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RE: Manufacturer's Profits at Buyer's Expense

To: MG Digest <>
Subject: RE: Manufacturer's Profits at Buyer's Expense
From: Chuck Renner <>
Date: Fri, 6 Dec 2002 12:13:03 -0600
> "According to Deutsche Bancs auto analyst Rod
> Lache, on average, the automakers make $5,500 more off
> of every mid-size SUV than they do off of a car."
> If they want to scalp those who buy them for fun, ok.  But, 
> for those who
> need one for a tow vehicle - shame on those greedy *#&$ companies.

Uh, they're making that much more for several reasons:

1) Volume:  the best selling vehicles in the US have been pickups for the
last few decades.  SUV's like the Explorer share many components with the
Ranger, and in and of themselves sell in huge numbers.  All of that
expensive tooling, along with engineering and development cost are spread
over a huge number of vehicles, so the profit per vehicle is going to be
higher because of that.

2) CAFE and other regs:  Yes, the vehicles classified as trucks don't count
towards the overall CAFE rating.  But the fact still remains that the
automakers have to take a hit on small cars to sell them and boost their
CAFE rating.  If they're losing money in one segment, they have to make it
in another.

3) Resale:  Trucks tend to do very well in resale value.  So while you may
spend more up front, you probably won't lose as much to depreciation.

4) Luxury content:  How many stripper SUV's do you see on the road?
Everyone who's buying them is getting them loaded with luxury features.
These are where the real profits start adding up.

5) Why do you need a luxurious mid-size SUV as a tow vehicle?  What's wrong
with buying the stripped down version for a lot less money, or getting a
regular pickup, which doesn't tend to have as much premium tacked on.

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