How car companies really make money | Podcast

Dan Prosser and Andrew Frankel discuss the ways in which car manufacturers really make money. Very often the profit margin on the car itself will be very small, but the profit on optional extras can be significant.
At the top end of the market, the likes of Ferrari, Bentley and Aston Martin are generating huge revenues by offering ever greater levels of personalisation, from bespoke colours and finishes to entire one-off builds. Indeed, those high-end manufacturers now have whole departments dedicated to optional extras and personalisation. Here's how it works.
#bentley #ferrari #carpodcast
This is episode 212 of The Intercooler podcast, available wherever you get your podcasts.
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[@Mucus1972]

I recently bought a new car in the UK from BMW, and I was actually pleasantly surprised at how few options there were. There were 2 packs, which had been well curated, and your colour choices. After joining a FB group relating to this model of car, it stuck me as fascinating that BMW do completely different things with options on the same car in different markets. You'd have thought BMW would do the same thing globally from an economic perspective. But they appear to be tapping into significant nuance between, say , UK, US, and Canadian customers.

[@mytinplaterailway]

One of the reasons - I would suggest - that we see so many boring grey/black/silver cars these days, isn't that people don't like nice colours, it's the cost of those colours as options.

[@fraserwright9482]

This is also a generation thing too.

[@ChrisDorgan]

And certain colours are just way more difficult to sell on too. Some cars look stunning in silver and black and so they’re a safe option.

[@mytinplaterailway]

@@ChrisDorgan The point is they aren't an option. They are no cost.

[@Jay-xr3sb]

It's resale, easier to sell a white car on, looks good and you can add colour via accents, wheels, decals if you want

[@ForeverManual]

13:45- That’s exactly why, while being an automotive journalist, I had to create a KZbin channel dedicated to the Base manual 718 after accidentally buying one. I never drove it prior to that! Regular people struggle to find the info on base models and there is nothing the press can help them with 😢

[@davidpickard9393]

I have ordered 2 cheaper new cars but refused the option paint. Neither order progressed from the factory.

[@ericokompatzki7110]

Some comments regarding the podcast: 1. Yes, it's Ferrari's Atelier 2. Porsche does have its own service: Porsche Exklusive Manufaktur 3. I agree, regular csr companies will shift towards personalisation. Citroen already has, and let's not forget about the pioneer in the regular car market, Mini. Granted, it's not bespoke manufacturing, but it is personalization to a greater degree without loosing economies of scale

[@JohnNick72]

As they say near the end… The worst part about pricey options is they generally don’t add any value when you go to sell/trade your car. 2nd hand value is based on the base model prices current trading value. I don’t know the Ferrari/McLaren markets well enough to address those specifically, but the volume is so low it doesn’t really matter. With BMW, Audi, Porsche (non special or GT cars) I can confirm it’s terrible. Options add basically no value when selling. So, be very careful if you aren’t going to keep the car for a long time and fully capture the value. If you have F¥€k Off money and just don’t care, do whatever. Helps the 2nd hand buyer when you get bored in 10 minutes. 😉

[@bibnakladnistvo]

Last racing stripe I saw, on a 458 Speciale, was a overpriced POS... quite short of "perfect"

[@I999-g2s]

Alcantara floor mats £3k 😂

[@mikadavies660]

Whilst this is both ridiculous and interesting..... I also find it sickening that people spend these amounts on these cars. If I won the lottery, I still wouldn't waste my winnings this way.

[@jonathancollard3710]

I have a newish McLaren 570 spider and not so new Ferrari California T so feel “qualified” to make some observations. Specifically carbon fibre “bits and bobs” are just the biggest rip off. Genuinely, the true weight saving on canards, rear wings, defusers, door cills , even a bonnet (hood) verses plastic or aluminium is marginal. I attend many track days where fat blokes wank on about spending X,Y,Z on this stuff whilst their stomach stretches at the waistband of their nomex race suits 🤦🏻‍♂️. If they want to improve laps times how about filling the petrol tank only half full or losing 2 stone .... 🤪 Conversely, forged alloy wheels and carbon ceramic brake discs are a worthy investment and if carbon look is the fashion just get the parts wrapped 😜. For sure, it’s horses for courses and the GR Yaris I also track is by far the best value car on the road today in terms of performance per pound.

