INVESTIGATION
HOW MUCH PROFIT IS IN A NEW CAR? PROFIT
• AN EXCLUSIVE SURVEY FOR US BY WHAT CAR? REVEALS MORE THAN A QUARTER OF CONSUMERS THINK THERE’S UPWARDS OF 30 PER CENT PROFIT IN A NEW CAR • SOME OF THE PRESTIGE BRANDS ARE MAKING MORE THAN 20 PER CENT • BUT OTHERS ARE LUCKY TO SCRAPE ONE PER CENT OUT OF A HIGH-VOLUME MODEL by James Baggott @CarDealerEd
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ore than a fifth of car buyers think car manufacturers earn between 10 and 20 per cent on every new car they make. In an exclusive survey for Car Dealer, What Car? asked 1,500 people what percentage of a new car sale they reckoned was profit. Some 23 per cent of them said they believed that car manufacturers earned between 10 and 20 per cent, while 21.3 per cent thought it was around five to 10 per cent. Of those surveyed, more than a quarter (25.8 per cent) thought car makers earned upwards of 30 per cent profit. In cash terms, the majority of consumers (31.1 per cent) thought manufacturers take a £1,000 to £3,000 slice out of every new car they sell. The reality is a somewhat mixed picture and varies by manufacturer and model. While some lucky prestige models can earn the maker upwards of 20 per cent, other mainstream models generate the factory owners margins in the low single digits. What Car? editorial director Jim Holder says that for the ‘vast majority’ of car manufacturers it is ‘not the licence to print money that many think it is’. He said: ‘The bottom line is that car manufacturing and car retailing is ridiculously tough, with even best-in-class margins around 20 per cent, very healthy margins around 10 per cent and some operating in the low single-digit zone, after spending billions on research, development, infrastructure and more. ‘While nobody is going to get a violin out for the firms involved, given the sizeable profits they can and often do rack up off the back of the scale of the sales they make despite the margins, it’s worth remembering that many car makers and retailers, especially at the massmarket end, live a knife-edge existence, looking to scrape decent margins while scrapping for sales in an ultra-competitive market, all the while under pressure on material and labour costs, tightening legislation and more.’ Automotive analyst David Leggett, of GlobalData, said margins ‘vary enormously’ on new cars. He told Car Dealer: ‘It depends on what brand and what model you are talking about. ‘The premium brands tend to do very well indeed when you analyse margin per vehicle 08 | CarDealerMag.co.uk
5% Average profit margin for car manufacturers
Nobody is going to get a violin out for the firms involved, given the sizeable profits they can and often do rack up.
Jim Holder, What Car? editorial director
