Having worked in manufacturing and manufacturing consulting for 40 years, as well as teaching manufacturing engineering at the university, I'll throw in my $.02.
One of the most challenging tasks facing any manufacturer is to know definitively how much it costs you to make something. Various cost accounting methodologies have been invented to isolate and assign costs to products to determine what the "actual cost" is for a product. With Polaris making a wide range of products, it wouldn't be unusual for them not to know exactly what they have sunk into each machine, unless they are using pure "activity based costing" The reason this is so challenging is that beyond the material and labor costs there are a whole host of costs which have to be born by the product. These costs known as "burden" consist of heat, lights, energy, non manufacturing staff (administrative), taxes, insurance, warranty, waste, theft, miscellaneous supplies, not to mention the cost of supporting other products that are "losers" and nobody has figured out what the losers are. The list goes on and on. Multiply that across all the products that Polaris makes and you get an idea why it might be anyone's guess what it costs to make the product. In fact one of the most prized skills a company can possess is the ability to know how much they are spending on a product. It is not uncommon for a company of any size to have a "bean counter" assigned to each product who spend 100% of their time analyzing how much it costs to build a product. Product management meetings often consist of product managers arguing over how much of the "burden" their product is going to bear. Typically though, material costs can be as high as 50-70 percent of the cost of the product, while labor costs can be as low as 3 to 18% depending on the product and industry. So in my opinion, maybe nobody know how much it costs to make a RZR and it's just dumb assed luck that they charge a price which allows the company to pay the bills and a return to the stock holders. But then again, maybe the RZR is a money sink and it's really the motorcycle that is paying the bills. Who knows?

 

Arapeen, in my humble opnion you are right on the money. There is a huge amount of variables in product costing.

 

I was in manufacturing of paint for a while, generally it was around 50%. dealers would get anywhere from 20% to 30% off depending on their volume, so as a general rule the manufacturer tries to see a 20 to 30% profit by selling to its dealer network.

 

THis is why there is sometimes a huge difference in advertised prices, and actual sale prices. Some dealers are willing to make very little on the sale price of the vehicle, and to get the accessory sales, and service to make up for it. Plus the more volume you do as a dealer, the more percentage off you may get from the manufacturer.

Also, financing is where most of the money is made on any sale, this is how most automotive dealers make their money.

 

My dealer claims he makes less than 200-300 bucks on each quad but being such high volume they move a ton of units as well as very good prices on services and aftermarket goods. They live by the high volume. I know the last Saturday I was there they sold or had customers picking up 20 quads or side by sides in an hour

 

I would bet they don't make nearly as much profit selling a 570 than an xp. They are probably close in $$$ in production costs. The thing costing more would be shocks but they get them for cheap compared to consumer

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Good stuff! I like hearing people's thoughts and opinions. Keep them coming

 

My dealer made approx $725 off me. Out of that, they had to pay for shipping and setup of the machine. I don't know how much they get charged for shipping or how much they pay the workers to bolt up the cage and connect the battery.

I saw the actual dealer invoice of what poo charged the dealer. This included any rebates.


I haven't a clue of what it cost poo to make a machine, but in my mind they sure as heck ain't losing $$$ on atvs or SxS.

 

These rzr's are pushing $20k. You can get a lot more new automotive value these days for $20k. No one can tell me that you can build a complete car with all the federal safety requirements, windshield, air bags, power windows, locks, seats, mirrors, bluetooth radios, etc. etc. and that production for car = same production cost of rzr ????

Forget about it. My guess is there's probably about 30-40% of MSRP is actual production / manufacturing costs. NO WAY it could be over 50% of MSRP. NO WAY.

X 2.....

My dealer made approx $725 off me. Out of that, they had to pay for shipping and setup of the machine. I don't know how much they get charged for shipping or how much they pay the workers to bolt up the cage and connect the battery.

I saw the actual dealer invoice of what poo charged the dealer. This included any rebates.


I haven't a clue of what it cost poo to make a machine, but in my mind they sure as heck ain't losing $$$ on atvs or SxS.

Please tell me you don't believe that.....!! :rofl3:

 

One thing that hasn't been mentioned, but is probably more true in the automotive world, is the additional burden of warranty work. At one time, I had a good source tell me that a new F150 that sold for around $23k only cost about $8k to build. What that cost entailed, I'm not sure, but I figured it was pretty close to real manufacturing costs. The rest goes to all the additional crap that goes with selling products. Marketing, dealer incentives, insurance, warranties......etc.

So, I guess the REAL cost of building one is yet to be determined. Like someone said earlier, look at the stock dividends and that will tell you how far off production "costs" are from sales.

