When you think our truck parts are expensive.......

[MARTINSR]

Ok, this is an example of how expensive parts are for late model cars, but it also shows you how bizzare (make that IGNORANT) some things are with late model cars.

Sometimes you just can't make this stuff up. This is a headlamp on a 2013 Infiniti QX50. I called the dealer to verify because my estimating system said this and I couldn't believe it. The second I started talking the guy said before I finished "Yes the lense and housing is twice as much as the whole assembly" LOL.

So it's cheaper if you buy all the parts as apposed to one of them?




You just can't make this stuff up!

Brian

[dwcsr]

That's not really as hard to explain as it may seem. The obvious answer is they don't want to sell just lenses and housings. They both take up the same storage space. so stocking just complete assemblies is cheaper.

The real question is why is it $1200 for a head light housing with some connectors

[joedoh]

actually, it is pretty simple to explain.

when the parts are made for the assembly, they are either produced in the same factory as the assembly or ordered "just in time" and stored around in bins until the very short time before assembly begins. a specific number (usually a large number) are produced and then production ceases. this large number of parts ordered is based on demand, and the part cost is made up of both fixed costs (material) and variable costs (labor, machine operating time, packaging, shipping, storage, inventory) as well as a composite cost of utilization (how long the machine sits around disused vs depreciation in a year).

when you only take into account the material cost, yes, the lens should be cheaper. but when you consider the smaller part run for just a lens, all the other costs like labor, shipping, packaging, storage, and inventory are much higher with the smaller divisor.

why not produce the extra lenses when producing for the main run? sometimes that is possible, but the way the cost of production is assigned to individual parts and then divided by the number produced, the individual part cost is still higher. also, keeping a high number of spare parts around means an inventory hit when the inventory turnover (how often the available parts are reordered) is low, like it would be for one part of the assembly like lenses. Because of accidents, damage, etc, it makes sense that the inventory turnover for the assembly is much higher.

I have worked in manufacturing most of my career, to be profitable takes teams of people figuring out costing and production. just wait till the perceived need for the part no longer warrants any production, neither individual part nor assembly! thats when NOS inventory hits its all time high price point.

[58CameoAZ]

Wow, after all that my head Hurt's lol...

[MARTINSR]

Originally Posted by joedoh

actually, it is pretty simple to explain.

when the parts are made for the assembly, they are either produced in the same factory as the assembly or ordered "just in time" and stored around in bins until the very short time before assembly begins. a specific number (usually a large number) are produced and then production ceases. this large number of parts ordered is based on demand, and the part cost is made up of both fixed costs (material) and variable costs (labor, machine operating time, packaging, shipping, storage, inventory) as well as a composite cost of utilization (how long the machine sits around disused vs depreciation in a year).

when you only take into account the material cost, yes, the lens should be cheaper. but when you consider the smaller part run for just a lens, all the other costs like labor, shipping, packaging, storage, and inventory are much higher with the smaller divisor.

why not produce the extra lenses when producing for the main run? sometimes that is possible, but the way the cost of production is assigned to individual parts and then divided by the number produced, the individual part cost is still higher. also, keeping a high number of spare parts around means an inventory hit when the inventory turnover (how often the available parts are reordered) is low, like it would be for one part of the assembly like lenses. Because of accidents, damage, etc, it makes sense that the inventory turnover for the assembly is much higher.

I have worked in manufacturing most of my career, to be profitable takes teams of people figuring out costing and production. just wait till the perceived need for the part no longer warrants any production, neither individual part nor assembly! thats when NOS inventory hits its all time high price point.

Very interesting! I was thinking it was something to do with Aftermarket competition. I have seen soooo much changes with pricing do to AM competition I just figured it went something like this.

This is what I was thinking: The assembly use to be more than just the lens/housing and when the AM started making the assembly and priced them lower than the OEM the OEM dropped the price to compete but didn't think to change the lens/housing price.

I know I have seen in my years in this trade crazy thing happen with prices. Back in the 80's when the AM body parts first hit the scene writing an est on a Chevy Van and the fender was something like $250. The customer came back to me and asked if he could get the fender himself at the dealer to save money. I figured the guy was getting it at wholesale like I was and told him he didn't need to do that I would check on the price (thinking I would give it to him at my cost plus a few bucks) and when I called the fenders LIST price was $105! They dropped the price from $250 to $105 just like that!

