Motorcycle dealers make no money from bike?

cbcanada

cbcanada

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Ahead of the bike shows coming up I wanted to touch up on this subjects..

So dealers tell us they make very little money from selling bikes..

Then can some one explain to me the massive price difference between a 250 cc and a 1000 cc bike?

Is there that much difference in raw material? steel and aluminium trade for nothing in the market. So that can't count for the differences. The difference in raw material weight Is less then 200 pounds which translates to no significant dollar value.

Or

Does it take $5000-$8000 more labor to put together a 1000cc bike? Pretty much same engine and parts , slightly bigger.

My dad worked (retired) at a high level for an automobile manufacturer. He said a car roughly cost $6000-$7000 to make, that car was selling for $35,000, so they made money...

Every other business in the world that sells a product makes money.. At significant amounts.

I know of no business model that can survive without making significant return on investment.

So either bike dealers are morons compared to car dealers and like to make no money or we are lied to?

I am sure they make money on parts and labor and service. But in the business model they proclaim , the revenue generated from the service and parts would all be dumped into the purchase of the bike from which they claim hardly any revenue. That would result bankruptcy

For example GP bikes ... Do they take the $25,000 profitthey make from parts and service and buy a $25,000 panigale to only sell it for $1000-$2000 profit?

What about the overhead of employees and hydro and land tax and so on. The advertising...

I guess the only way for us to believe motorcycle dealers make money on a bike is if some one from the motorcycle industry holds a news conference and says "we make money, we are not selling for pennies on the dollar" AND Ofcourse CNN or city tv reports it. :-)

So let's hear the Input of the Gtam community and hopefully we can have an interesting discussion






"If i was educated, I'd be a damn fool"
 
The formula for cars was printed in Consumer Reports years ago. Basically, it was what a dealer will settle for in a sale. That was the manufacturer cost of the car plus 10%. So you can expect that a typical dealer will make 10-15% commission on a car sale depending on the customer's ability to beat him down in price.

Typically any retailer will mark up a retail item 100%. That is the golden rule for retail. Everything you see at Wal-Mart cost them half, or less to buy. They will have to absorb the cost of distribution, labour etc. with that but that's it. I expect that the motorcycles you see in dealers are at least a 100% markup over cost for the manufacturer, with the dealer getting about 10%. Realistically, that is not much.
 
Agreed. The dealer markup is between 10 and 15 per cent, that's consistent for almost all brands. Whether the dealer wants to move older stock, last year's bikes that they are stuck with, or strange option combinations can determine the actual sell price. Ordering a bike is the most likely way to pay the most, although there are sometimes opportunities even in that situation. Used bikes are a far bigger opportunity for profit, with less investment.
Some dealers will sell much closer to their cost price, giving them higher volume and another service and parts customer, this goes for new as well as used.

cbccanada, I understand your logic of a 1000 cc bike costing the same as a 250. The only flaw in that is the quality and durability differences required in the bigger bike. Engine components and drive train parts are stressed more, there's more electronics, and so on. If your car theory was correct then a jaguar and a fusion should cost the same. There are also design, engineering and testing costs that have to be spread over the model run.
 
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Yes the raw materials of a bike are "relatively small" in comparision to the retail value charged for the bike. BUT that is obvously only a VERY small portion of the overall costs. Once the raw materials are purchased then someone has to machine those raw materials into parts, (so labour and all the associated costs, heat hydro, business taxes etc etc etc). Then the machined parts are sold to the manufacturer, (undoubtedly with a profit margin). then the manufatcurer has to pay to have those parts assembled and all their costs, ps of course a profit margin built in. Then the dealer has to pay someone to ship the bike to them, with a profit margin for the shipper. Then the bike has to be inspected and prepped for the showroom floor. Then the dealer has all his costs, Labour, building, heat, hydro, bank fees, (including the operating lines of credit to buy those bikes with), taxes etc etc etc.

So in the end yes they make a profit, BUT it is no where near what they make on parts and service, But even on their parts agan each step along the way have to have their profit margins built in.

So IF a dealer after paying the sales commission etc walks away with say 10%, On a $15,000 bike that is only $1,500. So dealers aren't getting rich on bike sales alone unles they were EXTREMELY high volume and were selling say 200 bikes per week. Don't forget to account for the fact that here in our climate they basically sell NOTHING from Oct till Mar, They still have to keep the employees employed, and the lights on, and the driveway ploughed etc..lol. But obviously delaerships are profitable, otherwise they wouldn't exist. But most of that comes from other revenue tools than bike sales. Also don't forget that when a shiny new bike has an issue it is covered under warranty, dealers don't get paid out at nearly the same rate for warranty work as they do from you and I.
 
