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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.
See for example Hillier and Liebermann, Introduction to Operations Research, "Inventory Theory" (chapter 18 in 8th edition) This is basically managing the components of the inventory model to where the value of filling the order yields maximum profit. It might be really annoying (like when I got charged $1500 for a replacement wiring harness for my truck), but it should not be a big surprise to anyone who thinks about this.
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.
So?
Are we saying that companies cannot charge what the market is willing to pay for their products now? In most cases, I hope not.
Where I get the feeling of outrage, why should I pay that much for a part for my car? I'm not opposed to collecting $300/hour for labor or selling that rare baseball card I found in the attic for a tidy sum. How's that different except that I'm the one collecting and not paying?
Companies should be able to charge what ever they can for their products and let the market chips fall where they may. As long as they don't collude with their competition, have at it. Just figure that consumers will eventually figure out what you are doing and you will have to live with the PR backlash.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
A Jeep to save money? Pretty much everything breaks on a Jeep.
Damn those silly algorithms and expressions organizing themselves in a way to make extra money for a completely uninvolved party who happened to deploy them. The nerve of them!
The practice may be automated now, but it's been going on for literally decades. Even as far back as the 1980s and 1970s, you could swap parts between Corvettes and other cars. The part numbers would be different, but the equipment itself would be functionally identical. Funny how the part for the Corvette always cost several times as much; I'm sure it's purely because there were fewer Corvettes on the road (than, say, Citations or Skylarks), so the manufacturing costs were higher, right? Riiiiiiight
The price of a thing is always cost plus, where "plus" is defined by what the market will endure. If you can keep the cost hidden (see also: US healthcare) or obscure the availability of a thing (nearly-identical parts with different labels, with only one label approved for your application), the market will endure a hell of a shafting until the house of cards comes down.
Pining for the days when The Glorious MEEPT!!! graced SlapDash with his wisdom.
That's interesting, because when different brands share the same platform with a huge parts overlap under different part numbers, you can save a fortune by cross-checking what are identical parts. For example, Porsche Cayenne, VW Touareg, and to a large extent Audi Q7 are largely the same, apart from trim and some of the engine options. But you can pick up things like air suspension components for a Touareg for a lot less than the same part for a Cayenne, even though the only difference is the part number. This is far from being an only example, too.
Nissan Frontier - mice or squirrels damaged the wiring. The labor cost was even more than the parts cost, $3700 all told. Fortunately my insurance covered this under Comprehensive coverage (less my deductible, of course.)
Ahh so the engine harness? Then that actually wasn't that outrageous a markup compared to some I've seen. We make and sell harnesses like that and they typically cost between $250-700 to make depending on complexity. I'm not actually surprised the labor cost more than the part. Pulling some of those things out and replacing them is a HUGE pain especially if they go through the firewall and under the dash.
Of course I've had an entire engine replaced for about that amount of money so...
There's a huge difference between outlawing collusion and price fixing and letting the government control prices. Go find somewhere else to post your ignorance.
APK quotes people (including myself) without context and should not be trusted. Just thought you should know.
You know that super annoying person who knows nothing of the industry suggests a simple solution? Hi, I'm super annoying.
Why are there huge wiring harasses in the first place? Wouldn't it make more sense to have many smaller harnesses that are easier to replace small sections of without having to disassemble half the car?
The story here is actually that some highly-skilled, white-collar jobs got automated out of existence.
Figuring out what the traffic will bear has been going on since forever. Used to be done by people, now software automates it and maybe takes more factors into account.
I'm not in the industry and know nothing, but my guess is it's because it's simpler logistically during manufacturing to have an all-in-one that is provided by a single vendor.
Are Honda's expensive to maintain? Mine has seemed fairly reliable. As I look at my spreadsheet there's only a handful of the costs that are replacement parts: 3% of the total cost of the car. (not including regular maintenance like a timing belt changes)
As I compare it to the cost of our 4Runner it is more expense; The Accord costing about $270/mo vs $191/mo but we've only had the Accord for 8 years vs 15 years for the 4Runner. Check it out yourself if you're curious: https://docs.google.com/spread...
