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Honda: Here is a proven bike for $1000 less than our new model
Vital: "Honda sucks and trying to pawn off their old parts on us"
Will trade for 420, price is firm
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Make that bike $7500 bucks and I think it would be a real home run.
Pit Row
Except no one really pays anywhere near msrp for a new yellow bike even in this crazy bike market. Hondas on the other hand typically with fetch msrp and are sold out almost everywhere.
Not bashing yellow but I went bike shopping a few weeks ago. No MX bikes to be found expect for a few discounted RMZz and some factory edition KTM 450s. Sad but all 3 yellow bikes were pretty deeply discounted and still were sitting on the showroom floor.
Theoretically, every unit produced is the exact same cost with the same profit margin.
The only ways to make each unit cheaper to build:
Build more volume to negotiate cheaper component part pricing
Use cheaper labor
Use continuous improvement processes to find more efficient ways to assemble the bike
Reduced factory overhead costs
That’s about it.
What I think Honda is doing is reducing their profit margin on the S model knowing they will recover it in higher take rates for the other variants. Pretty smart.
You are missing R&D costs in your example as well as initial tool up for a production run.
Regarding the argument of saving "only" $1k. I think there's a large market of people that routinely buy 1-3 year old used bikes. I know I have done that a ton. A used 450 MXer will usually sell in the $5500-7500 range. This option may bump some of those buyers up to buying a "new" 450R-S for just a tad more rather than buying someones used bike.
So, shopping around matters.
I even found some friends some good deals on the New R & RX last November while others were paying high "mark ups". We found them in Far Northern Cali and southern Oregon.
Again, it's all about where you buy. That's where I'm coming from.
I captured initial factory tool up for a production run in "factory overhead costs." Increased volume means the direct & indirect period overheads are spread out over more units thus resulting in a reduced per unit rate.
R&D costs are typically paid for by a separate account that is responsible for developing the machine and bringing it to market. Once the bike is ready for production, the factory account is then fiscally responsible for the costs associated for producing the bikes.
Each bike that rolls off the end of the assembly line is the same cost to build as the unit before and after it, until some cost reduction strategy is implemented. Let's say they build 1000 bikes with all the exact same input costs, processes, labor, etc. All 1000 of those bikes have the same costs for the OEM...they aren't decreasing in manufacturing cost just because they roll of the end of the production line. Now, let's say they discover a process that increases labor efficiency by 1% and it will be implemented on bike #1001. Bike 1001 will be 1% cheaper to build when compared to 1 thru 1000. On bike #2000, they implement a design change that saves $20 per engine assembly...more savings when compared to builds 1 thru 1999. On bike 3000, they see forecasted demand is up 5% so they go back to their supply management team to work with the supply base on new prices for the increased volume, so bikes 3000 and on have an overall reduction in manufactured costs because the component parts are becoming cheaper due to increased volume. While these are obviously made up numbers and a simplification of realit, what I am getting at is that he manufacturing cost is static until a cost reduction change is implemented.
I've spent 11 years in manufacturing, 9 of which were in a manufacturing engineer role, so I have first hand experience with how this stuff works in the real world. I've ready plenty about economies of scale in my undergraduate and graduate coursework. It seems that you have the misconception that you just build more and the price magically gets cheaper as each unit comes off the end of the line...it doesn't work like that.
Post a reply to: Hmmmmm.... 2022 Honda CRF450R-S huh.