There are a million of them, the coolant bottle in this Infiniti is $105. It is no more complicated than a juice bottle in your refrigerator. The same thing (though a different shape) is $6 in a Honda Accord because there is AM competition.

I have to wonder if it's not something about that competition too?

Brian

[joedoh]

Originally Posted by MARTINSR

Very interesting! I was thinking it was something to do with Aftermarket competition. I have seen soooo much changes with pricing do to AM competition I just figured it went something like this.

This is what I was thinking: The assembly use to be more than just the lens/housing and when the AM started making the assembly and priced them lower than the OEM the OEM dropped the price to compete but didn't think to change the lens/housing price.

I know I have seen in my years in this trade crazy thing happen with prices. Back in the 80's when the AM body parts first hit the scene writing an est on a Chevy Van and the fender was something like $250. The customer came back to me and asked if he could get the fender himself at the dealer to save money. I figured the guy was getting it at wholesale like I was and told him he didn't need to do that I would check on the price (thinking I would give it to him at my cost plus a few bucks) and when I called the fenders LIST price was $105! They dropped the price from $250 to $105 just like that!

There are a million of them, the coolant bottle in this Infiniti is $105. It is no more complicated than a juice bottle in your refrigerator. The same thing (though a different shape) is $6 in a Honda Accord because there is AM competition.

I have to wonder if it's not something about that competition too?

Brian

it has to do with aftermarket competition but not in the way you think. I explained above why the parts cant be less expensive than the assembly because lower demand+higher production costs=higher price, but lets say they WERE available at a lower price, the aftermarket could order these cheaper parts and produce lower quality parts for the rest of the assembly and make complete (and inferior) assemblies without spending money on tooling and production of the parts that are readily available.

when you buy an infiniti coolant bottle vs a honda coolant bottle, it has more to do with the production numbers of a honda vs an infiniti. honda is VERY good at standardizing parts and making universal assemblies that work on a lot of different models over a lot of years. infiniti has relatively low production numbers and makes a lot of what I like to call "unicorn" parts, parts that only work on one specific model and year. 1 million civic production over 5 years, 10k q37 per year. at a certain point in production, even your fixed material costs get cheaper because of how much you buy at one time.

for the most part, OEM does not worry about aftermarket competition except to set production totals of spare parts. some people will use OEM no matter the cost difference. A good lesson I learned early is that cheap products attract cheap customers, ones that have no loyalty to anything but price.

[1project2many]

A good lesson I learned early is that cheap products attract cheap customers, ones that have no loyalty to anything but price.

Thanks for the insights.

I'd hazard there are more people loyal to price than quality based on the success of Wally-World and other discounters. In fact, this is proven to be true to the point where brand loyalty is becoming worthless as one after another quality brand is reduced to being a more expensive label for low quality parts. It can be very tough to locate some parts in a "known good" configuration these days.

[joedoh]

Originally Posted by 1project2many

Thanks for the insights.

I'd hazard there are more people loyal to price than quality based on the success of Wally-World and other discounters. In fact, this is proven to be true to the point where brand loyalty is becoming worthless as one after another quality brand is reduced to being a more expensive label for low quality parts. It can be very tough to locate some parts in a "known good" configuration these days.

this happens all the time, in fact my favorite example is car audio and manufacturers who saw a marked decrease in quality when overseas manufacturers bought them for their name and logos only, shuttered the US plants, and started producing cheaper equipment with the name brand on it. first the prices were in line with the old equipment as the brand name did all the selling, then as people realized the quality was lower the prices normalized and now you have a choice of dozens of brands at a similar price point, most of which are made side by side in the same factory.

[MARTINSR]

Originally Posted by 1project2many

Thanks for the insights.

I'd hazard there are more people loyal to price than quality based on the success of Wally-World and other discounters. In fact, this is proven to be true to the point where brand loyalty is becoming worthless as one after another quality brand is reduced to being a more expensive label for low quality parts. It can be very tough to locate some parts in a "known good" configuration these days.

