Production Cost of Making a Dirtbike

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1/16/2018 10:34 PM
Edited Date/Time: 1/16/2018 10:39 PM

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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Positively, absolutely 110% obsessed with anything MOTO.

1/16/2018 10:39 PM

F150Motocrosser wrote: KTM Group 2016 Financial Report states that 2016 gross profit margin was 30.6%. So from an accounting stand point, for every ...more

I gotta believe merchandise and parts are wayyyy above 30.6% which means bikes are on the other side of that number.

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1/16/2018 10:47 PM

oldandslow1 wrote:

IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL ...more

I used to make pentiums, cost to make about 35 bucks. Sold em for close to thousand bucks. Now that's a profit.

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1/16/2018 10:48 PM

tcallahan707 wrote:

I gotta believe merchandise and parts are wayyyy above 30.6% which means bikes are on the other side of that number.

Bingo

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Positively, absolutely 110% obsessed with anything MOTO.

1/16/2018 10:52 PM
Edited Date/Time: 1/16/2018 10:57 PM

fwiw, Cannondale went bankrupt trying to develop 1 motorcycle.
They spent over 20 million in R&D.
True that’s from scratch, but even $10 mil to R&D an all new model is a large per unit cost.
Easy to see why Suzuki can’t develop new RMZ’s.
Cost too much.

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1/16/2018 11:15 PM

F150Motocrosser wrote: KTM Group 2016 Financial Report states that 2016 gross profit margin was 30.6%. So from an accounting stand point, for every ...more

This guy gets it.

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1/17/2018 1:05 AM

Cost per bike is entirely based on how many they sell.

Total initial cost to design, buy tooling, buy materials, buy assembly equipment, robots, people, etc... we are talking hundreds of millions of dollars easily.

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2009 Kawasaki KX450F
2009 Kawasaki KX250F
2002 Suzuki GSXR 600

1/17/2018 1:23 AM

kzizok wrote:

I’m going with about $50 more than $300.

Yep, 'bout tree-fiddy.

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1/17/2018 2:44 AM

F150Motocrosser wrote:

Quite the loaded question, with so many variables. I'm sure someone more knowledeable than myself will chime in, but I'd ...more

For a company like Yamaha or Honda, they're likely doing their own castings/forgings, etc. With the size of those companies (and the number of parts being made), they can likely do it for less than what a supplier would charge. As companies get smaller (towards KTM, and then Beta/Sherco/TM) you'll find they'll be doing less steps, or using different processes that make more sense at smaller volumes.

For example, KTM might buy crankcase castings, but machine them themselves. Or they might buy pre-cut/pre-bent frame tubing and then weld and powder coat themselves (I doubt that one's true, but they're sure as hell not extruding their own steel tubing).

And then TM will look to machine ignition covers from solid aluminium, rather than cast from magnesium like the bigger companies do. Maybe the cost of tooling up a casting for a run of only ~100 parts is more expensive than just CNCing from billet.

An important thing to remember about Yamaha/Honda/KTM buying from suppliers is that the engineering departments will (should) specify every dimension, tolerance, finish, material, etc. for the supplier, and they'll have a quality department to make sure that the product they receive is what they specified. So the quality of the parts on your bike is still "Honda" quality or "KTM" quality, i.e. the bike manufacturer is responsible to you for the quality of the product they sell, regardless of where they bought it from.

Interesting side note: It looks like Yamaha tracks the part production process using their part number structure. So 33D-XXXXX-XX-XX might be a post-machining in house aluminium casting. 17D-XXXXX-XX-XX might be a raw in house casting. Maybe purchased parts are 9XXXX-XXXXX-XX. Photo I don't know about any other manufacture part numbers as I've only owned Yamahas since 2006...

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1/17/2018 4:06 AM

Not exactly what you asked but here is a site with dealer cost

http://www.seedealercost.com/products/category-models/index/id/48/productCategorySlug/powersports

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Avoiding JS7 threads since 3/7/17.

1/17/2018 4:14 AM

40acres wrote:

I can confirm without a doubt that this is not true. Perhaps in some very rare instances, but not a normal occurance. Company ...more

Tell that to me and my co workers $4,300 450's...

