We know that the automotive environment has become much more competitive in recent years and that profit margins have thus been squeezed. Automakers and dealers have been forced to seek sales volume (numbers) to achieve the same or even a higher level of profit.
So what makes the most profitable automotive brands?
There are three major components that go into making a profit from selling vehicles. The big three include: price-point, high sales volume and long-life cycles.
The price-point component involves how much a vehicles can be sold for above what it costs to manufacture. Competition has put pressure on the price-point or markup on vehicles. Only the post popular and ‘usually’ the highest quality vehicles command the greatest markups.
Although the amount of markup on vehicles is limited by competition, the overall profit can still be good if a vehicle has a high sales volume. This is what has happened in the industry and is why auto salespeople want to keep customers happy and get repeat sales down the road.
Long vehicle life cycles add to profits because auto manufacturers do not need to incur costly retooling to put out a redesigned model. To get away with longer vehicle life cycles, the automaker must have a very good design in the first place (a design that does not age quickly). Vehicle redesign cycles have been getting shorter and shorter (from about 7 years to 4 years).
Although it is hard to accomplish, the most profitable automakers are able to do a good job of putting all three of these profit makers together. It takes vision, engineering, good design (styling), dependability (loyal customers), service and just downright staying ahead of the competition!
The German automakers including the BMW 5 and 3-Series as well as the Mercedes S and E Class have captured all three of these components.
What are the 12 most profitable cars and trucks? Autoblogs.com provides the following list:
The Ford F-Series, GM pickups (Silverado and GMC Sierra), Dodge Ram, Mercedes S Class, BMW 5 and 3-Series, Mercedes E Class, Lexus RX, Dodge Jeep Grand Cherokee, Honda Accord, Porsche 911, and Toyota Camry.
There is good reason why these vehicles are very popular with consumers and thus profitable for their builders.
The success of these vehicles indeed came long before the roar of their engines. Wait a minute, I mean the smooth and quiet running of their engines!
Kyle Busch is the author of “Drive the Best for the Price: How to Buy a Used Automobile, Sport-Utility Vehicle, or Minivan and Save Money.” He welcomes your comments or car questions at his newly redesigned auto web site at: www.drivethebestbook.com
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