Several people, including businesses, have raised interest in this topic and want to know how much it costs the manufacturer to produce a vehicle before shipping it to dealerships. For some manufacturers, it costs $12,500; for others, it may cost up to $133,000.
This article explains why and also shows how much it costs popular manufacturers to produce vehicles. From raw materials and labor to overhead expenses and distribution, learn all about the car manufacturing cost breakdown.
How Much Does It Actually Cost Manufacturers to Make a Car?
The exact figure for manufacturing vehicles is impossible since no automaker reveals the statistics. However, we can say it is more cost-effective to manufacture larger cars or have a higher production volume. This means that exclusive versions or vehicles with luxury features produced in a limited number will be much more expensive.
So, the more limited or exclusive a car version is, the more expensive it will be to manufacture. Similarly, the lower the price tag, the fewer quality materials are used, and you can expect fewer luxury elements. But what makes up these costs? There are two types of expenses for vehicle manufacture: fixed costs and variable costs.
Car Manufacturing Cost Breakdown: Fixed Costs
Fixed costs remain constant regardless of how many cars are produced. They act like a foundation upon which the variable costs layer on top. These costs are the same if you make just one unique vehicle or produce two million units of that model.
When it is time to produce another model of the same vehicle, the fixed costs are usually smaller than the first because less technology and research is needed here.
Below is a car manufacturing cost breakdown for fixed costs:
Research and Development Cost (R&D)
One of the significant costs of producing a vehicle is Research and Development. For every new car manufactured, millions and even billions of dollars must be spent on Research and Development.
This department handles the research and manufacturing strategy, engines, safety features, and overall car design. It’s a continuous process that ensures the manufacturer stays competitive with advancements.
Cost of Operations
This covers expenses related to running the manufacturing facilities. It covers things like:
- Salaries for administrative staff, security personnel, and some engineers (those not directly involved in model-specific R&D). These are fixed costs since they don’t typically fluctuate with production volume.
- Rent or mortgage payments for factories and warehouses.
- Maintenance of the machinery and equipment used in production.
- Utilities like electricity to power the facilities, etc.
Cost of Marketing and Supply
Here, the focus is establishing and maintaining long-term supplier relationships for parts and materials. It also includes:
- Marketing efforts to build brand awareness and promote existing car models.
- Costs associated with managing the supply chain and logistics.
Minor Charges
These charges are usually considered minor and insignificant, including property taxes, facility insurance, waste disposal fees, office furnishings and supplies, etc.
Car Manufacturing Cost Breakdown: Variable Costs
Variable costs represent the costs of producing the vehicles. It typically includes materials, labor, maintenance, utilities, and other related costs. These costs vary based on the number of cars manufactured.
Below is a car manufacturing cost breakdown for variable costs:
Materials For Car Manufacturing
This is the most significant chunk of variable costs taking up to 57% of the vehicle’s price. This cost covers all the raw and processed materials and car-building parts. Some of these materials are:
- Steel and Aluminum: The foundation for the car’s body and frame.
- Rubber: For tires, hoses, and various seals.
- Plastics and Fabrics: Used for interior components, dashboards, and seats.
- Electronic Components: Microchips, sensors, and other technology powering the car’s features.
- Pre-Assembled Parts: Engines, transmissions, axles, and other significant components sourced from suppliers.
Note that the costs of these parts/components usually vary based on the market and suppliers. For example, fluctuations in the price of steel, aluminum, and other raw materials can significantly affect the variable cost per car. However, having a supplier can make things slightly more affordable.
Labor
Although the manufacturing process is automated, manual labor is still needed in the automobile industry. This cost includes the wages paid to assembly line workers, quality control personnel, and other individuals directly involved in building the car. As production volume increases, more labor hours are required, increasing variable costs.
Production Costs
Production costs are usually fixed, especially if the factories are already established. However, the cost of energy consumption, which increases with the volume produced, and other materials need to be accounted for if the automaker is working on a new model/generation.
