pressure on component suppliers. I recently replaced one of the turn signal lenses on my SL600 - about $60. The old (1996) one said "Bosch - Made in Germany", the new one said "Bosch - Made in Czech Republic". One suppliers way of reducing costs is to move production out of Germany which has some of the highest unit labor costs in the world.

Porsche make the Boxster in Finland and the Cayenne is Leipzig; Mercedes make Left Hand Drive C class in South Africa and the M Class in the US, all lower costs centres of production than the (former) West Germany.

In a similar vein, Jaguar's new aluminium XJ8 body-in-white costs about $600 to make.

Mustard

Very interesting - I heard a new Mini cost less than $3000 to make but that seems a bit slim to me.

On the Jaguar - how does the Ali cost compare with steel?

samwzhang

Well that 16k figure is in my opinion quite pointless. We all know how little it costs to produce a marginal copy of Windows XP professional and yet you can¡¯t say that the product is way overpriced. Neither can you "predict" the profit margin that Windows XP generated for Microsoft approaches 1.0 because aside from R&D/marketing expenses, customer/ technical support and software updates represent major expense as well.

Same thing applies to MB. A transaction does not just end when a customer drives a brand new SL home. Customer service and Technical support represent major expenses. Read the DaimlerChrysler annual report and you will find the figure for 2002 Mercedes car group profit margin. At 6.1%, although one of the highest profit margins in the industry, MB¡¯s profit is nothing compares to the 16k/100k difference we see here. (Assuming that figure is truthful)

blueSL

Far from being pointless, it is absolutely the point. I posted it to illustrate just how little of the price you pay goes into making "your" car. The rest is overhead, from the investment in R&D, plant and tooling through to unwanted junk mail coming through your door.

You must tell me more about Microsoft customer and technical support. A virtual concept if ever there was one.

Scotsman

Friend went to Microsoft factory and was told he could buy any software for US$10. I can't see them selling at a loss so that must be cost plus any admin. So, yup, you can say it's wau overpiced. Now you know why Gates is so wealthy.
Just a pity you can't get an SL at cost plus admin

FInality

That goes for any tech heavy manufacturing industry where huge R&D costs are invloved. It costs Intel less than $50 to produce a chip but they sell the same thing for upto $800 a pop. There are massive R&D costs + the need to fund further R&D for future projects.

Probably the only really overpriced car companies are Ferrari and Porsche which has a profit margin exceeding 40% which is rediculous...

vraa

Quite, IIRC you have to PAY after the first phone call or e-mail, which ever comes first!

Mustard

Vraa, you're very cute..(smart)

Are you really just 14?

vraa

15