[@flexinclouds]

Ferrari's carbon fiber options have always been laughably & eye-wateringly expensive. Which is pathetic cause Ferrari's 1x1 weave "checker" carbon is trash. Lambo & Mclaren's are far nicer & much of their carbon is included. (Look at a Huracan Performante's interior, engine bay, wing etc).. all forged carbon as standard. If Ferrari's gonna charge $70-100k+ for carbon.. it should be Koenigsegg/Pagani level. But currently Corvette & Cadillac have better looking carbon😂

[@fraserwright9482]

Odd look at the car market, McLaren and Ferrari press cars which will always have lots of options because how else do customers know what they are? You look at the special order section of Bentley, Ferrari and Porsche. Dan ties it in with Singer and you think every production car is built regardless of someone specing it as though manufacturers are building random plain jane cars or ones with options and just sending them to a dealer? That hasn't happened since the 70's. Even Dacia don't do that? Also why would I buy a palette cleanser 911T if I am waiting 2 years for it? Who in the real world and not a journalist is buying this 911?

[@Spenny909]

That data on margins are available. From memory, so I may be quite wrong, but I am sharing since I heard the figures, I heard a company like Jaguar make £4k per car, hence needs volume, vs Ferrari makes min £120k per car. I recently placed an order in for a car, and the options went over £80k, as much as I would get for my current car that is the same model. Also, the increased costs of servicing a high-end car I am sure add to their profit. Charging £500 for an hour of work to fix something created by their inadequate tech but we must accept it as part of owning a performance car. Overall, it is the Rolex-type model. Build desire and limit supply.

[@HiddenWen]

It's clever. People know they don't make the best cars in terms of quality (though they do make the most desirable cars, which is something different). So they build a reputation as cars that only a certain "special" type of person would be able to own and appreciate.

[@justincoleman4133]

Ferrari = Tailor Made. Porsche = Sonderwunsch

[@sutats]

The economics of wheel options that most don't realise is that one does not retain the original factory configured wheels when a cost option wheel is "added" instead. Generally options are an addition to instead of a replacement of a configuration. On a side note, I remember seeing a Nick Murray KZbin video in recent years where he test drove a viewer's Ferrari (F12 TDF?) where its blue paint colour option cost $300K.

[@BarikSingh]

Most of the options on that Ferrari I have deemed as completely superfluous and unnecessary; they don’t enhance the driving experience. The Fiorano pack is a total no-go as it removes the nose lift feature, an absolute essential as you don’t want to be scraping the front chin on speed bumps or the drive. You could do away with the vast majority of the carbon fibre options, especially the ones that you can’t really see like the hidden pieces in the engine bay and the underbody ones. You never want carbon on the door sills or the front splitter, they will crack and break. Could easily knock £80k in options that won’t affect the driving experience and still have all the options you could really want plus some carbon fibre you can see. Although maybe then Ferrari won’t let you build the car if it doesn’t meet a specific dollar amount on the build. These absurd options lists are really just a cynical cash grab. Btw Dan and Andrew, I’m sure you’re aware of the name, but it was fleeting the tip of your tongues, Ferrari’s programme is called Ferrari Tailor Made.

[@JoshuaKoerner]

I think it's funny that carplay and the car's built-in nav system even enter into the conversation for y'all. All the modern ones sell your data back to the insurance companies so your rates go up. Automatically, I'm not at all interested in modern cars. Give me a dumber car that has enough theater to enjoy on the way to coffee, comfortable enough to drive across a continent, and I'll use my phone for the rest. Why does my car need to do that too?

