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.
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.