Production Cost of Making a Dirtbike

JW381
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1/16/2018 4:45pm Edited Date/Time 1/17/2018 3:12pm
Does anyone have some educated info as to what it costs the OEMs to make the bikes we buy and ride? Excluding R&D. How much is done in house and how much is outsourced (i.e. bars, tires, rims, exhaust etc.)? Assuming a roughly 50% margin we're looking at ~4-5k? But what about shipping costs, is that factored in? Would the answer surprise me, more like 2500?
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1/16/2018 4:56pm Edited Date/Time 1/16/2018 5:08pm
Quite the loaded question, with so many variables. I'm sure someone more knowledeable than myself will chime in, but I'd imagine nearly every component is outsourced. Not talking just wheels from Excel or tires from Dunlop; but everything from motor casings to cranks. Granted, the parts are produced to the OEM's specs with strict quality control - but still cast, forged, machined, etc by component suppliers who specialize in those specific abilities.. I'd go as far to say that the only thing done "in house" is assembly..

What I'd really be interested in, is how the number you're asking for differs from say the Honda's and Yamaha's of the world, to the Beta, Sherco and TM's of the world. On one hand, the smaller OEMs have way less overhead expense; but on the other hand I'm not sure how much they lose out on economies of scale...
Rockinar
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1/16/2018 4:58pm
Extremely complicated and those are numbers only the top brass know.
kzizok
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1/16/2018 5:07pm Edited Date/Time 1/16/2018 5:08pm
I’m going with about $50 more than $300.
JW381
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1/16/2018 5:10pm
Rockinar wrote:
Extremely complicated and those are numbers only the top brass know.
I wasn't expecting a PDF file Wink just some curious bench racing, err, accounting. It's an interesting question.

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PJRAUS
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1/16/2018 5:13pm
For what it's worth, back in 2000 I asked a very well known motocross guy who works For Yamaha USA this exact question, his answer was that the YZ250 that I used as my example would have a recommended retail price approximately 5 times the cost of the unit as it rolls off the production line, so in today's figures , let's say the bike is
$10k sitting on the dealer floor, the unit cost was probably around $2k.
That's what I was told, don't know if it's true...true back then or true now...Who really knows?
mxjeff575
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1/16/2018 5:13pm
This should be fairly accurate info for the big-4 - Engine cases are die cast and machined at the OEM Factory. Frames fabricated and painted. Not sure on the transmission gears. Plastic injection molded in house. Fasteners sourced. Carbs/FI/Ignition sourced. Suspension sourced. Engines assembled in house, and the bikes assembled in house on a separate assembly line. I would bet crankshafts are machined and assembled in house too. (I worked as a Manufacturing Engineer at Kawasaki Motors Manufacturing making lawn-mower and 4-wheeler engines and also got to visit KHI in Japan).
1/16/2018 5:17pm
Production cost on most retail units is ~ 1/4 of the suggested retail price.
1/16/2018 5:29pm Edited Date/Time 1/16/2018 5:30pm
My current and previous job are/were both with manufacturers (in a totally unrelated industry), and from my experience I can tell you that spare parts are a really high profit margin business.
JBecker 72
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1/16/2018 5:37pm
mxjeff575 wrote:
This should be fairly accurate info for the big-4 - Engine cases are die cast and machined at the OEM Factory. Frames fabricated and painted. Not...
This should be fairly accurate info for the big-4 - Engine cases are die cast and machined at the OEM Factory. Frames fabricated and painted. Not sure on the transmission gears. Plastic injection molded in house. Fasteners sourced. Carbs/FI/Ignition sourced. Suspension sourced. Engines assembled in house, and the bikes assembled in house on a separate assembly line. I would bet crankshafts are machined and assembled in house too. (I worked as a Manufacturing Engineer at Kawasaki Motors Manufacturing making lawn-mower and 4-wheeler engines and also got to visit KHI in Japan).
My friend has a book on the history of the GSXR and that’s essentially what the book says about Suzuki.

I also watched a YouTube vid on KHI and it was talking about their parts delivery system. They dont get the parts for what they are working on until just before assembly. Thought that was pretty cool and efficient rather than having massive warehouses stocking every little item needed to complete a bike.
kzizok
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1/16/2018 5:40pm Edited Date/Time 1/16/2018 5:42pm
JBecker 72 wrote:
My friend has a book on the history of the GSXR and that’s essentially what the book says about Suzuki. I also watched a YouTube vid...
My friend has a book on the history of the GSXR and that’s essentially what the book says about Suzuki.

I also watched a YouTube vid on KHI and it was talking about their parts delivery system. They dont get the parts for what they are working on until just before assembly. Thought that was pretty cool and efficient rather than having massive warehouses stocking every little item needed to complete a bike.
It’s called “just in time” inventory.
reded
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1/16/2018 5:50pm
JBecker 72 wrote:
My friend has a book on the history of the GSXR and that’s essentially what the book says about Suzuki. I also watched a YouTube vid...
My friend has a book on the history of the GSXR and that’s essentially what the book says about Suzuki.

