Production cost of auto engines? 1

tbuelna · Dec 11, 2003

Does anyone have a valid figures for production costs of automotive engines? I've seen figures for a typical DOHC in-line 4 cylinder of about $700 to $800 (US$). I'm curious if this number is correct- it seems a little bit low. And how much more would a V6 or V8 engine be?

Thanks in advance.

Terry

enginesrus · Dec 12, 2003

Well in the not to distant past. Complete factory new Chevrolet V-8 engines were selling retail for that. I would say it all depends on how many years an engine type or design is to be produced. To spread out developement and tooling costs. Actually that may be about right. Or even less. Manufacturing is way more automated now than the old days. So I would guess the actual cost is less than years ago. But to pay for those automated machines and all the extra overhead in the offices these days, any savings will not be passed on to the end user. It becomes profit.

strokersix · Dec 12, 2003

In the Agricultural Equipment industry, my company in particular, if a customer pays $100 for a service part it actually cost the factory somewhere between $15 and $50 to produce including factory overheads. If the automotive industry is at all similar I would assume the factory cost for an engine is at maximum one-half of the retail price.

Chumley · Dec 12, 2003

Terry:

Are you looking for the cost of a complete engine assembled with all accessories and fuel management, a short block, a long block, delivered to a retail outlet, picked up at the factory?

Normally, I've found that a general rule of thumb is that the net cost of an item once it is in your hand at the place where you take ownership of it is about 32% to 45% of its suggested retail list price at that same location. (don't confuse the suggested retail list price with what you may have acutally paid for the item)

That doesn't apply for small ticket items or large ticket items, factory closeouts, items on sale, special orders, high demand/critical short supply items, items bought in large quantities, etc.

So, for example, if you walked into a Honda dealership and wanted to buy a new single complete generic assembled crated drop in 2.0L DOHC engine delivered to the parts department and the regular retail list price was $7,500, the cost of that item to the dealer, assembled, crated, and shipped to that point would be somewhere between $2,400 and $3,375.

The actual production costs of the individual unassembled unpackaged parts picked up at their factory of origin however would be far less than that.

Chumley

tbuelna · Dec 12, 2003

Thanks for the replies.

But actually what I was looking for was the cost to the OEMs to put their engine in their vehicle. The only (public) information I could locate on the net were these articles on Toyota's engine production costs:

http://www.rbbi.com/folders/engn/lcost2.htm

http://www.rbbi.com/folders/engn/toyota.htm

I have an idea for reducing engine production cost (ie: reduced parts count) and I was trying to do a quick trade study on how cost effective it would be for the automotive OEMs. In the automotive business, with its thin profit margins, "cost is king". The main driver for cost is typically parts count.

If there's any ex-automotive types out there, I'd love to get your input.

Regards,
Terry

franzh · Dec 12, 2003

tbuelna;
To quote a famous composer when asked by member of royalty, how many notes were correct, his reply was, "Just enough, neither too little or too many!"

Today’s auto engine builder runs VERY strict cost containment and controls on their parts, often making several do double duty (blocks with multiple bolt patterns to fit in different frames) etc. When I was doing a similar study, I found that most of the cost of the engines was not in individual parts, but in the R&D and assembly machinery. Raw materials counts for less than 10% the cost of the engine. Bolts, bearings, gaskets, other related fasteners, are all required to perform a certain function, but no more than necessary, nor too little to allow a fault.

I could well imagine an engine with reduced head bolts (blown head gaskets), reduced crankshaft bearings (how about a three main engine?) engines without lower end fasteners for the oil pan (adhesive anyone?) camshaft followers, chains, belts, etc.

Help any?

Franz

GregLocock · Dec 12, 2003

tbuelna, I agree with your initial estimate, figure on perhaps 15% more for an I6, and 30% more for a V8.

That doesn't include the EEC of course, and I'm not too sure how fully dressed the engine would be (alternator etc).

It's interesting that the engine cost about $10/kg, given the bulk prices for aluminium, copper and steel.

Those figures would be for a high volume engine made in an optimised plant.

Cheers

Greg Locock

Chumley · Dec 12, 2003

"But actually what I was looking for was the cost to the OEMs to put their engine in their vehicle.

Geeze Terry, you are asking a question that is impossible to answer accurately because too many conditions to
establish a long term working business relationship are undefined.

Here's a few conditions to think about.