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1/17/2018 4:29 AM

Bosco wrote:

For a company like Yamaha or Honda, they're likely doing their own castings/forgings, etc. With the size of those companies ...more

Your post makes a lot of sense, but just to clarify, the first part of Yamaha part numbers design the model they were initially made for (17D 2010 YZ250F, BR9 2018 YZ450F, etc.), second part describes the part (M6 wide flange 20mm bolt, right side panel...), then the other parts specify the part versions (different material, more durable, different color, but compatible with the original)

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1/17/2018 4:31 AM

F150Motocrosser wrote: KTM Group 2016 Financial Report states that 2016 gross profit margin was 30.6%. So from an accounting stand point, for every ...more

Except that KTM doesn’t sell bikes for 10,000. The dealer does. So their sale price would be dealer cost, making actual production cost a bit lower. But otherwise I agree with your conclusion.

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1/17/2018 4:42 AM

YamahaJT1 wrote:

With ya here...

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

Had I been afforded the opportunity to ...more

I recall hearing something about this years ago on thumpertalk. ML or someone else in the know will hopefully chime in.
Because the manufacturers have so many skus they need to maintain for decades of models, they cannot maintain them all in house. The capital costs would drive the part prices sky high. At some point in the product lifecycle of a bike (let's say a 2008 crf450) , the manufacturer reaches a pre set time or profit indicator, they will sell the dies, tooling, etc needed to make non standard parts for that model to third parties.

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1/17/2018 5:07 AM
Edited Date/Time: 1/17/2018 5:07 AM

jtiger12 wrote:

I recall hearing something about this years ago on thumpertalk. ML or someone else in the know will hopefully chime in.
...more

Yeah, hard to say. This is a genuine Honda OEM cylinder purchased from one of the largest "motorcycle goodies" outfits.

Also, your position about the third party tooling makes sense. Honda just would have to stock them, not manufacture them. Honda certainly is NOT making $$$ "hand over fist" on 05'-07' CR125R cylinder heads!smile

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1/17/2018 5:09 AM

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 ...more

40acres wrote:

I can confirm without a doubt that this is not true. Perhaps in some very rare instances, but not a normal occurance. Company ...more

Cygrace74 wrote:

Tell that to me and my co workers $4,300 450's...

Tell me more about you and your coworker's jobs at Kawasaki Motors Corp., USA

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1/17/2018 5:16 AM

F150Motocrosser wrote: KTM Group 2016 Financial Report states that 2016 gross profit margin was 30.6%. So from an accounting stand point, for every ...more
Sheriff245 wrote:

Except that KTM doesn’t sell bikes for 10,000. The dealer does. So their sale price would be dealer cost, making actual ...more

I don't think it matters who the sales are to.... 30% GP margin is 30% GP margin, regardless. But this is probably a moot point to squabble over laughing As pointed out earlier, the fact that parts, accessories and merchandise is likely a 40-50%+ profit margin business, that says a lot about how much higher costs on the bikes are

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Positively, absolutely 110% obsessed with anything MOTO.

1/17/2018 5:26 AM

Production cost and what the manufacture sells it to a retailer are two different animals. Production cost is the actual cost of the bike, when the manufacture wholesale the bike they calculate in marketing, sales, r&d and so on. Then they need to make a profit. I would tend to think the actual production cost is lower than we think but after overhead and trying to show a profit for shareholders we arrive at a high sticker price.

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1/17/2018 5:29 AM

oldandslow1 wrote:

IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL ...more

IF YOU ACTUALLY OWN A BUSINESS AND YOU HAVE TO KILL FOR 14% RETURN, YOU HAVE WHAT IS CALLED A FAILING BUSINESS.

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1/17/2018 5:45 AM
Edited Date/Time: 1/17/2018 5:48 AM

oldandslow1 wrote:

IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL ...more

Donovan759 wrote:

IF YOU ACTUALLY OWN A BUSINESS AND YOU HAVE TO KILL FOR 14% RETURN, YOU HAVE WHAT IS CALLED A FAILING BUSINESS.

Nevermind, I re-read the post.
Carry on.

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1/17/2018 5:52 AM
Edited Date/Time: 1/17/2018 5:53 AM

Well I can pick up a 16 hold over rmz 450 at my local dealer for about 5 grand right now. And you know everyone is still making money on it.

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1/17/2018 6:18 AM

Not sure about MFG costs, but dealers typically make about 12-15% on a new bike, and 30-40% markup on clothing.

