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Car Makers Used Software To Raise Spare Parts Prices (engadget.com)
An anonymous reader writes: Ever had the nagging suspicion that your car's manufacturer was charging outrageous prices for parts simply because it could? Software might be to blame. Reuters has obtained documents from a lawsuit indicating that Jaguar Land Rover, Peugeot, Renault and other automakers have been using Accenture software (Partneo) that recommended price increases for spare parts based on "perceived value." If a brand badge or other component looked expensive, Partneo would suggest raising the price up to a level that drivers would still be willing to pay. It would even distinguish parts based on whether or not there was "pricing supervision" over certain parts (say, from insurance companies or focused publications) to avoid sparking an outcry.
Ever had the nagging suspicion that your car's manufacturer was charging outrageous prices for parts simply because it could?
Suspicion? No. It's a well known fact. There is a reason car dealers have terrible reputations for ripping of their customers. Of course the markups on service parts is huge. Anyone who didn't know this is an idiot.
My day job is running a small manufacturing company that makes (mostly) car parts. I know what the markup is on the stuff we sell. As a crude rule of thumb you can take whatever they charge you and divide by 8 and chances are good that's about how much the company that actually made the part sold it for. My company makes wire harnesses and I've seen products that have maybe $5 worth of material content and maybe double that in labor and overhead being sold for north of $300. One of the sales reps we work with from a big distributor told me a story about how he saw a guy buying a harness for his car ahead of him in line at the dealer. He started laughing and when they asked him why he said "I sell every component that goes into that harness and you are holding maybe $4 in material". The sale price on the harness was $540.
Then no one would ever buy a Honda.
Also, companies charge different prices for the same part depending on which model it is for. A friend was a moderator at corvetteforum.com, and there were several parts that cost less if you ordered it for a Cavalier versus a Corvette. My friend had trouble with water leaking into his door after someone broke into his car, and he went through several power window switches. IIRC, the part for the Cavalier was half the price but the same exact part.
While it would reduce labor for many repairs, it would likely increase initial manufacturing labor costs and increase the number of SKUs to stock for spares (which increases costs for both the manufacturer and dealers). Large integrated harnesses can be built by (the cheapest?) suppliers and be installed "on the line" more quickly than a bunch of discrete wiring.
The manufacturer cares much more about initial manufacturing cost than later repair costs - by reducing the former they can either keep the difference (more profit per car) and/or sell more cars because their pricing is more competitive (therefore increasing volume).
While this decision likely increases the cost of insurance slightly, consumers don't look that closely at that aspect and it's quite possible that if the manufacturer passes on a portion of their manufacturing cost savings that will more than compensate for the increased labor costs of replacing a complicated wiring harness. Most cars (well, before soy based insulation at least) never have any wiring harnesses replaced and many cars that would need that done would have been totaled even if the parts and labor for replacing the harness were free (for example after a fire or flood).
Why is there an "insightful" mod and why isn't it "-1"? If I wanted insight, I wouldn't be reading