Thread: Riddle me this Tombie.

That’s a bloody good question.

In many instances it is common to mark up to what the market will bear.

The Range Rover Vogue was a $200k vehicle. To build was approximately £14k.

I remember reading from a Detroit guru who explained the mark up on vehicles based on what people would pay.
There was a formula - body coloured bumpers, door trims, chrome - all had a price.

Just look at what people here pay for a HSE... there’s not $30k worth of gear in it...

Doesn’t mean I won’t spend silly money - but I recognise it.

For much of what I would make for 4wds. I would charge 20% Gross Margin

Partially it comes down to units produced, time etc invested...

In the 70s car manufacturers would consult psychologists to help determine prices. They may still do so.
I think you're on the mark with 'what the market will bear', it seems to be the way with most commodities.

Originally Posted by V8Ian

In the 70s car manufacturers would consult psychologists to help determine prices. They may still do so.
I think you're on the mark with 'what the market will bear', it seems to be the way with most commodities.

Yep, they always say charge what the market will bear.

Then they cry when people dont shop local.

According to the news tonight the "intent" to purchase property is up but the "intent" to purchase a new vehicle is down, way down. So how much can the market bear? Has the upper end of the market gone too far?
I know I have no "intent" to purchase either but I couldn't even afford a base model Chinese anything at this time. Prices keep rising, wages remain stagnant, or with minimal increases and the grubberment want us to work longer. Where does something give? What is the breaking point?
Not sure about vehicles but from my time in retail and hospitality, I would suggest that most mark ups from wholesale to retail would be in the vicinity of 100-200+%.

I read that total Australian vehicle sales have fallen every month for 18 months. I guess stagnant wages mean less money to spend.

Originally Posted by Tombie

The Range Rover Vogue was a $200k vehicle. To build was approximately £14k.

does that include research n development costs?

When determining costs, you have to look at total Life Cycle costs. That is from development to production to post production to warranty cost. Then divide that total cost by the number of expectant vehicles, allowing for future development of the product, economies of scale, opposition inroads to sales, and inflation and then finally company profit expectations. Its not just a simple % added on. For example we have owned a Mazda 3/323 since 1995. Until 2019 (when we are about to replace), the base model has been $19,990 or near enough for the 23 years. The car we had in 1995 had basically nothing where as our last car had a lot of things that have been included. Maybe thats why the new Mazda 3 is now $30K as they got it wrong or they have changed their target market.