When my dad was a car salesman back in the fifties, sixties and seventies people were crazy brand loyal! They would bring their family members in for their first cars at the same dealer they bought theirs. The photo is my dad (on the right) delivering a new 53 Ford. The "dented" fender is a wrinkle in the photo.

Brian

[MARTINSR]

Originally Posted by joedoh

it has to do with aftermarket competition but not in the way you think. I explained above why the parts cant be less expensive than the assembly because lower demand+higher production costs=higher price, but lets say they WERE available at a lower price, the aftermarket could order these cheaper parts and produce lower quality parts for the rest of the assembly and make complete (and inferior) assemblies without spending money on tooling and production of the parts that are readily available.

when you buy an infiniti coolant bottle vs a honda coolant bottle, it has more to do with the production numbers of a honda vs an infiniti. honda is VERY good at standardizing parts and making universal assemblies that work on a lot of different models over a lot of years. infiniti has relatively low production numbers and makes a lot of what I like to call "unicorn" parts, parts that only work on one specific model and year. 1 million civic production over 5 years, 10k q37 per year. at a certain point in production, even your fixed material costs get cheaper because of how much you buy at one time.

for the most part, OEM does not worry about aftermarket competition except to set production totals of spare parts. some people will use OEM no matter the cost difference. A good lesson I learned early is that cheap products attract cheap customers, ones that have no loyalty to anything but price.

You are right to a point, the insurance industry is the "customer" and they look at $$ only. Most every insurance policy out there has a clause in it that the insured signed saying AM parts would be used on their car for repairs. And the AM parts have gotten absolutely crazy, there are weld in AM parts like Radiator supports! The amount of AM parts available is CRAZY! Aluminum fenders and hoods even, plastic air guides, underbody shields, grilles, bumper brackets and even reinforcements! It is NUTS how much the AM has covered.

The AM industry has kicked the OEM's ever loving ass! It has cost the OEM a serious amount of money and they have just in the last year or so started fighting back big time. First off, there are programs with most every OEM foreign and domestic to match prices with the AM and reconditioned (lots of reconditioned parts like headlights, wheels, bumpers, ect.) where they drop the prices on their OEM parts big time, I mean BIG TIME to guarantee the sale. And they also have put core charges on things like lights, bumpers and wheels to ensure those parts are destroyed and not left out there to be reconditioned and they loose another sale.

No the AM and RM parts have cost the OEM manufacturer dearly!


Brian

[1project2many]

When my dad was a car salesman back in the fifties, sixties and seventies people were crazy brand loyal!

It was still like that when I lived in MT in the '90s. If you owned GM you just didn't consider any other make worthwhile. And it wasn't just brand specific, but dealership specific. A certain rancher would pay me to drive 150 miles to his house to work on his vehicles because he and the owner of the dealership where I worked had a disagreement over warranty coverage back in 1973 and he said he'd never go back.

[_Ogre]

great pic martinsr

[joedoh]

Originally Posted by MARTINSR

You are right to a point, the insurance industry is the "customer" and they look at $$ only. Most every insurance policy out there has a clause in it that the insured signed saying AM parts would be used on their car for repairs. And the AM parts have gotten absolutely crazy, there are weld in AM parts like Radiator supports! The amount of AM parts available is CRAZY! Aluminum fenders and hoods even, plastic air guides, underbody shields, grilles, bumper brackets and even reinforcements! It is NUTS how much the AM has covered.

The AM industry has kicked the OEM's ever loving ass! It has cost the OEM a serious amount of money and they have just in the last year or so started fighting back big time. First off, there are programs with most every OEM foreign and domestic to match prices with the AM and reconditioned (lots of reconditioned parts like headlights, wheels, bumpers, ect.) where they drop the prices on their OEM parts big time, I mean BIG TIME to guarantee the sale. And they also have put core charges on things like lights, bumpers and wheels to ensure those parts are destroyed and not left out there to be reconditioned and they loose another sale.

No the AM and RM parts have cost the OEM manufacturer dearly!


Brian

I think we are going to have to agree to disagree. I am talking about the willingness and rational of OEM to make spare parts. You are talking about the price points of spare parts at an independent body shop. One (the independent body shop) is a very small portion of the other (the OEM making parts).

my point is that OEM parts are not built to compete with AM parts, the OEM builds parts to support its dealers and service centers and customers who want to maintain their warranties and retain the originality of their cars. They are built from original tooling that produced the complete finished good and are subject to demand pricing and inventory costs. They are built to the original production specifications and tolerances.

