Quote:
Originally Posted by Matteo88
i get it but your numbers are very convenient for your example :P
put a lower cost and higher profit on 6MT and it makes the case to price the 6MT lower and therefore do higher volumes... i'm arguing that by taking away the lower cost benefit of the 6MT, or better said, by offering the 8AT as a *no cost* upgrade, BMW is giving customers an incentive to go for the 8AT over the 6MT. as such, 8AT volumes/demand go up and they conclude "well, customers are just demanding more automatics", but is that really the case or was an incentive given to customers to opt for the more expensive option at no additional cost?
there's something similar with the xdrive vs rwd example: here in canada xdrive is a $2700 option. however BMW finance currently puts a 57% residual on a 340i xdrive and a 52% residual on a 340i rwd. that 5% better residual more or less negates the higher cost xdrive would command when it comes to the monthly payment on a lease. what customer, if offered *free AWD* wouldn't opt in? well, me, for example, but couldn't we also look at it as BMW having raised the price on RWD 6MT models to equal that of 8AT xdrive models?
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yeah i know, i tried to keep it simple lol.
the fact is that you cannot make a profit on something that doesn't sell, and it's near impossible to make up for your losses by raising the price.
typically you will take risks and put more aggressive deals on things that sell better. so taking from your example, in my area i couldn't get a deal on a rwd 4 series. They felt like they don't sell here, so there's no reason to cut a deal because 1. it's a new order vs something sitting on their lot 2. they don't want to get stuck trying to sell a vehicle that they can't move quickly after my lease is up and 3. They know no one else in the area will be willing to cut me a deal either. However, they will put good deals on cars that they know will move quickly because the volume will make up for slightly less profit per car.
you can't just saturate the market with cars that don't sell, or raise the price on cars that have less desirable options to make up for the direction that your market is going. your consumer sets the value.