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-   -   X3 costs an estimated $14,000 to make (

S93D 04-24-2008 12:04 PM

X3 costs an estimated $14,000 to make

Analysts also estimate that BMW's upfront costs, for defraying Magna's tooling and startup expenses, will be only about $100 million, rather than the estimated $500 million it would have cost to expand BMW's capacity. Merrill Lynch analyst John Casesa estimates BMW will pay Magna $14,000 for each X3 built

So I figure it's roughly $500 in tooling costs ($100M divided by number built), maybe $2,000 in development costs so it costs BMW $16,500 to make. So they have $20,000 for expenses, advertising costs, warranty costs, maintanence, etc. That's not bad. If their reputation were not so well regarded and had to sell the vehicle for $28,000 then it would be harder to make a profit.

I was a little surprised at the $14,000 figure. My previous guess was that it cost a bit over $20,000 to make.

Andrew*Debbie 04-24-2008 12:08 PM

Interesting read. From what I've read elsewhere, Magna did a lot of AWD engineering. The rest was mostly BMW.

I wonder if the $14,000 includes the engine from BMW's Munich plant. That is $14,000 in 2003 when the Euro was a $1.10.

That is more like $19,000 at today's exchange rate. Costs may have changed a bit too. Of course BMW is hedged at something like $1.30... ..

AzNMpower32 04-24-2008 12:10 PM

That article was written YEARS ago in 2003. Who knows how accurate the result actually is?

BMW chose to build the X3 thru a subcontractor because it was (and still is) running at full capacity. In 2004, they had the new 1-series and 5-series to build in Germany. Thus, it makes more sense to outsource the job, than spend millions in additional capital to expand their own existing infrastructure.

Austria does have lower labour costs than Germany. However, the price of raw materials has steadily risen since then. The Euro is now also worth much more v. the USD than it was back in 2003. There are just too many factors, in addition to the fact that the article was dated back in '04, to determine whether the article is correct.

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