Regarding the 250cc versus 1000cc ...

Years ago, due to licensing restrictions in Japan, all of the Japanese manufacturers made 4 cylinder 250cc high-revving bikes to fit that licensing category. In that situation, yes, the parts count for a 250cc engine is pretty much the same as that of a 1000cc engine, and the engineering, tooling, machining time, assembly time etc are pretty much the same; the difference in the cost of the raw material is insignificant. Then the licensing changed, making the 4 cylinder 250cc bikes redundant, and the high cost of manufacture is why those 4 cylinder 250cc bikes are gone and won't return.

Now, take another look at those 250cc bikes in the modern era. The 1000cc bike has a 4 cylinder engine. The 250cc has one or two cylinders. Simpler engine. Simpler throttle bodies. Simpler exhaust system.

But then there's all the little stuff. The 1000cc supersport is in a premium market segment. It demands premium suspension, traction control, quick shifter, etc which are absent from the 250cc bikes. All that stuff costs money. And ... The 250cc (now 300cc) segment has fairly large production volume worldwide. The 1000cc supersport market is tiny by comparison. High production volume drives costs down. Honda Motor makes somewhere near 15 million motorcycles per year. The number of CBR1000s within that total is a rounding error. It is one of their flagship models that is intended to draw attention to the brand, but the 250cc and below bikes are what sell in enormous volumes worldwide.
 
Roadghost said:
I expect that the motorcycles you see in dealers are at least a 100% markup over cost for the manufacturer, with the dealer getting about 10%. Realistically, that is not much.
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How is that not much? With the whole production series of events taken into account from mining raw materials out of the ground right thru to the bike rolling off the dealers lot what is the dealers investment in effort, time and money percentage wise? Do dealers think they are an employment agency where everybody else does the mining, prototyping, engineering, manufacturing etc and they slap a 50% profit for providing a storefront? Depending on business climate he may need well over 10% to stay in business or make a killing at 5%.
 
Roadghost said:
I expect that the motorcycles you see in dealers are at least a 100% markup over cost for the manufacturer
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100% on what planet? Manufacturers are lucky to see a 10% return on each bike. If a dealer marks up a further 10%, everyone walks away VERY happy. Margins are tight.
 
Lee Ioccoca said 5-6% in the auto industry is a good year. That doesn't account for tax shenanigans of course.
 
The higher end SS bikes have a lot of engineering in them. The cost of that engineering R&D and even some of the racing programs is spread out over all the bikes made, this also drives the prices higher. Also, as others noted better suspension parts, better materials, more materials all factor in.

The 250cc bike just don;t have the same costs, the engineering is also trickle down.
 
All stores, bike stores included, make money on accessories. I know that the markup at The Bay and other big box retail stores is in the 250+% range. This can add much needed profit for the store. Also, 60% or more of yearly sales are at Christmas, with other blips including back to school and Mother's Day. Maybe for bike stores this is different, but for regular stores a botched Christmas means starving for the rest of the year or death. Retail is very cut throat, that is for sure.
 
inreb said:
How is that not much? With the whole production series of events taken into account from mining raw materials out of the ground right thru to the bike rolling off the dealers lot what is the dealers investment in effort, time and money percentage wise? Do dealers think they are an employment agency where everybody else does the mining, prototyping, engineering, manufacturing etc and they slap a 50% profit for providing a storefront? Depending on business climate he may need well over 10% to stay in business or make a killing at 5%.
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Can't say I'm an expert on this topic. I only know what I have read. But... how many bikes do you think a dealer will sell in a month, and how many does he need to sell to survive as a business? We're not talking about who gets the credit for building the bike. The small topic of market realities and cost of maintaining a business is involved. A manufacturer may *deserve* more profit after it covers its costs, but if the dealers are shutting down (and many of them are right now) it won't sell many bikes. If a dealer sells five $15,000 bikes in one week, @10% that's like $11500 gross. Certainly not enough to employ all the people, pay the rent and the advertising. What are the chances of selling five bikes a week in October? November? January? Merchandising and service have to keep them alive I would guess.
 