 

I wish I would have bought some Polaris stock in 2009 at $8 per share...
or even 1 year ago at $75 per share...

"July 23 | Tue Jul 23, 2013 7:24am EDT
(Reuters) - Polaris Industries Inc reported a higher second-quarter profit on Tuesday and raised its outlook for the full year, citing strong sales of its all-terrain vehicles and other power sports products in North America.

The Minneapolis-based company, which also makes snowmobiles and motorcycles, said it earned $80 million, or $1.13 a share, up from $69.8 million, or 98 cents a share, a year earlier.

Sales rose 12 percent to $844.8 million.

Polaris said retail sales to consumers in North America rose 11 percent, offsetting what it called "sluggish international consumer demand."

The company, which had already raised its earnings outlook in April, increased it once again on Tuesday. Polaris said it expected to post a full-year profit of $5.20 to $5.30 a share, up from the most recent forecast of $5.05 to $5.20."

 

You should Cliff.... Polaris paid me handsomely this year. Otherwise I think building RZR cost much less then half what they sell for it. 30-40 % max. IMHO
milos

 

people always forget to include research , engineering and design time followed by test and re design time when building something.

 

And I think everyone is forgetting that all the design cost have to be divided up over the number of units made. If sales are low...the cost per unit is extremely high. I've heard that the molds alone for new plastics on a unit are over $40k alone. Takes a lot of units to spread cost like that out on. And that's just for one piece of the whole.

 

Heard the same from several dealers across a couple of brands, the dealer makes very little selling new products. Selling used and accessories is where they make it. One dealer will not sell a RZR without a bunch of installed accessories. Then they add delivery and setup fees. That dealer is not doing so good. Another simple tells you, it is the volume they are after. The more they sell in a month the more they get back from Polaris and that is where the money is made. So they can cut the buyer a great deal and still make money.

 

A portion of the cost is R&D and product durability testing.

I personally know when Polaris made jetski they had a R&D department here in Fl with 10 drivers that went out all day, 8hours a day, to beat on the jetski, tank after tank, all day, week after week. Think they put 1000+ hours on each jetski model before they got the thumbs up to be released for sale. I would assume the same type of R&D testing goes on for the SxS division, somewhere...

When something would break, the crew of Engineers back at the facility would figure out if improvement was needed, or a design change needed, to fix the problem.

There was a complete R&D facility at their secret lake that employed 15-20 people with some high payed engineers always at the facility working. One of the engineers was a personal friend of mine.

That type of R&D is a huge cost that does get spread out over the total units sold. So the cost is hard to figure in till the production run is over and done for that unit.

 

All things considered, developmental costs, research and development, still cost is around 50% that is an industry standard, and KPI (key performance indicator), if a company (any company) is lucky to GROSS in any double digits (10 to 15%) but cost of production, is only one facet of that.

 

In addition to pure cost to manufacture, you have to plan for recalls, warranty work, assembly line/distribution mishaps, supplier failures, strikes, and lots of other oddball things.

Can you predict the price of steel in 14 months? No, no one can. But manufacturers have to account for it. Can you predict when you're $250,000 mold will crack? No, you can't Maybe it will never. But there is a backup sitting there, probably 2 or 3, and they may never get used.

What if the company that makes the rod bearings for your engines goes out of business? Is there enough of a margin in each unit you sold before that to cover the cost to buy the machinery and equipment to start making your own rod bearings?

Don't forget, government regulation. This is potentially a huge cost and huge liability. Then you have to factor in a profit. Smart ones, like Polaris, use that money to make better product, and buy suppliers. This maximizes profit and minimizes downtime.

Vehicle manufacturing and pricing is a fascinating concept. One thing in Polaris' favor is that they have yet to price us out of market. Everyone knows Yamaha invented this segment, but Polaris owns it. Resale values are high, they can barely keep new vehicles on the showroom, yet they are behind the scenes, making better versions. And here we are, 20,000+ of us, posting about it on the internet.

 

I worked at a high volume dealer for 2 years. To be competitive we typically sold at a $200 to $500 profit over invoice. There are holdbacks the Polaris give to each dealership based on total volume of units sold,preseason parts order,advertising program purchased thru Polaris and several other factors. This is usually between 1-5% of total cost of units purchased.

Now typically it takes about 60-80 minutes to remove the unit from its shipping crate assemble,fuel,short test ride and bust down the crate for disposal. So, that's another expense. As you can see not much money is made on the sale of a Rzr parts and accessory is 50% so that is a big chunk of profit.

So the biggest chunk of profit is financing,parts and acc. Sales and service work