By on February 1, 2011

Throughout the month, TTAC tries to go back to recent sales numbers in hopes of providing greater context for the industry’s day-to-day decisions. On the first of each month, however, we get so overwhelmed with volume numbers, we thought we’d take this opportunity to explore the price-volume frontier. Inspired by recent rumors of a 120k unit production goal for the $41k Volt and the ensuing discussion of the BMW 3 Series’ unique position on the price-volume frontier, we thought we’d feel around the data for this mythical plateau. Sadly our unsophisticated graphing software (and overworked editor) didn’t allow for a more full exploration of high-priced vehicles reaching near-mass-market volumes, so we put together a “basket” of higher-priced, strong-selling models. And though we obviously cherry-picked a little, we did use four manufacturers to indicate an approximate “delta” between price (base MSRP) and volume (2010 numbers). Are there outliers to our “price-volume frontier”? Possibly. Did we leave out the most interesting area of the graph (the mass-market vehicles) Definitely. But in the process we have hopefully proved that selling over 100k units of a vehicle costing $40k or more is not a goal to be taken lightly.

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18 Comments on “Chart Of The Day: The Price-Volume Frontier...”


  • avatar
    SVX pearlie

    It’s a darn good thing that the post-credit Volt is at the same $33.5k point that the 3-series holds.

    • 0 avatar
      GS650G

      I think it’s more of a 48K car with 7K of my money on the hood. Either way, why do I get to subsidize someone elses car to the tune of almost 20 percent?
      I think I’d rather have any of these vehicles than a chevy cobalt with a tiny engine, a battery pack, and plenty of hope that it won’t give me trouble 20 miles from home.
      The only way they move 120K volts is by fleeting them out to every government agency there is by mandating they buy them. This way Government Motors gets to build them and we get to completely buy them with tax money, cutting out the necessity of competing with the Leaf or any other car that costs less.

    • 0 avatar
      jmo

      The only way they move 120K volts is…..

      They are rioting in Riyadh, strikers have shut down the Dhahran oil terminals, oil is set to open up $50 when trading resumes…..  Nah…. that could never happen.

      With the US being the Saudia Arabia of coal, it sure wouldn’t make sense to help subsidize a fleet of domestically produced hybrid/electric vehicles, would it?

    • 0 avatar
      sitting@home

      “why do I get to subsidize someone elses car to the tune of almost 20 percent?”
       
      As far as I can tell the 7K is a “tax credit” ie. the buyer gets his own taxes back, not your money. I thought the small government mob would be all over this as a way to send less of their hard earned wages to DC.
       
      But then (tax) life is never fair; half of my property tax goes to educate kids I don’t have, and a significant chunk of my federal taxes go to pay debts I didn’t run up, social security I will never receive and wars I don’t believe are justified.

    • 0 avatar
      mcs

      It’s a darn good thing that the post-credit Volt is at the same $33.5k point that the 3-series holds.
      Not everyone qualifies for the subsidy. For many people, it’s still an unsubsidized $41k+ car. I wonder how many people are going to buy one of these expecting the credit, then get some unexpected bad news from their accountants at tax time.

  • avatar
    Doc

    Brilliant,
    Never thought of car sales this way. The 3 series is not a surprise, the T&C and E Class are big surprises.

    I would like to see the Porsche Panamera on this chart. (I guess that you would have to make the price line go over 80 though)
     

  • avatar
    tallnikita

    Go the Camaro!  I thought Mustang would’ve had it beat.

  • avatar
    CJinSD

    I can’t believe Cadillac sells 45,656 CTSs. Every time I look at pricing on Cadillac’s website, I am stunned. I recall being in a Cadillac showroom around 2005. It was during ‘employee pricing,’ and the invoices were taped to the walls of Colonial Auto Center. Invoices don’t mean anything, but at the time they raised an interesting question. If one were supposed to believe that dealers were paying over $40K in 2005 for gen1 CTSs, why didn’t the dealer go accross town and buy a bunch of 330i BMWs for retail and try to mark them up instead? They would  still have been a better value and an easier sale. Looking at CTS build and price now, things that are standard on sub-30K Hondas are still optional on a $40K CTS. BMW has been building 3 series brand equity since 1968. You can’t jump on their option price gouging plan with the Cimarron MK3. When Acura was hitting on all cylinders in 7 years ago, they sold a bunch of cars by making everything standard for a price that compared with stripped BMWs. Acura only messed things up by trying to out ugly BMW. If anyone wants to pick up the ball they dropped, they should do it by adopting a similar pricing model.

