mccombie_5 Posted March 23, 2006 Report Share Posted March 23, 2006 I've always wondered this, how do they make money?? They produce a tiny amoutn of cars, and can't possibley make that much money, even if they made £100,000 on every one they made, it wouldnt make that much money, would it? I'm not sure how many they've made so far, but I dont get how they can sell a specialist product and make enough money to run it, by the time they've paid staff, factory etc, parts and development thered be nothing left surely? Can someone enlighten me? Link to comment Share on other sites More sharing options...
malagus Posted March 23, 2006 Report Share Posted March 23, 2006 Niche Marketing. a niche firm can slap on a huge markup and its fine, as the volumes are low. Not to mention Pagani for one have low sunk costs. They buy the engines from Merc AMG, and most small manufacturers buy engines from big firms. The Carbon Fibre is created by their sister firm, modena design, and there is alot of money put in before development. Most of the parts are outsourced, and merely assembled by the compnay, so sunk costs are as low as possible. Nearly everything pagani makes in house is carbon IIRC, and there is low cost for Pagani to do this, as they are part of Modena design. Another good example is Spyker. Victor Mueller went around accepting orders (and money) for the spyker C8 long before he even built one (c2-4years before IIRC) again, most of the construction was outsourced, the firm really only designs the car, assembles it, and probably builds the chassis. This is the key. unlike large companies, most of the building is done by external companies, and this means little machinery or labour costs. as such most of the costs are direct costs. these sorts of cars are cash, then they build you one, so the company needs no financial help to build the car, so cash flow is usually positive. Link to comment Share on other sites More sharing options...
mccombie_5 Posted March 23, 2006 Author Report Share Posted March 23, 2006 I see, I thought some parts (obviously the engine) would be sourced externally, but I didnt think that that much would be. How much must the markup be Link to comment Share on other sites More sharing options...
malagus Posted March 23, 2006 Report Share Posted March 23, 2006 Price Elasticity of Demand is determined by availabiliy and closeness of substitutes - Pagani has v.few substitutes, highly differentiated, exclusive vehicle - they can charge what the hell they like! Many small car companies are owned by people with other interests - pagani has modena design, Gumpert is owned my Roland Meyer - who owns MTM etc. a profit of £100k p.a is more than enough for them. Link to comment Share on other sites More sharing options...
mccombie_5 Posted March 23, 2006 Author Report Share Posted March 23, 2006 That's very interesting, not making much profit, so effectively the business in real terms isnt really profitable for the sake of £100k PA, they are jsut ran as a sub division Link to comment Share on other sites More sharing options...
Thorburn Posted March 23, 2006 Report Share Posted March 23, 2006 They are run because the people behind them love what they are doing, not because they need the money. Link to comment Share on other sites More sharing options...
Ian_C Posted March 23, 2006 Report Share Posted March 23, 2006 Pagani funded the car through Modena Design. Even if the car only breaks even, it is great advertising for Modena Design itself. Ian Link to comment Share on other sites More sharing options...
theduisbergkid Posted March 24, 2006 Report Share Posted March 24, 2006 [ QUOTE ] They are run because the people behind them love what they are doing, not because they need the money. [/ QUOTE ] Just like TVR (until Smolenski bought it). Link to comment Share on other sites More sharing options...
DHA Posted March 24, 2006 Report Share Posted March 24, 2006 [ QUOTE ] Price Elasticity of Demand is determined by availabiliy and closeness of substitutes - Pagani has v.few substitutes, highly differentiated, exclusive vehicle - they can charge what the hell they like! [/ QUOTE ] Doing Economics A-Level? Pagani make a large % profit on each car compared to other supercar manufacturers. The AMG purchased engine is a huge saving on development costs. Link to comment Share on other sites More sharing options...
Mac Posted March 24, 2006 Report Share Posted March 24, 2006 Link to comment Share on other sites More sharing options...
batterseaboy Posted March 24, 2006 Report Share Posted March 24, 2006 I've met Klass Zwart the owner of Ascari a couple of times and he said their car production runs at a loss Similar to the Veyron (although nothing like the 4million euro VAG lose on each veyron!). He basically dose it for the Sheer joy and love of cars and He's out racing most weekend. Being an oil multi millionare probably helps but what levels things out for him is the Ascari resort in Portugal, which is a pretty amazing, if expensive place! see here http://www.ascari.net/ Link to comment Share on other sites More sharing options...
mccombie_5 Posted March 24, 2006 Author Report Share Posted March 24, 2006 This is all very interesting. I thought Malagus might have been doing Economics or Business Studies, this isn'y my area I'm an art/photography/English/film studies student. I do feck all at college Link to comment Share on other sites More sharing options...
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