Shipping Fee
The cost of transporting raw materials and finished cars varies depending on the number of vehicles produced. This includes:
- Delivery of parts from suppliers: Higher production volume translates to more shipped parts, increasing transportation costs.
- Shipping finished cars to dealerships: This cost can vary depending on the distance and mode of transportation used.
Costs Of Manufacturing Well-Known Models And Makes
Now that we understand the car manufacturing cost breakdown, let’s look at how much it costs significant car brands to manufacture vehicles.
Toyota
Toyota vehicles stand out when compared with other brands because of their reliability. They are also one of the most popular cars today. So how much does it cost to make one?
Remember earlier we mentioned that the higher the production volume, the cheaper the manufacturing costs? So, let’s say a Toyota vehicle costs $15,000. After selling this vehicle, Toyota typically makes only about $2500, bringing the manufacturing cost to $12,500.
Ford
Ford is another famous vehicle manufacturer. On average, Ford makes around $13,000 for every base-model F-150 sold for $40,000, bringing the manufacturing costs down to $27,000. Let’s take another example: the Ford Mustang. This popular sports car has an MSRP of $27,000 and can cost up to $25,000 to manufacture.
Porsche
On average, you can expect Porsche luxury cars to have MSRPs of $50,000 to $150,000. With Porsche making around $17,250 for every vehicle sold, manufacturing costs range from $33,000 to $133,000. This explains our theory mentioned above. The more luxurious a car is, the more expensive it is to manufacture.
Tesla
Teslas are very expensive to manufacture, leaving the manufacturer with little profit. According to reverse engineering analysis, a Tesla Model 3 costs around $28,000 to manufacture. An MSRP of $40,630 in 2024 leaves a profit of around $12,630.
READ ALSO: Tesla Pricing Strategy: The Impact of Price Cuts on the Auto Industry
Ferrari
The cost of manufacturing a Ferrari varies depending on the model and production specifics. Estimates suggest that the manufacturing cost, including development, ranges from approximately $130,000 to $140,000 per car.
Additionally, a study revealed that Ferrari generates an average profit of around $80,000 per car sold, with prices ranging from $200,000 to over $300,000 per vehicle.
You can see now how expensive it is to manufacture a car. Audi, BMW, Mercedes, and other luxury car manufacturers also tend not to profit from car manufacturing. For example, these three car manufacturers can make an average of $10,500 in profits, with Maserati giving around $5,800 per car.
Although some cars have high MSRPs, don’t be quick to assume that manufacturers are making large profits. They tend to spend almost 80% during manufacturing.
APIs for Dealerships and Business Owners Interested in the Manufacturing Sector
Knowing the costs of manufacturing cars is a great starting point if you run a dealership, want to start one, or have any other business. However, every business needs tools and resources to excel in the automotive industry, including an API.
A vehicle data API is an application programming interface that connects your business to our extensive database. What’s in this database?
- Vehicle Specifications and Features: Access detailed information about various makes and models, including engine types, horsepower, dimensions, fuel economy, and more.
- VIN Decoding: Easily decode Vehicle Identification Numbers (VINs) to obtain comprehensive details about a specific vehicle, such as its manufacturing details, country of origin, engine specifications, and production year.
- Pricing Information: Get accurate data on vehicle costs, including MSRP (Manufacturer’s Suggested Retail Price) and historical pricing trends.
- Vehicle History Reports: Provide your customers with detailed vehicle history reports, including previous ownership, accident history, ownership records, and more.
- Maintenance and Repair Data: Access information on common issues, maintenance schedules, and repair costs for various vehicle models in the auto industry.
- Sales Listings: Access sales history, auction records, and more.
- Market Value: Verify the trade-in, dealer-retail, and private party values of any vehicle based on their condition, age, location, etc.
That’s not all! Vehicle Databases has over 60 million vehicle records and we would like to cater to your use case. Sign up now, claim your free 15 credits, and get started!
