Saint_Spinner

Well, thats was what I was taught at Art Center (transportation design major). I think the automotive designers and marketing folks know a little more than you guys.

kumainu

It wouldn't surprise me that Honda loses net profit on S2000s. The margin of profit from revenue sales of every S2000 is very low, but taken into account the free warranty services, the net profit could be negative. Hence, Honda could lose some money on every S2000 sale. For example, if Honda makes $500 of profit from initial sale of an S2000, then would have to pay $1000 over the 3-year warranty to dealerships for free services (ITB, etc.), it will lose money in the end. Case in point, my '01 S2000 must've had thousands of dollars worth of services done for free at dealerships; from simple ITBs to other mechanical and aesthetic fixes. Those thousands of dollars were paid by Honda to the dealerships. Surely, that S2000 was a loss of profit for Honda. My family had a new '02 Accord, and it had never been to any dealership for any service over the entire warranty. That Accord netted profit for Honda. And I think that's the same for most Accords.

Chris Stack

[QUOTE=kumainu,Oct 26 2006, 04:57 PM]It wouldn't surprise me that Honda loses net profit on S2000s.

Chris Stack

It's true, but you are talking about different business models. There is a theory that "halo cars" draw favorable press, headlines, people into the showrooms, etc.

There is also an entirely separate business theory, which is related to the game console example, but it has nothing to do with cars. I believe Gillette pioneered the idea, where they gave away razor handles for free. Didn't everyone receive a Gillette razor when they turned 18, presumably after they registered for the draft? I got a Mach 3 handle, which probably cost $10 in the store, and which Gillette probably made for $1 or so. In return, I spent quite a few years buying expensive Mach 3 blades, to fill my free handle. This same approach is also used with printers and cartridges (printers are real cheap, but cartridges real expensive), and the aforementioned game consoles. However, as ipimpgarland pointed out, it isn't applicable to cars.

Saint_Spinner

I always did suck at wording my thoughts. Thanks for the clarification.

Penforhire

I imagine they were losing money for the first several years but now? Maybe but it can't be much of a loss. And what do dealers know? These are the lame sources that said the S2000 would only be produced for three years.

aklucsarits

Look at it from another marketing angle - Honda sells the Insight hybrid as the most fuel efficent car in US at steep losses. They also sell the Civic hybrid as a loss leader too. But as a result, Honda is seen as an environmentally conscious company. They can also advertise their model lineup as getting the best fuel economy in the industry. Even though Honda looses money on those hybrids, they are getting some value out of that loss in the form of good press and public goodwill about being an environmentally friendly automaker. Honda become THE fuel efficient car maker in the public's mind

Andrew

harshfury

Tell the dealer that you don't believe him...and that, that is Honda's problem, not your's.

If he goes on to tell you that it is true...and that the only reason they do it is to cement Honda's Image in consumer's heads, then tell him:
Great, then sell me the S2000 at this (presumably fair for both) price...and everytime somebody sees me driving it around Honda's stock (in that person's head) will go up.

Heck, if you're smooth enough you might even get them to pay you for driving it.

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The bottom line is that no company, that isn't insane (which Honda is not), does anything that they will ultimately lose money on. I'll grant them that it is possible that they lose money on each S2000 sold...but that money is more than made up for indirectly (just as others have already stated).

If somebody tried to convince you that they do, in fact, lose money on the S2000 (in the bigger picture sense). You should ask them if they lose money on advertising as well. If so, why do they continue to do it?

kumainu

A few years ago, Honda OFFICIALLY (from the horse's mouth) said it was losing money on every Insight and S2000 sold. But the loss wasn't substantial so they kept building the cars that served their purposes.

Defender

So, since this is the last year for the Insight ... what will they say next year ??