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Originally Posted by wtwo3
"If it was cheaper for them they'd already be doing it" isn't a valid argument... that's not how companies work. You invest in studies designed to uncover potential opportunities and it then goes through a process of validation for approval. If everything that was cheapest was already being done there would be no room for efficiency gains at any company. You're basically saying BMW is already operating at max efficiency and has no room for improvement.
I'm not saying it IS cheaper, I'm saying I wouldn't be surprised if it is. Truthfully we don't have insider information on their sourcing, transportation and distribution costs, but you can bet they've conducted the break-even analysis for this proposal. I've worked in various manufacturing industries over my career and currently lead a department dedicated to supply chain optimization, so I have an idea of how much of an impact logistics and supply chain efficiencies have on overall COGS.
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You seriously wouldn't be surprised if a car company could make every single car fully loaded and have it cost them less money? Surely if this was the case one of them would have discovered this secret to success excepting a subscription model.
Looking at examples, for the last few years Porsche has the highest margins of any major automotive brand with the most customizability and no trim levels. Every model has literally millions of possible configurations. They make most of their profit from SUVs that are only slightly more expensive than those from other German luxury brands. If shipping, logistics, and supply chain mattered more than material and parts costs then they should be loosing tons of money. Clearly that's not the case. Maybe Porsche also saves money by not installing costly equipment on every vehicle. I personally dislike their pricing model too, but it clearly works.
Genesis has only a few trim levels and almost no a la carte options on any of their models. Being part of Hyundai, they're also extremely vertically and horizontally integrated even doing their own shipping and in some cases their own raw materials. Their pricing is nearly in line with Audi and BMW now and even with new cars currently having barely any manufacturer incentives Genesis is barely turning a profit. We don't need insider to data to see that there's more to profitability in the automotive industry than sourcing, transportation, distribution, and production line simplicity.
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Originally Posted by wtwo3
Absolutely it can be cheaper. If you're now shipping FTL as opposed to say, LTL or parcel due to maximized volumes tied to your main product line, there's a certain break-even point where shipping efficiencies begin to favor higher volume, regular ordering. I worked at a large manufacturing and distribution company where we conducted a study showing exactly that. That by maximizing truckloads we could actually reduce our logistics costs while simultaneously shipping more product. Think of it this way - by standardizing your ordering process and maximizing truckloads, you're sending less but fuller trucks as opposed to frequent, less than truckloads. This also ties into your forecasting - if you have greater forecast accuracy because your ancillary products are tied to your main product, it benefits your logistics costs as well as inventory costs.
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BMW made 433,810 vehicles in 2021. They're already operating at a scale where things like LTL and parcel are not even considered. Nearly every part they make is produced in the tens of thousands, hundreds of thousands, or even millions. The following numbers are examples, but if they go from ordering 100,000 adaptive cruise radars to 400,000 adaptive cruise radars they're not going to suddenly see a dramatic decrease in cost simply from volume. Increases in efficiency for a company of that size that come from improvements in engineering, technology, and logistics rather than scale.
A basic principle of an economies of scale graph is that it doesn't just keep going down forever. Eventually you reach constant returns where the price levels out. After that it's diseconomies of scale where supply is overwhelmed and the cost per unit starts to go up again. This is true for everything. We've seen countless times in the last couple years that big supply chains can clearly get overwhelmed at which point it makes sense to cut features and reprioritize. There's no way every single part BMW manufacturers or orders is still in economies of scale in terms of manufacturing and installation.
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Originally Posted by wtwo3
As for individual colors - yes I agree there's many components that go into pricing for it - perhaps even profit. But I wouldn't be surprised if disruption to supply chain is the #1 cost associated with it. If BMW was actually making a healthy profit on individual colors, they'd advertise them much more openly. Outside of this forum, few people even know what an individual color is, and most don't even know you can special order a car. Majority of people still assume your only method of purchasing is off the lot and your color selection is what has been ordered by the dealer for inventory (obviously there's some change happening in the current climate).
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You also have to consider that outside of enthusiasts the idea of paying $5000 for a different color car is insane. I am personally quite willing to compromise on color so I don't really get it either. Even if individual colors are hugely profitable it doesn't make sense for them to spend money advertising something that barely anyone is going to get. Also my local dealership has a huge wall display for BMW individual so it's not that much of a secret.
I really don't see how it could be justified that BMW equipping cars with every feature then blocking them behind a subscription could possibly reduce prices for consumers. I also can't think of any industry at all where the most profitable company only sells a single variant of their product, so for that to be true for something as complex and expensive as cars seems farfetched. This is clearly a cash grab and not some amazing achievement in efficiency that no other automaker in the history of mass production has ever thought of. I think this unbecoming and anti-consumer behavior from a so-called luxury brand should be called out, not defended.
On a side note, I really don't want to come across as rude or anything because I'm enjoying this discussion! You bring up a lot of points I didn't fully consider.