    • 0 avatar
      Educator(of teachers)Dan

      A given product sells for a the price the market will bear.  If Cadillac can get that price for the product, more power to them.  When products constantly sell at a steep discount, that means that the true market price is whatever the discount is (for an example see GMs constant “Red Tagging” of 90% of their lineup.) 

    • 0 avatar
      Doc

      The CTS is a strange car. It falls into a netherworld market between the 3 and 5 series both in pricing and size. I think that it is taking some sales from both markets.
      The real test for Cadillac is going to be up-sizing and up-pricing the CTS and selling the ATS against the 3 series.

    • 0 avatar
      CJinSD

      Dan,

      I’d be curious to know what the transaction prices for the CTS are. When I was looking for a car for my father in 2004, Cadillac was aggressively advertising the $29,999 CTS. The billboards had the prices bigger than the picture of the car. The gotcha was that not only did the $30K CTS come with nothing, popular options weren’t available on it. Getting an automatic transmission meant moving to a bigger engine which came with a number of luxury options. Just needing an automatic transmission meant spending more than 30% over the advertised price. Considering that the number of manual transmission Cadillacs sold since 1950 are statistically insignificant, that is pretty close to the definition of a bait and swap. On top of that, when you got home with your $40K 2004 CTS, everyone thought you had a $30K car. Some people like to ask what you paid for a car, and it probably isn’t fun telling them you paid a third more than the widely advertised price.

    • 0 avatar
      SVX pearlie

      I have an E60 with the luxury package with the premium 14-way leather seats.

      Do you have any inclination of how much rock hard plastic is *still* in that interior? Hard plastic that you will see and/or touch every single day?

      Did you know that your knee touches hard wood on the door? That the center console where your other knee touches isn’t well-padded?

      And how much did that car cost compared to the current CTS?

      Right.

    • 0 avatar
      vbofw

      @CJinSD you raise a good point.  For those who have to watch their shekels, there seems to be a psychological preference to get as much as possible included in that base price, ala the Honda/Acura model.

    • 0 avatar
      Motorhead10

      I haven’t calculated the numbers for the full year yet – but in December here are the numbers:
      average incentive on CTS was $6627 (including financing incentives) average transaction price was $41408. Incentives on the V were $4902 with an average transaction price of $66034. Coupe incentive $3553 transaction $46389. V Coupe incentive $2985 transaction $68387. Wagon incentive $6362 transaction $39290. Keep in mind the transaction price is BEFORE incentives. Average Cadillac transaction price in December was $55839 with an average $5959 incentive. Just for context Lexus average transaction price was  $48272 with an average incentive of $2196.

    • 0 avatar
      Educator(of teachers)Dan

      Honestly guys, my larger point was that if you never sell a product for the advertised price or even close to the advertised price, then your product is too damn expensive.  Which is why GM has spent the last X# of decades trying to slash costs.  (Funny it never occured to them to build a supperior product across the board and sell it for a profit.  Good thing that never worked for Toyota or Honda. :P) 

    • 0 avatar
      SkiD666

      Dan, using January numbers
      GM:
      Average Transaction Price: $34,067
      Average Incentives: $3,089
      Average Incentive Percentage: 9.1%

      Toyota:
      Average Transaction Price: $25,221
      Average Incentives: $2,179
      Average Incentive Percentage: 8.6%

      Don’t see much difference.

    • 0 avatar
      krhodes1

      I think BMW is a bit of a different case than Acura. Honda can afford to make relatively little money on each Acura they sell – the costs are amortised over a huge number of other models that they sell tons of. BMW does not have this luxury. 100K cars sounds like a lot, but it is a drop in the bucket compared to true mass-market cars. And BMW uses some very expensive technology across the board in thier cars.

      I would bet that there was relatively little profit in the fairly stripped 3-series wagon I just ordered. The options are where the real profit is! For example the sport package is $2050. This gets you different seats, different suspension bits, different wheels and tires. But the base car already comes with all that stuff, the added cost of the Sport versions is very close to nothing. Probably more cost in having to inventory them than in the actual bits.  

      This model works for me – I don’t want all that extra crap anyway. I bought the car to drive, not to be a toybox.

      One lesson Cadillac has simply not learned-you don’t talk price of a “luxury” good. Advertising $29995 CTS did them no good in the long run. BMW is much smarter about this. They also do thier discounting through the back door. The free “Value pkg” they currently offer is essentially a $2500 incentive, and they subvent thier leases.

  • avatar
    gslippy

    Very interesting – keep collecting more data.  The subsidies and rebates will make a big difference on some vehicles.


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