I also watched a YouTube vid on KHI and it was talking about their parts delivery system. They dont get the parts for what they are working on until just before assembly. Thought that was pretty cool and efficient rather than having massive warehouses stocking every little item needed to complete a bike.
kzizok wrote:
It’s called “just in time” inventory.
Works really well, until it doesn't. Then shit hits the fan!
BobbyM
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1/16/2018 6:04pm
Quite the loaded question, with so many variables. I'm sure someone more knowledeable than myself will chime in, but I'd imagine nearly every component is outsourced...
Quite the loaded question, with so many variables. I'm sure someone more knowledeable than myself will chime in, but I'd imagine nearly every component is outsourced. Not talking just wheels from Excel or tires from Dunlop; but everything from motor casings to cranks. Granted, the parts are produced to the OEM's specs with strict quality control - but still cast, forged, machined, etc by component suppliers who specialize in those specific abilities.. I'd go as far to say that the only thing done "in house" is assembly..

What I'd really be interested in, is how the number you're asking for differs from say the Honda's and Yamaha's of the world, to the Beta, Sherco and TM's of the world. On one hand, the smaller OEMs have way less overhead expense; but on the other hand I'm not sure how much they lose out on economies of scale...
I say bullshit. Honda outsources it's motors? Uh huh.
Boxvan446
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1/16/2018 6:15pm
It's a difficult question because it has so much to do with over head and how you determine "cost." Just the cost of parts? Labor to assemble? Mortgage/rent, machines, etc.
Cygrace74
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1/16/2018 6:16pm
Well just look at it the way that Kawasaki employee's get half off bikes and you know they're still making money in there somewhere,
oldandslow1
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1/16/2018 6:40pm Edited Date/Time 1/16/2018 6:40pm
IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL PIECE THE DEALER COST IS ABOUT 8000 AND FACTORY COST IS AROUND 7000. THATS A HEATHY 14% RETURN ON INVESTMENT, ANY COMPANY WOULD KILL FOR THOSE NUMBERS.
TeamGreen
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1/16/2018 6:40pm
I heard that a coupl'a models of current 450s were made "just in time" for 2018 homolgation requirements. You think that was expensive? The metrics for 1,000 units is waaaaay more expensive than the metrics for 5,000 units.

What would really make people scratch their heads is what an OEM pays for tires, bars, rims, grips...etc. But, then you have to factor in that they're buying them by the THOUSANDS.

$80 handlebars for $16? Sure! (When you buy 5,000 at a time & they ship in a giant container...not one at a time)
TeamGreen
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1/16/2018 6:42pm
Quite the loaded question, with so many variables. I'm sure someone more knowledeable than myself will chime in, but I'd imagine nearly every component is outsourced...
Quite the loaded question, with so many variables. I'm sure someone more knowledeable than myself will chime in, but I'd imagine nearly every component is outsourced. Not talking just wheels from Excel or tires from Dunlop; but everything from motor casings to cranks. Granted, the parts are produced to the OEM's specs with strict quality control - but still cast, forged, machined, etc by component suppliers who specialize in those specific abilities.. I'd go as far to say that the only thing done "in house" is assembly..

What I'd really be interested in, is how the number you're asking for differs from say the Honda's and Yamaha's of the world, to the Beta, Sherco and TM's of the world. On one hand, the smaller OEMs have way less overhead expense; but on the other hand I'm not sure how much they lose out on economies of scale...
BobbyM wrote:
I say bullshit. Honda outsources it's motors? Uh huh.
Yo! I heard Maico bought it's motors in Taiwan! (Yes, I'm messin' with ya!)
40acres
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1/16/2018 6:51pm
I can't speak on OEM margin but the dealer margin is roughly 10% depending on the unit. For instance, a 2018 yz125 has a dealer cost of $5900 and full retail is $6500. Then you can factor in freight which ranges anywhere from $195 (think PW50) to $895 (side x side) and your margins start to disappear fast. This can lead into another conversation entirely but I won't go there right now. I just left the industry and I'm beginning to love motorcycles and the people that ride them again, little by little. I don't want to mess that up just yet.
Katoomey
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1/16/2018 6:52pm
there's no way you could ever know what it costs the Japanese. Their manufacturing (tooling, labor, materials, R&D, marketing, packaging, design, engineering, vendor partnerships, ect) is so interdependent between product lines that individual product accounting is almost impossible. They look at entire product lines.

KTM would have a good idea, as well as any of the other smaller, dirtbike-only manufacturers. One thing to note though, is that the smaller guys are going to have higher production costs, and way less marketing overhead, so they may not be comparable to Japanese bikes.