[@Jay-xr3sb]

Take porsche, they have faults that are known and persistent. Ie. PADM failure, mounts cost £2k a pair to replace. If they aren't oem then your warranty is void. They dont add much to the 981/718 but they have been failing since 2012 to today, so replacements are subpar. So, you pay £750pa for the extended warranty, you can't improve the car (mesh to cover radiator). They make money on the warranty, the parts, the labour... all for a bad replacment product that add little value. I love my 981s, the warranty is to protect the pdk (very reliable) and resale really.

[@bispal]

Cruise control total must for average speed cameras and long journeys. 8 hour's at the wheel through France in a 911 will give you a massive dead leg on constant throttle. I know through lots of experience. The only spec I want on a car sunroof (glass), cloth / alcantara seats (no leather), Radio, AC, Cruise, manual box, LSD, heated seats (if convertible). Not bothered about screens, safety equip, sat nav (we all have phones) . What I abhor is paying for standard equipment i don't want or need, especially pleather seats.

[@1ongava]

Isn't this exactly why we car enthusiasts tinker and customise our cars after they leave the factory? The modern cookie cutter, one size fits all, high volume consumer car will never be able to offer high levels of personalisation. It will cost too much and be too slow. Specing your Singer is a different world to those most of us operate in.

[@maaasaa]

Never had Ferrari my options, or limit an order. Porsche? Who knows ;-)

[@23gps]

A Singer Gazelle with a glass roof. Wow.😂

[@RumblestripDotNet]

Porsche's bespoke division is Porsche Exclusive Manufaktur.

[@DoublePattyy]

Correct me if I’m wrong, but I think Porsche have a tier system similar to that of Bentley. You have exclusive manufaktur (as you see on some configurator options) and then you have Sonderwunsch above that. Where you can really go off-piste

[@indiebekonn]

@@DoublePattyythat’s it. Exclusive is “just” the normal thing where you choose a non-standard colour or similar where at Sonderwunsch sky is the limit.

[@madmcadder4536]

Sorry guys I'm don't like Porshe. I have driven one at Jonathan Palmers track and with the computer turned off it was hateful with zero feedback into corners unless you count spins. I have driven many cars over the years and done some motor sport and I find Porshe drivers a bore...... Otherwise keep up the great interviews. 😊

[@fraserwright9482]

I agree, this is why EVO fell over. They ignore the fact that none of the reviewers actually buy the special order Porsche or any ECOTY car. You can't walk into a Porsche West London and buy a unique ST or whatever they have reviewed. I agree there are people who do and it's interesting hearing their path that it took as this isn't related to car culture or their own experiences other than what it took to buy the 992.2 GT3 Touring even if the dash makes a noise like a Dacia or the paint has orange peel, it's the £400k in other Pork to get there. It's become what the Lamborghini owners did in the 80s to impress each other. No one is racing a Singer 911, it's a cosplay version.

[@ebbs0000]

All I found out from this is theses lads are really posh, and I'm really poor.

[@thehegdehog624]

@6:12 ref Apple CarPlay… do we not think it’s very safe to assume that CarPlay is standard because Eddy Cue - SVP Services at Apple - happens to be on the board at Marranello??

[@philiprodney7884]

I bought a 992T off the showroom floor. GT Silver, and a sunroof. Nothing else. I don’t miss all the other stuff that I would have added if I’d specced it. In fact I think I prefer it in its purer form. It also took away the stress of spending hours on the configurator.

[@avnews2860]

Interesting stuff indeed chaps. Not sure when you were last on a production line but locally Ford build Rangers just about to spec on the line already. Doesn't change the cost of options though but they are already on the build order that tags along with each vehicle - which makes the assembly process even more fascinating than it already is.. 🙂

[@RobertMoore-x7b]

I plan to buy a car in November. One of the first things I'm telling the salesperson is I only want to pay for the car. Absolutely no accessories, except $595, for the optional paint. Options are overpriced and I'm not trying to finance anymore than necessary. It probably won't go well.

[@dane458]

Awesome podcast! Love from South Africa 🇿🇦