BMW Earns Approximately $5000 Profit Per Vehicle

[roastbeef]

there is no way a company can survive on that margin. not even close.

[M3 Adjuster]

Originally Posted by ASAP

Either I am terrible at math or this is a very low margin business... if they make 5k on average... and their absolute cheapeast car is 33k, then the gross margin is 5/33 or ~15.1%... in one of the best case scenarios.

Again, this is not a good business to be in.

It is a terrible margin business when compared to many other products. The average consumer just assumes that because the prices are large that the margins are huge also.

While many products in many industries sell at 100 percent markup .. (or more ..) sometimes products have a very low markup such as 15 percent but "volume is king ".

Cellular phones are a great example of a low margin item that is sold alongside high margin products like Audio speakers. Video products have margins that are easily 1/3 of speakers.

[M3 Adjuster]

Originally Posted by roastbeef

there is no way a company can survive on that margin. not even close.

? There are plenty of businesses that do ..

[roastbeef]

Yea, not buying it.

[Fahrvergnügen]

Originally Posted by roastbeef

Yea, not buying it.

Can you explain why you don't understand?

It's pretty straightforward actually, $5,000 profit/vehicle multiplied by 2+ million vehicles... add in financial services, motorbikes, Rolls, and some other revenue generating activities and you got a company that has been around for awhile.

GM/Ford/VW/Toyota/etc all have lower margins and doing just fine...Why?

Walmart has razor thin margins on many products and doing fine...Why?

VOLUME!!! hehe

[M3 Adjuster]

Originally Posted by roastbeef

Yea, not buying it.

But would you sell it at 15 percent ? Is the question ...


And if you had 10 million sales .. you would.

Would you rather have 100 sales of a $50,000 product with 50 percent margin or 100,000 sales with 15 percent margin?

Volume is king.

[Don Molina]

Margins = "efficiency"
has to be above zero, but actual number is a matter of market and company's strategic positioning in it. Number comparison between companies only makes sense within same industry segment or even product line.

Comparing BMW's margins with Toyota margins makes little sense.
Comparing 5-series margins with E-Class margins make a lot of sense.

revenues = "scale"
has to be as big as possible. If you max out on a market segment, you go to the next. When all market segments are maxed out, you create new ones to destroy old ones hoping that the new ones will be more profitable or you can get more scale (exhibit A: X6 and the segment it spawned)

[PKumarM3]

that profit is associated to the company, not the dealership.

[64-bit]

I really thought that on a M3 like my case, they would be making at least 100% profit, boy I was wrong.

[InTheNightKitchen]

Originally Posted by conradb

No one cares about your emotions.

He's saying kids buying JDM are looking at BMW.

No one cares for your assessment, I was talking to him.

[roastbeef]

Originally Posted by Fahrvergnügen

Can you explain why you don't understand?

It's pretty straightforward actually, $5,000 profit/vehicle multiplied by 2+ million vehicles... add in financial services, motorbikes, Rolls, and some other revenue generating activities and you got a company that has been around for awhile.

GM/Ford/VW/Toyota/etc all have lower margins and doing just fine...Why?

Walmart has razor thin margins on many products and doing fine...Why?

VOLUME!!! hehe

i understand that bmw's bread and butter has become parts and service. this is only established after a ton of vehicles are on the road. so absolutely, they have other means of income.

unless thats what they make just selling the car to the dealers, and then the dealer's msrp is $8k above that...
i'm not in the car business, so there are some things here i'm probably not considering and/or don't understand.

[UPSROD]

WHO really cares!

[IK6SPEED]

Originally Posted by roastbeef

Yea, not buying it.

Its not 5% profit margin per car in terms of how much it costs to buid a car vs how much they sell it for. It doesnt cost bmw $95k in parts and labor to make a $100k 7 series. Not how that 5% was calculated. But it might cost them $45k in parts to make that $100k 7 series, the rest of the $50k (on average) costs isnt directly associated with that particular car. It is made up of wages and other compensation for workers(still gotta pay workers even if that one 7 series wouldnt have been produced), designers, R&D teams, warranty work, lawsuits, //M-arketing, and etc. 5% profit is after everything and everyone is paid for and BMW pays its employees and management and all the top bosses. Whats left is an $X amount of dollars that are divided by X amount of cars to get a average $5k net profit per vehicle after every single possible expense is paid for. Hope that makes sense.