Even at GM, they have trouble evaluating costs for individual car models. Marketing is one of the hardest entities to account for, something that has very little to do with the actual manufacturing, but has a lot to do with the final price of product.
40acres
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1/16/2018 6:53pm
Cygrace74 wrote:
Well just look at it the way that Kawasaki employee's get half off bikes and you know they're still making money in there somewhere,
I can confirm without a doubt that this is not true. Perhaps in some very rare instances, but not a normal occurance. Company policy is 25% off a new unit.
BikerScars
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1/16/2018 7:00pm
IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL PIECE THE DEALER...
IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL PIECE THE DEALER COST IS ABOUT 8000 AND FACTORY COST IS AROUND 7000. THATS A HEATHY 14% RETURN ON INVESTMENT, ANY COMPANY WOULD KILL FOR THOSE NUMBERS.
You are outlining more of a net margin scenario (after ohd, r&d, shipping, interest exp, marketing, insurance, etc...). Which are very significant costs in the big picture.
But a pure manufacturing product cost is usually 4X mark up.
Braaaphole
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1/16/2018 7:12pm
IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL PIECE THE DEALER...
IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL PIECE THE DEALER COST IS ABOUT 8000 AND FACTORY COST IS AROUND 7000. THATS A HEATHY 14% RETURN ON INVESTMENT, ANY COMPANY WOULD KILL FOR THOSE NUMBERS.
With a 14% profit margin, you'd be out of business faster than you can blink. That wouldn't even pay for your lease on the building, much less all the additional overhead of owning a business.
JW381
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1/16/2018 7:14pm
Super interesting convo, love it, thanks for the input.
1/16/2018 7:14pm Edited Date/Time 1/16/2018 7:15pm
BobbyM wrote:
I say bullshit. Honda outsources it's motors? Uh huh.
I'm not saying they outsource an entire motor; I'm talking about components, which are made 100% to their specifications but not in a facility actually owned by the OEM. I honestly don't know what % or what kind of components are truly made "in house" versus at another facility. I'd love to know the answer, though.

For example, doesn't Pro-X supply a lot of OEMs with parts??
YamahaJT1
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1/16/2018 7:40pm Edited Date/Time 1/17/2018 4:41am
I'm not saying they outsource an entire motor; I'm talking about components, which are made 100% to their specifications but not in a facility actually owned...
I'm not saying they outsource an entire motor; I'm talking about components, which are made 100% to their specifications but not in a facility actually owned by the OEM. I honestly don't know what % or what kind of components are truly made "in house" versus at another facility. I'd love to know the answer, though.

For example, doesn't Pro-X supply a lot of OEMs with parts??
With ya here...

I ordered an 07'CR125 OEM cylinder Horrible void/casting flaw.

Had I been afforded the opportunity to inspect the cylinder firsthand prior to purchase, I'd have declined. Looks like a crack. Check it out.

Here is a pic:







EDIT: Also, more and more OEM Honda "Nuts and Bolts" are labeled U.S.A., not Japan. Good or bad? Time will tell. OEM Japanese stuff was really durable.

Removed seller reference to let them have more time to sort it out.

From what I understand, Pro X sells a fair amount of OEM parts in Pro X packaging. Usually Pro X is good stuff, but like anything, check it out first.
motokiwi
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1/16/2018 8:00pm
JW381 wrote:
Super interesting convo, love it, thanks for the input.
Thanks for asking an interesting question
JM485
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1/16/2018 8:49pm
I think a lot of the disconnect here is the different ways people are defining "profit". Are we talking profit based only on the cost of goods sold, like raw materials, machining time (labor and equipment depreciation), etc? Or are we defining profit after all expenses have been accounted for, even the more hidden ones like marketing, engineering, R&D, office/plant wages, possibly even building rent, the list goes on and on. After all of those costs are accounted for and subtracted from the selling price, I would bet margins are not quite as high as some have suggested. However, if we're talking just raw material and direct costs, then maybe that 400% profit figure is a little more realistic.

Just a thought, I'm far (read: very far) from an expert on this, but I do have a little bit of knowledge on this.
1/16/2018 10:33pm
JW381 wrote:
Super interesting convo, love it, thanks for the input.
Agreed... Good call starting the topic
1/16/2018 10:34pm Edited Date/Time 1/16/2018 10:39pm
KTM Group 2016 Financial Report states that 2016 gross profit margin was 30.6%. So from an accounting stand point, for every $10,000 in sales, they profited $3,060... meaning there was a $6,940 Cost of Goods Sold. Keep in mind this applies to ALL of KTM Group's revenue sources; bikes sales, merchandise, etc.

I did see in another article that in 2014, Harley Davidson earned 39% gross profit margin on their motorcycle line... so their cost for every $10,000 Harley was $6,100.

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