cost of selling a4 in the US

[Eliot Lim <eliot@u.washington.edu>]

On Sun, 5 May 1996 ScharfR@aol.com wrote:

> In a message dated 96-05-03 16:59:02 EDT, eliot@u.washington.edu (Eliot Lim)
> writes:
>
> >seeing that a4s are starting to sell really well, that would mean that
> >their unit cost will be dropping (because the fixed certification
> >costs are divided over each unit sold) which would mean that they can
> >price it more competitively without hurting themselves too much.
>
> This would be true if there was any unused/unsold production capacity.  As I
> read it in the Greman press, Ingolstadt is operating above its rated capacity
> throught the use of overtime.  The unfortunate implication is that no
> volume-based price decrease is likely.

that's a completely different variable.  the cost of building each unit in
germany is unrelated to the cost of certifying the model for sale in the US.
the cost of crash testing the A4 is divided over the number of units sold.
the more a4s sold in the US, the lower the certification cost per a4.  this
is quite a crucial number for the american importers because US certification
is quite expensive.  a german made golf VR6 would have to be sold at $26K
to break even given the certification costs and anticipated sales volume.

> It's also worth remembering that the current U.S. volume is still only a tiny
> fraction of world wide Audi volume.  Last year AoA sold a bit over 18,000
> cars.  Audi's total volume was around 450,000.  So again, even a doubling of
> U.S. sales isn't likely to lead to any significant economies of scale.

which would support the notion that increased sales in the US would mean
lower unit cost, since doubling US imports wouldn't amount to much in
terms of production cost, while halving the certification cost per car
sold in the US.

i'm not making any of this up.  this was stuff that the west coast vw rep
told me.

now, the dealer also claims that audis are "subsidised" for the US
market.. i.e.  cars sold here are sold at a loss to the maker.  i
don't have reason to doubt that claim since prices in other countries
are quite a bit more than in the US.  but i maintain that increased
US sales are a positive development in terms of the bottom line.


eliot