How many engines do you want to buy and when do you want them?
Where and how do you want them packaged for shipment?
Prior to your order, how much advance notice will you
give us?
What are the conditions for payment?
Do you pay on time?
What is your credit rating? Do your checks bounce?
Does our company even want your company to succeed?
(we might all ready sell the same engine to your direct
successful competitor at a better price than you want
to pay us)
What are your warranty reqirements?
Does your company sue us when the slightest problem
exists rather than contacting us directly?

key issue for prices. . . . .

Do we like you and/or have you made us money or brought us good business leads the past or are you a historical loser?

enginesrus · Dec 13, 2003

Some years back I was privy to a certain manufactures "confidential price guide". It broke down the cost of manufacture, and the cost to dealers etc. Well if the cost to manufacture is, $50.00 and the retail price at the dealer was $2500.00 what is the profit? True costs are top top corporate secrets.

tbuelna · Dec 13, 2003

Locock:

Thanks for the reply. Here's are quotes from the articles I linked, one article quotes engine costs of $1500 to $5000 and the other quotes $600 to $700:

"Engines account for $1,500 to $5,000 of a car's total cost and can contain more than 1,000 parts. The quandary for Japanese auto makers is that they have built their reputations on developing costly, high-tech overhead cam engines that pack plenty of power into a small footprint. But Toyota realized two years ago that its engines had become too costly and complex, and initiated a program, known as PC21, to cut costs 50% by 2000. ''They have to strike a delicate balance between cutting cost and maintaining their reputation [for performance and quality],'' says Dave Andrea, an analyst with Roney & Co. in Detroit."

"Industry experts estimate that a conventional four-cylinder engine costs an auto maker $600 to $700, so a 25% cost reduction might amount to more than $150 a car -- a huge amount in an industry that shaves costs by nickels and dimes."

My question is what cost estimate is closer to reality?

Regards,
Terry

GregLocock · Dec 13, 2003

It all depends on what you mean by cost, as someone else said.

In the BoM an engine will be around $800. That is the internal, variable, cost with no profit.

However, when you amortise tooling, engineering and so on into that you will start to bump it up, but cost reductions are based on the BoM cost.

Now, when the car company sells you a car for say 45k, we only get about 20k for it. So the higher number is the ratio of the sold cars price that the engine represents, I suspect.

Aftersales and option parts we sell at 5-10 times the cost to us, that's why we like selling you fancy wheels.

Cheers

Greg Locock

Tranger · Dec 14, 2003

When I worked in the conveyor industry (back in the 80's) the Ford Livonia (Michigan) Transmission Plant cost $5000 per hour to run. It produced 60 transmissions per hour at full speed. Doing the math, it cost Ford about $83 bucks to produce a transmission on average. Back then they did a lot of the machining "in house". This does not include what parts they purchased from other sources to assemble the transmission, but these are good numbers for the plant and production. To figure it out on a macroscopic level you would need to consider many other things(as you suggested) which might be easier to calculate if you were in some top level accounting department where the entire plant/part costs are availiable. It's a very interesting subject you bring up! Mark

enginesrus · Dec 15, 2003

Now what does everyone think the cost of a new car or suv out the factory door cost is? I have heard around $4000. to $5000.

patdaly · Dec 15, 2003

As with the engine, that cost is hard to document. I would lay dollars to doughnuts the true cost of regulations per car is higher than that at least in the USA.
Perhaps your figure could be close if one eliminates the cost of Regulation, Liability, Marketing, etc.....

Chumley · Dec 16, 2003

"When I worked in the conveyor industry (back in the 80's) the Ford Livonia (Michigan) Transmission Plant cost $5000 per hour to run. It produced 60 transmissions per hour at full speed. Doing the math, it cost Ford about $83 bucks to produce a transmission on average."

OK. Assuming brain turns on.

Does someone come to the plant and pick that transmission up? How .. . . . Nahhh this discussion is just too stupid to even continue. Get your own education. Don't try to hang on my coat tails.

Chumley

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Production cost of auto engines? 1

tbuelna

Aerospace

enginesrus

Mechanical

strokersix

Mechanical

Chumley

Automotive

tbuelna

Aerospace

franzh

Automotive

GregLocock

Automotive

Chumley

Automotive

enginesrus

Mechanical

tbuelna

Aerospace

GregLocock

Automotive

Tranger

Mechanical

enginesrus

Mechanical

patdaly

Mechanical

Chumley

Automotive

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