BTW: this is what it looks like if you try to "drive the car until the wheels fall off".
A while back, Toyota claimed I needed a new exhaust pipe for my Echo - $2,900 for the part alone. Quote from a reputable 3rd party repair shop: $400 including labour. It was just a bent pipe after all.
Final cost? Free. I took it into a repair shop and he just welded over the holes, used old wire hangers. It took him so little time he didn't bother charging me.
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
This is changing with soy now getting used in wiring harnesses. It is insulation with rodent food. It gets eaten anytime rodents get access to your sitting car.
Makes me wonder what automobile make is the best for TCO, over the long haul.
Generally speaking the one with the cars that break down the least. My guess would be Toyota would be pretty high on the list of best TCO. They tend to top most reliability surveys.
Some fools buy vehicles other than actual jeeps (Wranglers these days) from jeep. The Cherokee is pretty awful, in a league with the leather covered, castrated Land Rovers sold in the USA.
Even actual Jeeps were terrible during the AMC days. Some had Renault (spit) parts. But those were just bodies to install V8s into. None of the driveline components were worth keeping.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
This is why you look at car repair cost estimates before you buy your car, and use aftermarket parts when you can.
Then no one would ever buy a Honda.
Uh, let's keep in mind that only 10% of the automobile-driving population still knows how to use a wrench under the hood, so the cost of maintenance is essentially a non-factor. They're all expensive to maintain or repair because the overwhelming majority of car owners are paying someone else to do the maintenance.
Are Honda's expensive to maintain?
As a general proposition they're generally pretty affordable to maintain. They're generally pretty high on the reliability charts and speaking from first hand experience the maintenance on them is generally pretty reasonable in comparison to other makes. I've got a Honda with around 180K miles on it and I expect to get to 250K baring something odd happening.
You are suffering from learned helplessness. Fix yourself. Change your oil, once in your life, anybody can do it. Watch a Youtube video. Yes, your time is worth more, the knowledge is worth still more.
You don't have to be a mechanic to know you've gone 5k (10k for synthetic oil) miles and need an oil change. That's a tell, you have mentally checked out and 'punted' to your mechanic. Do you also ask your barber if you need a haircut? Do you ask Microsoft if you should upgrade to the latest Windows? Intel if you need a CPU upgrade? Stock broker if you should move your holdings around? Shyster if you should sue someone (for $5 in damage)?
You have to be a not incompetent shade tree mechanic to find an honest professional mechanic. If you know nothing, you are in the position of the PHB counting lines of code. Best option is a reference from a mechanic you can trust, but I've observed that mechanical incompetence runs in social circles. If you can't wrench, the odds are high that _nobody_ you know can.
First sign a mechanic isn't completely honest: Works for a stealership. He knows that even if he's completely honest, the rest of the process is crooked, and he's OK with that (e.g. He replaces good parts, cause that's what the 'writer' wrote.)
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
The harness is easier to install during production if it has as few connectors as possible.
Speaking as someone who makes harnesses for OEMs, minimizing the number and variety of connectors does not appear to be a substantial concern of the automakers. You would not believe how fragmented the wire harness industry is.
Cars made in the last decade are increasingly prone to failure due to environmental regulations which make engine tolerances narrow. A V8 can take a lot of mishap whereas 1.0l 100bhp cannot. That said, Honda is one of the best engine builders despite pricey parts.
If you believe what you just wrote, you would be absolutely amazed how often the difference between parts, even across vehicle manufacturers, is simply a model number and badge. A ton of parts are made by 3rd parties and sold to multiple car makers. If you read a bit more of the discussion on this article, you'll find numerous examples, but there is a fair bit of behind-the-scenes coordination to ensure that part numbers don't match (and aren't even similar) in these instances, even when part numbers for other parts do match (often despite being completely different parts) and can only be told apart by visual inspection or looking at the OEM badge on them.
APK quotes people (including myself) without context and should not be trusted. Just thought you should know.