In this article we explore the value that car makers derive from selling more expensive trims and optional packages. By analyzing millions of vehicles sold over the last 6 months across 25 brands, we’ve been able to break down revenues into three categories:

• Base: revenues that car makers derive from selling the cheapest trim for a given model
• Trim upgrade: revenues that car makers derive from upselling more expensive trims
• Optional upgrade: revenues that car makers derive from upselling optional extras

For the industry as-a-whole, only 10% of revenues (and 15% of unit sales) are derived from selling base-level trims, with 84% of the revenues coming from trim-level upgrades and 6% from optional package upgrades. This means that on average, consumers are spending over $6,300 extra to purchase higher trims, and $2,650 to purchase optional packages.

Mainstream brands rely more heavily on upgrades

When breaking down these figures to a brand-level, significant differences begin to emerge. Premium brands like BMW, Lexus, Genesis and Mercedes-Benz derive a larger proportion of their revenues from selling base trims with optional extras.

On the other end of the spectrum, Buick, GMC, RAM and Chevrolet derive almost none of their revenue from their cheapest trims, relying almost exclusively on customers upgrading to more expensive trim-levels and purchasing optional extras.

Digging deeper into individual models it becomes clear that Pick-ups are the primary source of incremental spend for car makers. We’ve listed below the top-5 models that earn car makers the largest overall incremental spend (as a percentage of the minimum MSRP). All five of these models are pick-up trucks, with the average selling price of some of them almost double the minimum MSRP.

Infotainment and Safety features drive optional revenues

Although optional extras represent a relatively small proportion of total revenues for car makers, they tend to be high-margin items. In order to identify which types of features generate the most opportunities for car makers, we assigned the revenue associated with optional extras to one or more feature category. As expected, the results showed that Infotainment and Safety packages rank as the highest revenue earners for the industry – a result that was consistent across most segments. Although as pointed out previously, the opportunities to offer many of these features as standard are narrowing.

Planning vehicles in an uncertain world

Optimizing feature sets across trims and packages is often seen as a dark art within car makers, requiring complex spreadsheets and formulas in an attempt to balance competitiveness against profitability.

The life of product planners is likely to get even harder as we head into a potential recession. With the MY20 data we’ve started to collect, we’re already seeing a 5% increase the proportion of revenue derived from base-level trims.

VehiclePlannerPlus has been designed to help simplify and accelerate the process of collecting, analysing and make decisions based on automotive data. This month we’re rolling out a range of new features, including a competitiveness dashboard. If there are other functions or data types that you feel would make your life easier, please get in touch!

 

A few notes:

• The above analysis does not include revenues derived from either aftermarket or aftersales offerings
• The above analysis does not account for brand or dealership-level discounting (i.e. we calculate revenues based on MSRP – not invoiced price)
• The above analysis only covers data for MY19 vehicles
• Brands define trims and packages differently, which can make it difficult to to do a like-for-like comparison
• Penetration data for Ford, Subaru, JLR and Porsche is still in the process of being released and is not included within the above analysis