FROM CONCEPT TO DEALERSHIP
Making a car, from start to finish, is an expensive, extremely complex process
When you buy a new vehicle, you’re paying for the direct costs of its construction: The steel, the rubber, the labour. But you’re also paying for its development, and it’s a long, complicated, and expensive journey from first sketches to the showroom floor.
While designing and building the car is time-consuming and pricey enough, there are numerous other factors — setting up assembly lines, contracting suppliers, and advertising — that add to the cost and complexity. Once an automaker has done its market research and determined what type of vehicle it’s going to build, the process begins.
It’s a balancing act between designers and engineers. Even the best-looking vehicle won’t succeed if its occupants aren’t comfortable, or if the design is too radical for mass production on an assembly line. Much of the design work is done on computers, but virtually all automakers still make full-size clay models because they provide a perspective that computers can’t match. Models also have to be made for wind-tunnel testing, because aerodynamics play a large role in fuel efficiency. Each time the design is tweaked, there’s more time and money.
The interior design requires extensive testing for ergonomics and usability. The studios must decide on materials for the seats and panels, and determine if they’ll stand up to daily use.
Using common components saves money, and automakers incorporate them wherever possible, such as sharing platform designs, engines, transmissions and suspension parts between vehicles. An automaker will design different exterior or interior components to distinguish between its brands and models, but if a part is hidden and performs the same way on every car, such as window motors or lock mechanisms, it’s common to use the same one on every vehicle.
Not only are vehicles extremely complex, but they have to work properly in extremes of weather and road conditions. Prototypes and pre-production vehicles undergo testing in laboratories and at outdoor tracks, racking up the equivalent of millions of kilometres. If any issues are found, including anything from component durability and water leaks, to squeaks and rattles, it’s more time and money to fix the problem. In addition to internal company standards, the vehicle must also be tested to meet government standards for safety and fuel efficiency. Of everything that goes into creating a vehicle, testing and validation usually account for the majority of development time and cost.
Many (if not most) of the vehicle’s components are made by outside suppliers, and these companies are brought on board early in the development process. Any all-new components must go through the same process as the vehicle itself for design, testing, and production feasibility.
The automaker even works with tire companies to source the right tires. In a few cases, especially with higher-end sports cars, tire manufacturers may create a new tire specifically for the car and work in conjunction with the automaker’s engineers to optimize the combination of tire and suspension for better handling. The assembly line has to be set up for the all-new vehicle, and any parts the factory makes — such as body panels — will require new stamping dies in the presses. Factory workers have to learn the jobs on the line, and time studies are done on each task to see how it’s done and how long it takes.
Marketing materials have to be created, and the owner’s manual has to be written and printed. The vehicle has to be introduced to dealers, and not just on the sales side.
Repair and warranty procedures have to be determined, tested, and written up, replacement parts have to be stocked and catalogued, and if the vehicle has any new technologies, technicians have to be trained to repair them. The marketing department introduces the vehicle to the press, and works with agencies to create advertising campaigns.
Depending on its complexity and how much it shares with other models, an all-new vehicle can take as long as five to seven years from that first idea to customer delivery. And the costs are astronomical: To design a “cleansheet” engine or transmission — meaning one that’s completely new and not based on an existing design — can cost between $500 million and $1 billion when all of the engineering, prototype development, and testing and validation is done.
All of that has to be considered when the automaker determines the vehicle’s suggested retail selling price. Those huge development costs have to be amortized over the number of vehicles it expects to sell, but fixed costs also have to be taken into account. Making a small vehicle isn’t that much cheaper than making a big one. The difference in extra steel or bigger tires is minor, but such costs as electricity and heat for the factory, wages, building maintenance, taxes, and other overhead expenses are the same for both.
Automakers need economy of scale, selling enough vehicles to cover those huge development and production costs. It’s not easy, and it’s why startups such as Tesla take so long and spend so much before showing any profit. If you think your car is expensive to buy, that’s nothing compared to what it costs to build. Driving.ca
It’s not easy, and it’s why startups such as Tesla take so long and spend so much before showing any profit.