Saving Money when Building Cars
Monday, April 1, 2013 
A few days ago we were reflecting on how manufacturers save money, and where they save money on vehicles. How often do we hear and are told that the new model replacing the previous model has more features, livelier styling, and a lesser price.
If you have an interest in the industry, you are certainly aware of increasing common platforms, raising the production volume, and saving money through common parts behind the brand distinctive touch points.
From way back in the day, it was known that some manufacturers had the innate ability to design parts and components with a precise life expectancy, and cost factors. Obvious that the life expectancy would slightly surpass the warranty parameters.
If at one time some manufacturers had better vehicles than others, today everyone has a good vehicle without exception they are all good vehicles. While suppliers have developed components that can be installed and/or used by various manufacturers. Need an electric power steering, need an 8 speed automatic transmission, need a navigation system, a sound system, and so on.
We all know that the auto industry has been global for a few generations, and components are sourced on a global basis, with cost being a high priority consideration.
We can keep on going, hopefully you understand our thought vector.
Where do they save money? Some items that have caught our attention....
- Have you seen the carpeting in some vehicles? Yes the floor mats are now the carpets.
- Trunk lids that are not solid (flimsy) accompanied by hinges that are of the same standard.
- Black plastic (hard) to cover vast expanses of interior surfaces.
- One form or another of a generic electric power steering disconnected from the vehicle.
- Leather that looks and feels like vinyl.
- Sheetmetal that is competing with aluminum foil.
- Components that were sourced from the other side of the planet (agreed we have to get used to it).
- Vehicles assembled in low wage areas of the planet to save on labor costs (we have to get used to it).
Then you reflect on "where else are they saving money"..."where have the spreadsheet jockeys and power point pilots exerted their influence".
We had an opportunity to experience a very popular car in the Canadian market, it was literally a case of the phoenix rising from the ashes...wow what a great price, on a great car.
Our observations...
- A ton of black plastic, and vinyl...its OK the price is low.
- Rear drum brakes on one version...you want to save money you get drum brakes.
- Then at 25,000 kms...wow this car is pretty loose (showing more wear), for only 25,000 kms...
- At 50,000 kms its even looser (even more wear), an exit strategy is on order.
More observations...
- It still costs money to engineer, and build a vehicle that performs comparable to the "average" of modern vehicles.
- Obvious that money is saved "somewhere" to accommodate an increasing array of technology while meeting competitive price points.
- When manufacturers embark on a mission to reduce the price point while improving the touch points, the savings usually accelerate the wear and tear cycle.
- How long does the initlal new vehicle feel of quality last, before it starts deteriorating?
- Does CMS (Citizen Main Street) understand how and where manufacturers save money?
Care to share your thoughts, leave a comment.