The economies of an AM manufacturer who builds spare parts is vastly different from an OEM manufacturer who builds nothing but replacement parts. They are built from tools that are commissioned, engineered, tooled, tested, and produced as completely independent entities. They are subject to the same demand pricing and inventory costs, but the development cost a fraction of the OEM and their overall infrastructure costs are lower.

this is why AM plastic parts sometimes dont fit as well, dont last as long, dont look as good. Its why additional shop hours are sometimes needed for AM sheetmetal work.

You asked why a lens was more expensive and its blossomed to OEM vs AM. I worked as an engineering director at a retail manufacturer and our primary concerns with regard to replacement parts were 1. to do only what replacement parts building as was required by law, and 2. to make sure someone couldnt build a fraudulent copy using spare parts. There were AM parts suppliers for motors and switches, and we couldnt care less, parts sales were less than 0.1% of total annual sales and the largest consumer of our spare parts was the warranty dept.

[MARTINSR]

Interesting stuff, thanks.

Brian

[1project2many]

my point is that OEM parts are not built to compete with AM parts, the OEM builds parts to support its dealers and service centers and customers who want to maintain their warranties and retain the originality of their cars.

This makes full sense, and folks who have worked in the auto industry for years know the OEM's felt they could do whatever they needed for years. But I'm guessing Brian has seen, as I have seen, OEM's making some efforts to bring customers into the dealership for parts and service as they see new car sales in the US decreasing. I certainly have noticed the dealership price level for some parts is much lower than expected and over the years many parts have decreased in price as the need for available replacement parts increases after a new model has been in service for some time. On occasion a price change to a lower amount roughly coincides with the introduction of an aftermarket part. When this happens it's common to think the OEM actually cares about the dealership, and that they are interested in selling parts directly to the consumer. When we can find someone to talk with who has inside knowledge the truth is usually vastly different.

The promotional programs in place which lower the cost to end user or small shop often result in a loss. Many of the aftermarket programs require the seller to sell at a loss and apply for a rebate from the mfgr, maybe the OE suppliers simply sell to the dealer at lower cost up front. They save the buyer money and do drive business to the dealership but they have the side effect of making the parts appear to be cheaper to manufacture than they actually are. I am careful to ask how these programs work before signing up. I want to ensure the supplier I rely on is happy to help me and stays in business after the promotion ends.

[MARTINSR]

Originally Posted by 1project2many

This makes full sense, and folks who have worked in the auto industry for years know the OEM's felt they could do whatever they needed for years. But I'm guessing Brian has seen, as I have seen, OEM's making some efforts to bring customers into the dealership for parts and service as they see new car sales in the US decreasing. I certainly have noticed the dealership price level for some parts is much lower than expected and over the years many parts have decreased in price as the need for available replacement parts increases after a new model has been in service for some time. On occasion a price change to a lower amount roughly coincides with the introduction of an aftermarket part. When this happens it's common to think the OEM actually cares about the dealership, and that they are interested in selling parts directly to the consumer. When we can find someone to talk with who has inside knowledge the truth is usually vastly different.

The promotional programs in place which lower the cost to end user or small shop often result in a loss. Many of the aftermarket programs require the seller to sell at a loss and apply for a rebate from the mfgr, maybe the OE suppliers simply sell to the dealer at lower cost up front. They save the buyer money and do drive business to the dealership but they have the side effect of making the parts appear to be cheaper to manufacture than they actually are. I am careful to ask how these programs work before signing up. I want to ensure the supplier I rely on is happy to help me and stays in business after the promotion ends.

I was once told that the GP at the dealership from car sales was in the neighborhood of 3%. The other 97% of GP comes from parts, loans, upsells like insurance and maintenance programs and that sort of thing and of course maintaining the cars and warranty's.

Brian

[joedoh]

Originally Posted by MARTINSR

I was once told that the GP at the dealership from car sales was in the neighborhood of 3%.

right, so that might be why the dealerships would have an incentive to manufacture more parts. wait...

the dealerships dont manufacture parts. they have an incentive to SELL more parts.