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Washed up Canadian ex-pro couch racer. Selling bikes for a living

2003 KTM 125SX
2009 KTM 450SX
2016 YFZ450R


1/17/2018 6:22 AM

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 ...more

kzizok wrote:

It’s called “just in time” inventory.

reded wrote:

Works really well, until it doesn't. Then shit hits the fan!

"Just in time" delivery is what I sometimes refer to as "don't expect it right away" delivery. Overall I think JIT stretches out the production schedules of everything which can be a big negative. It was one of those ideas that appeared some 30 yrs ago and took off like wildfire through the manufacturing industry.

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1/17/2018 6:30 AM

How about the mark up on plastic . Take for instance a whole plastic kit , 100 dollars or so for 5 dollars worth of plastic . I haven't studied every piece of plastic to determine if they use a hot runner system or other stuff that would add to the cost of tooling . I know some shops that only build tools will cost 5 times what a shop that runs the parts in house would charge for a new tool.

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1/17/2018 6:30 AM

OldYZRider1 wrote:

"Just in time" delivery is what I sometimes refer to as "don't expect it right away" delivery. Overall I think JIT stretches ...more

JIT was developed by the Japanese in the 70s, and I believe it still the core of Toyota's mfg business model

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Positively, absolutely 110% obsessed with anything MOTO.

1/17/2018 6:38 AM

oldandslow1 wrote:

IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL ...more

Donovan759 wrote:

IF YOU ACTUALLY OWN A BUSINESS AND YOU HAVE TO KILL FOR 14% RETURN, YOU HAVE WHAT IS CALLED A FAILING BUSINESS.

For the record I’m referring to net profit. The average McDonald’s in America cost 2 million to get going and the average profit is $154000 or 7.7%. Pretty sure those are considered a successful business.

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1/17/2018 6:48 AM

20-25% for cost of the actual parts and assembly of the motorcycle would be appropriate. A large part of my job is to help manufacturers all over the world in various industries and that is typically what i see. That is just the cost of the parts. Doesn't count fixed costs, marketing, R&D, distribution, etc. By the time all those things are factored in the numbers drop considerably. Profit is made in the volume. The costs are very different from what you would expect to see from a low volume boutique type product like a TM, etc. Anyone who thinks the actual motorcycle itself costs anywhere near what you pay is out of touch with manufacturing on a large scale.

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1/17/2018 6:55 AM

F150Motocrosser wrote: KTM Group 2016 Financial Report states that 2016 gross profit margin was 30.6%. So from an accounting stand point, for every ...more
Sheriff245 wrote:

Except that KTM doesn’t sell bikes for 10,000. The dealer does. So their sale price would be dealer cost, making actual ...more

F150Motocrosser wrote:

I don't think it matters who the sales are to.... 30% GP margin is 30% GP margin, regardless. But this is probably a moot ...more

Gross Profit is not Profit. EBIT or other numbers would be a much better indicator. I suggest people understand the financial terms being used before making assumptions.

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1/17/2018 7:09 AM

AZRider wrote:

Gross Profit is not Profit. EBIT or other numbers would be a much better indicator. I suggest people understand the financial ...more

I'm aware, hence gross profit, not net profit, not EBIT, not EBITDA, etc. Forgive me for trying to create a post that resembled at least a semi rational thought. Fuck it, we'll go with dude's 400% number. Stamp it. laughing

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Positively, absolutely 110% obsessed with anything MOTO.

1/17/2018 8:54 AM

oldandslow1 wrote:

IF YOU COULD GET 400% RETURN ON INVESTMENT THEN EVERYBODY WHO HAD MONEY WOULD BE MAKING MOTORCYCLES. I BET ON A 9000 RETAIL ...more

Donovan759 wrote:

IF YOU ACTUALLY OWN A BUSINESS AND YOU HAVE TO KILL FOR 14% RETURN, YOU HAVE WHAT IS CALLED A FAILING BUSINESS.

oldandslow1 wrote:

For the record I’m referring to net profit. The average McDonald’s in America cost 2 million to get going and the average ...more

I assumed you were. Not many people work from GPM that I know of when discussing their actual profit. And this point would be totally relevant, IF motorcycle manufactures sold anywhere close to as many motorcycles as McDonalds sells Big Macs... You're comparing a french fry to Filet mignon here.

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