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You cant make sweeping comments on margins at retail, saying Sears is 250% and everything in retail is 100%. Dozens of products have different margins in different stores. I spent a decade in retail as a buyer and in sales, the margin on a jacket, a cordless drill and a pc on 2x6 lumber is about 150% different.

I've never sold motorcycles but It wont be very different than any other sale, you'll have ie: 250 dirt bike, audience has no options on accessories, there is 5 good manufactures and all selling in the same market. Margin is XX. Then you have a flagship model, options into the thousands and dealer installed accessories (ding,ding,ding) margin can be very lucrative. Gain a percentage on add on warranty, financing kicks and manufactures rebate to the dealer if he's moving dog models and its probably not awful.
 
Roadghost said:
Can't say I'm an expert on this topic. I only know what I have read. But... how many bikes do you think a dealer will sell in a month, and how many does he need to sell to survive as a business? We're not talking about who gets the credit for building the bike. The small topic of market realities and cost of maintaining a business is involved. A manufacturer may *deserve* more profit after it covers its costs, but if the dealers are shutting down (and many of them are right now) it won't sell many bikes. If a dealer sells five $15,000 bikes in one week, @10% that's like $11500 gross. Certainly not enough to employ all the people, pay the rent and the advertising. What are the chances of selling five bikes a week in October? November? January? Merchandising and service have to keep them alive I would guess.
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I probably know less than you but always find the Jewish type philosophy curious in that their input to product development and manufacture is essentially percentage zero but want to resell it at percentage max. So, to take 10% on a $20K product......what's next 6% on a 2 million$ home?
 
inreb said:
I probably know less than you but always find the Jewish type philosophy curious in that their input to product development and manufacture is essentially percentage zero but want to resell it at percentage max. So, to take 10% on a $20K product......what's next 6% on a 2 million$ home?
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Jewish type philosophy, eh? That's a new one...
 
10-15% markup from cost to full MSRP is pretty standard, for both cars and bikes (cars for sure, it's been a while since I worked at a bike shop). That's at full MSRP, but how many people pay full MSRP? It's not uncommon for cars to get sold at bare cost, or even below, to move inventory and hopefully make the profit in other departments. The salesman's pay accounts for 20-30% of that profit, if not more. The front end numbers are pretty damn slim, no matter how you look at it. The back end (that guy you see to setup financing, purchase extended warranty, etc.) is much more lucrative, figure at least a 100% profit margin on those services. It's very common to make 2-3 times the profit (sometimes more) on the back end than the front. That's why the F&I managers (the financing/extended warranty people) are some of the best paid among all dealer staff.

There is more money in parts and accessories, notice how the most successful shops (GP, Rider's Choice) have the biggest accessories departments? Don't remember exact profit margins, but I would expect them to be in the range of 50-100% depending on item.

Service department is another area of profit. don't know about bikes, but car dealerships are somewhere in the 70-80% range (retail labour - tech pay).

Of course, there's huge overhead costs that bite into all the above mentioned profit margins. Rent/maintenance/advertising/employee costs/inventory costs/etc.

If you calculate the above, it's easy to see why GP bikes is so successful. They are hitting hard in each one of the above areas.
 
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crankcall said:
not new at all, anti-Semites have been around since the beginning of recorded history.
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While this may be true the comment you're referring to isn't anti Semetic or pro-regular folk.
 
inreb said:
While this may be true the comment you're referring to isn't anti Semetic or pro-regular folk.
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Your post is very difficult to decipher, but what I could gather is it implied some sort of negative business concept, and you tacked on Jewish to the heading. Am I on the right track? Or did I completely misunderstand what you were trying to say?
 
I have been torn between buying a new ZX6R or a used one... so I went to a few dealers (3 to be exact), looking to see what kind of prices I would be looking at if I wanted to buy a new one.

I don't know if I'm being crazy, but I was never really met with enthusiasm when looking to buy a new bike... like everyone was pleased to give me information but no one was really trying to "sell" it... compared to when I have been looking for cars... hell even when I went looking for a new mattress I had people actively trying to sell the product to me.

So I don't know if that's indicative of whether they make good profits on bikes or not, it's definitely something I've noticed though.
 
TiburonJA said:
I don't know if I'm being crazy, but I was never really met with enthusiasm when looking to buy a new bike... like everyone was pleased to give me information but no one was really trying to "sell" it...
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I've noticed the same. Zero aggression from salespeople. Does seem to indicate that margins are crazy low on new bikes.
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