I can assure you that the profit margin on a car is not 3% to the manufacturer.

The promotional programs in place which lower the cost to end user or small shop often result in a loss. Many of the aftermarket programs require the seller to sell at a loss and apply for a rebate from the mfgr, maybe the OE suppliers simply sell to the dealer at lower cost up front.

when I worked aircraft there was a brake company that developed a braking system and wanted to sell it through the aircraft OEM service center. the price was X and the aircraft company got all of it back in a lump sum up front based on the number of aircraft. the brake company didnt care at all about the price of the system, or the money made by the service center installing it, they wanted to sell brake pads for the service life of the aircraft. Their budget was enough that they spent the up front money to allow them access to perpetuity of brake pad sales, something they wouldnt have access to otherwise because with aircraft you spend a LOT certifying different parts. In that area, aircraft sales, the parts and spares are hilariously priced because there is usually only one manufacturer authorized to even build the spare.

[Valarius_Starchaser]

Well I have a direct view everyday to what profits are made on parts at a GMC dealership and can attest to how high markup is/can be now I don't know if it would be wise for me to share those numbers or not but I will anyhow

Walk ins = 100%
Shops = 50%-70%
Fleet = 40%
Friends = 20%
Family and Myself = 10%



And before anyone asks "how do you sleep at night" I simply say I don't I'm to busy building a truck for that

[joedoh]

Originally Posted by Valarius_Starchaser

Friends = 20%
Family and Myself = 10%

[mr48chev]

Originally Posted by MARTINSR

I was once told that the GP at the dealership from car sales was in the neighborhood of 3%. The other 97% of GP comes from parts, loans, upsells like insurance and maintenance programs and that sort of thing and of course maintaining the cars and warranty's.

Brian

Having worked in several dealerships over the years I'd say that is pretty close to correct.

I remember that a number of years ago some clown tied to sue one of the manufactures because all the parts needed to assemble a car were many times the actual list price of that car if bought off the showroom floor.

Customer loyalty also meant that the customer also went back to the dealer for all of his/her service work and repair work. Plus when I worked in a Pontiac dealership in Texas I lost track of how many cars that I was working on got traded in as I was working on them.

I'd agree though that current prices on a lot of OEM parts are astronomical in price for what you get.

[S10Fan]

Guys! This is simple, drive old crap, save money!

[MARTINSR]

Originally Posted by joedoh

right, so that might be why the dealerships would have an incentive to manufacture more parts. wait...

the dealerships dont manufacture parts. they have an incentive to SELL more parts.

I can assure you that the profit margin on a car is not 3% to the manufacturer.




when I worked aircraft there was a brake company that developed a braking system and wanted to sell it through the aircraft OEM service center. the price was X and the aircraft company got all of it back in a lump sum up front based on the number of aircraft. the brake company didnt care at all about the price of the system, or the money made by the service center installing it, they wanted to sell brake pads for the service life of the aircraft. Their budget was enough that they spent the up front money to allow them access to perpetuity of brake pad sales, something they wouldnt have access to otherwise because with aircraft you spend a LOT certifying different parts. In that area, aircraft sales, the parts and spares are hilariously priced because there is usually only one manufacturer authorized to even build the spare.

Consumables, oh heck yeah, you get a free razor handle that will only fit the suppliers razor blades.

Brian

[MARTINSR]

Originally Posted by S10Fan

Guys! This is simple, drive old crap, save money!

YEP! That's one of the reasons I drive mine! That and they have a personality unlike late model cars which have none.

Brian

[MARTINSR]

Originally Posted by mr48chev

Having worked in several dealerships over the years I'd say that is pretty close to correct.

I remember that a number of years ago some clown tied to sue one of the manufactures because all the parts needed to assemble a car were many times the actual list price of that car if bought off the showroom floor.

Customer loyalty also meant that the customer also went back to the dealer for all of his/her service work and repair work. Plus when I worked in a Pontiac dealership in Texas I lost track of how many cars that I was working on got traded in as I was working on them.

I'd agree though that current prices on a lot of OEM parts are astronomical in price for what you get.

Yeah, the customer drops his car off for a brake job then wanders around while he is waiting for his ride to pick him up and ends up buying a new car! LOL

Brian