In the case of SUVs, it’s not primarily the oil lobby, it’s car manufacturers. Put simply, they get to charge way more than the extra materials costs, for a “premium” vehicle. They’re making bank out of this shit.
Yeah, “cost plus” pricing strategy (link) means that you make a fixed percentage of profit. When you sell a vehicle for $200, you make $20 in profit (at a 10% markup rate); But if you sell a $400 vehicle, you can make $40 in profit. It’s crazy to me that they’re not just selling the same $200 vehicle for $220 to make $40 profit ($180 manufacturing cost), but that’s apparently the world we live in: People accept that companies can make more profit on higher-cost items.
It’s not the same markup rate for a higher priced product. It’s a higher markup rate. Crossovers in particular aren’t much bigger than sedans and wagons. It’s only actual SUVs with off-road equipment (lockable diffs, 2 speed transfer case, etc) that cost significantly more to manufacture than regular cars.
In the case of SUVs, it’s not primarily the oil lobby, it’s car manufacturers. Put simply, they get to charge way more than the extra materials costs, for a “premium” vehicle. They’re making bank out of this shit.
Yeah, “cost plus” pricing strategy (link) means that you make a fixed percentage of profit. When you sell a vehicle for $200, you make $20 in profit (at a 10% markup rate); But if you sell a $400 vehicle, you can make $40 in profit. It’s crazy to me that they’re not just selling the same $200 vehicle for $220 to make $40 profit ($180 manufacturing cost), but that’s apparently the world we live in: People accept that companies can make more profit on higher-cost items.
It’s worse than that actually.
It’s not the same markup rate for a higher priced product. It’s a higher markup rate. Crossovers in particular aren’t much bigger than sedans and wagons. It’s only actual SUVs with off-road equipment (lockable diffs, 2 speed transfer case, etc) that cost significantly more to manufacture than regular cars.