[CalCarNut]

Originally Posted by Fahrvergnügen

No one's calling your car cheap, just cheaper than other models BMW offers. The only option my 1M has is heated seats! lol... i prefer manual seats and no nav.

Me too (no nav and manual seats, but the car came with power..so...I'll use them. I prefer manual.)

Oh..it's cheap (my car) given some sticker prices of others for sure! In hindsight (and in using my wife's multiple camera setup in her X3), I like that option...and I'd consider getting it since it gives birdseye view which is super cool. Mine has just rear back up cam only and sensors (f/r)...which is fine. I still wouldn't get Nav..(her nav screen drives me crazy while I drive). Comfort access still won't make it on my list even though hers has it. The leather is nice, so MAYBE I'd spring for an upgrade there...maybe. Otherwise, I am not sold on all the loaded stuff. The N52 is sweet though.

[crabu2]

Originally Posted by ASAP

Either I am terrible at math or this is a very low margin business... if they make 5k on average... and their absolute cheapeast car is 33k, then the gross margin is 5/33 or ~15.1%... in one of the best case scenarios.

Again, this is not a good business to be in.

They said profit.. so I'm guessing it's NET profit.

[crabu2]

Originally Posted by 64-bit

I really thought that on a M3 like my case, they would be making at least 100% profit, boy I was wrong.

BMW AG might be making 100% profit on an M3.. The article isn't based on model, it's based on all cars they sold.

[ASAP]

Originally Posted by crabu2

They said profit.. so I'm guessing it's NET profit.

Thats a really misleading way to look it and tells us nothing about the actual margin on the car... this is just taking the profit and dividing by total amount of cars sold... that profit number can be spun 30 different ways and no one knows what it actually includes.

[UPSROD]

Originally Posted by ASAP

Thats a really misleading way to look it and tells us nothing about the actual margin on the car... this is just taking the profit and dividing by total amount of cars sold... that profit number can be spun 30 different ways and no one knows what it actually includes.

And a great strategy for tax purposes!

[crabu2]

Originally Posted by ASAP

Thats a really misleading way to look it and tells us nothing about the actual margin on the car... this is just taking the profit and dividing by total amount of cars sold... that profit number can be spun 30 different ways and no one knows what it actually includes.

It worked for news purposes... It's got us all reading it.

And for comparison purposes to other brands, as long as they use the same logic it works to show their average profit per vehicle.. although it's a bit misleading since they're looking at company profit ... including accessories like key chains ... But I guess it's the cars that sell the key chains and everything else.

[Vidgamer]

Originally Posted by Naz24

I thought the 228i was the cheapest? 32,850 vs 33,100 for an X1

And yet when I shopped, I couldn't seem to find a basic 2-series for anywhere near $32,000. $42,000, maybe.... But in theory, I guess you could order a base model for $32,850. I didn't see it.

Ended up buying a used X1. That was affordable, but not luxurious.

[rainfall]

Originally Posted by OP

These profit per vehicle figures were calculated considering the operating profit of each company, divided by the number of vehicles delivered last year.

Originally Posted by crabu2

They said profit.. so I'm guessing it's NET profit.

Operating Profit = Sales revenue - Variable costs

It's basically the gross margin of the actual car making process (manufacturing and shipping).
In other words, this is excluding interest, taxes, fixed cost (such as R&D, manufacturing buildings, crash test) and weird costs (like lawsuits, ...)

It's what others said, this is the cost of making a car and selling it to the dealer ON AVERAGE.
I'm sure BMW makes more than $5k when they sell an M4 GTS... and probably less than $5k when they sell a stripped out 230i.

[David70]

Originally Posted by M3 Adjuster

After seeing the article regarding the average Porsche profit at $17,xxx I feel a lot smarter being a lifelong BMW guy.

I don't care how much profit the car company makes on my car except I hope they are making a decent profit. Companies that aren't making decent profit sometimes do things to cut costs or decide to try to get from standing behind their products. If the company can manfacture a product that is better than their competitors and make a big profit I don't have a problem with it.

For those that want to buy from a company making very little profit per car I recommend buying a Chrysler car, they make very little profit per car.

Originally Posted by Germanauto

You hit the nail on the head.

Unfortunately, this is why BMW has had to water down their cars big time. Porsche, aside from the electric steering, is still a true driver's car.

I think the vast majority of their volume and profits come from their SUV's. Probably the best driving SUV's you can buy but I wouldn't call them true driver's cars.

Anyone actually try to use profit per item as part of their buying criteria?