Publication Details

Title : Light-Duty Vehicle Cost Markup Analysis: Literature Review and Evaluation
Publication Date : July 01, 2020
Authors : J. Kelly
Abstract : Knowledge of historical automotive manufacturing costs and intended sale prices of vehicles is important in understanding the costs and prices of current and emerging vehicle technologies, as well as the types of technology choices that original equipment manufacturers (OEMs) may make with their technology planning and vehicle deployment. Current practice is to translate available OEM manufacturing costs (or cost estimates) into likely sale prices by using a markup factor. This study examines the state of the literature as it pertains to light-duty vehicle cost markup factors to understand the foundation of available markup factor formulations and to describe how variations in assumptions may impact those factors. The study examines and evaluates literature to observe trends, such as markup factor variance and efforts to devise variable markup factors. It finds that there is consensus for a markup factor of 2.0 for vehicle parts produced by “in-house” and a factor of 1.5 for parts that are outsourced. There is wide acknowledgement that these values are not indicative of any specific part, or manufacturer. Rather, they highlight that over time the market has shown that it will, on average, across a manufacturer’s entire fleet, allow the OEMs to set their prices such that their return is consistent with the markup factors presented. Some vehicles will have higher markup factors and they will thus subsidize vehicles with lower markup factors.

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