# Automobile industry retail price equivalent and indirect cost multipliers

In the automotive industry, a common way to incorporate indirect costs has been to use a retail price equivalent (RPE) multiplier. The RPE multiplier is a ratio of the total revenue of a company to the direct manufacturing costs.

## What is the production cost of a car?

According to the 2012 study Automobile Industry Retail Price Equivalent and Indirect Cost Multipliers, the breakdown of the production cost of a car is: Raw materials and the prices of auto parts – 57% of the total price Research, development, engineering, and running the facilities – 16% Average advertising charges for each sold unit – \$1,091

## What are the variable costs of making a car?

Variable Costs These are the expenses when you will go into the production of the vehicle. These include the costs of raw materials, labors, maintenance and utilities in the factories, and other related things. The costs will be proportional to the number of units manufactured.

## What are the costs involved in the manufacturing process?

These include the costs of raw materials, labors, maintenance and utilities in the factories, and other related things. The costs will be proportional to the number of units manufactured.

## How are IC multipliers derived?

As discussed above, IC multipliers are derived from the RPE multiplier by using adjustment factors to indirect cost contributors. The magnitude of adjustment depends on technology complexity and time frame. In this subsection, we first describe how technology complexity and time frame affect adjustment factors. We then present engineering adjustment factors (introduced in Section 3.2 ), and how they were used to adjust cost contributors of the RPE multiplier to estimate IC multipliers. At the end of this subsection, we present arguments about the inclusion of profits in our estimates of IC multipliers.

## What is the purpose of RPE multiplier?

The goal for either the RPE multiplier or the IC multiplier is to improve the estimate of the total costs of a new technology. In this context, the role of profits needs careful consideration. On the one hand, profits result from an interaction of supply and demand curves for a product. The total effect on profits depends on the relative slopes of the supply and demand curves: although a reduction in quantity and an increase in cost hurt profits, a price increase can offset some or all of these effects.

## What is hybrid electric vehicle?

Hybrid electric vehicles are in various stages of development by almost all major light-duty car manufacturers. There are two basic types of driveline structures found in hybrid vehicles. The most common, parallel hybrid, is where the engine drives the powertrain and a generator helps recharge the battery. A second type, a series hybrid, is where the engine does not drive the powertrain but always drives the motor/generator to move the vehicle and recharge the battery. This technology results in reductions in carbon dioxide emissions of 15–30% ( Ricardo Inc., 2008 ).

## What is product cost estimation?

Niazi et al. (2006) identified and categorized PCE studies. Among those, several studies attempted to estimate overhead costs. In a method developed by Son (1991), referred to as the breakdown approach, the author estimated total costs by summing all manufacturing and overhead costs. This method required detailed information about resources consumed to produce a product , including purchasing, processing, and maintenance costs ( Niazi et al., 2006 ).

## What is a DCT transmission?

This technology combines the high mechanical efficiency of a manual transmission with the shift control of an automatic transmission. The benefits of this technology are lower CO 2 emissions and better fuel economy. Mechanically, a DCT represents two parallel transmission paths, each containing its own clutch. A change in gear is achieved by disengaging one clutch while simultaneously engaging the other ( Ricardo Inc., 2008 ).

## What is manufacturing a new model?

It includes the cost of maintaining the facilities, testing prototypes, paying the salaries of the staff, finding suppliers, and some other related things. It can cost hundreds of millions and it will increase if you decide to send the prototype into production. Retooling the factories and retraining the workers (in case, it’s a completely new product) will add to the figures.

## What are variable costs?

Variable Costs. These are the expenses when you will go into the production of the vehicle. These include the costs of raw materials, labors, maintenance and utilities in the factories, and other related things. The costs will be proportional to the number of units manufactured.

## How Much Does It Cost to Make a Car?

No automaker reveals the actual figures. So, the final estimation depends on plenty of ‘ifs’ and ‘buts’. The general rule is the larger the car and the bigger the production volume, the more cost-effective they are to manufacture. Building a concept car or a limited number of exclusive versions is much more expensive than producing a big lot. When tens of thousands of similar models of a vehicle are produced in a factory, the pricing meter tends to go down.

## Why are the costs of the 2nd generation Toyota Prius less than the 1st generation?

For example, the fixed costs for the 2nd Gen Toyota Prius were much less than the 1st Gen models because they incorporated many technologies developed for the 1st Gen batches.

## Who is Philipp Meister?

Philipp Meister. Philipp Meister is an amazing part of Car From Japan’s blogger team. After obtaining a degree in Automotive Technology from Technical University of Munich, Philipp worked as a technician in various Volvo dealerships. He has long been a car owner and enthusiast.