Re: cost of selling a4 in the US

[ScharfR@aol.com]

In a message dated 96-05-05 21:00:40 EDT, eliot@u.washington.edu (Eliot Lim)
writes:

>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.

If you believe the first part about the subsidy, then it becomes hard to
support the second part about higher volume being a positive development for
the bottom line. Sort of like "We lose money on every one, but we make it up
in volume."

I don't suggest that Audi is in business in the U.S. to lose money, but in a
world wide market where demand for A4s outstrips supply, the opportunity cost
of selling in the U.S. instead of other markets is high.  In the short term,
every A4 sold here has to be compared to the lost opportunity of earning more
money on the same (fixed) production volume elsewhere. No matter how much you
reduce the certification cost per unit, you won't get below the cost of not
doing it at all.

The good news (and I trust that we can agree on this) is that Audi now seems
to be pursuing a long term strategy of investing in the U.S. market at the
short term cost of foregone profits from other markets.  This I find
laudable, especially compared to the short term thinking that caused other
manufacturers to dis-invest inthe U.S. when things got tough.