Cars that lost their makers a fortune (and the reasons why...)

Cars are big business, but some don’t always make great business sense. Here are some that proved VERY costly to the good folk that built them...

1y ago
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The world of commerce is a complicated one, but you don’t need the business acumen of Bill Gates to know that it all works around one basic principle. If you can sell a thing for more than it costs you to make, then you get to trouser the difference. It’s called profit.

it might be that the manufacturer simply didn’t give a flying fiscal forecast whether the car made a profit or not

Do this on a large scale, and you make lots and lots of profit. A car manufacturer, for example, builds and sells lots and lots of cars, and makes a slice of profit on each one. And even once you’ve factored in every single cost involved in making the cars – including design, development, engineering, buying parts and raw materials, building and equipping factories, running dealer networks and aftercare services, paying staff and all the rest of it – all these slices usually add up to a pretty big profit pie. Happy days.

We say ‘usually’ because it doesn’t always happen like that.

Sometimes, a model will actually cost the manufacturer more to make than customers will pay to buy it. How can this be allowed to happen? Well, it could be that the manufacturer seriously ballsed up its sums at the outset. It could be due to unforeseen circumstances along the way to production. Or, it might be that the manufacturer simply didn’t give a flying fiscal forecast whether the car made a profit or not.

Whatever the reason, though, you could argue that whenever the manufacturer makes a loss, the customer gets one heck of a good deal. And here are some of the cars that give you much, much more than you pay for…

Bugatti Veyron

We kick off with the biggest loser of them all. Despite the Veyron costing its customers around a million quid to buy, the Volkswagen Group (who built it) actually lost almost four million quid for each and every one sold. That’s according to research done in 2013 by an outfit called Bernstein Research

Don’t go thinking it’s because the good folks of Wolfsburg are in any way stupid, though; profit was never the idea of this car. This car was a statement. This car was about showing the world the technical might of the company. This car to showcase what incredible engineering feats they were capable of if the normal shackles are loosened. And boy oh boy, did they ever achieve that.

Why was the Veyron so expensive to build? First, there’s all the ‘stuff’ on board that you need to achieve 1,000 horsepower and 250mph. The 8.0-litre W16 engine, the four turbochargers, the ten radiators, etc etc. Then there’s the thousands of hours of development, packaging all this stuff together and making it work to its maximum in every area. Then there’s the money-no-object approach to the interior fixtures and fittings. It’s no wonder that this car was a money pit for Bugatti. But, in a funny kind of way, the amount that VW invested in this car without getting it back also makes it a bargain. A very, very expensive bargain.

Fiat Stilo

The Stilo was Fiat’s fourth attempt to recreate the success of the 128 (after the Strada, Tipo and Bravo/Brava), and as such, Fiat threw a shedload of clever technology – and as a result, a shedload of development cost – at it.

Predicting (rightly, to be fair) that connectivity was about to revolutionise the way buyers choose their cars, the Stilo was made available with mobile phone connections, internet access, MP3 compatibility and satellite navigation, which were all pretty advanced for this class of car in 2001. Meanwhile, the ‘Connect’ service – a telematics-based concierge service – was truly ahead of its time. The car could also be had with electric front seats, radar cruise control, climate control, eight airbags and a skyroof (like an elaborate electric sunroof made up of several glass slats).

The thing was, all this stuff was optional, or only standard in the high-end models. And because Fiat had previously developed a reputation for bargain-basement small cars, nobody wanted the pricey ones, and nobody bothered ticking the options list. This meant Fiat got hardly any payback for the investment they put in.

The fact that buyers only wanted the basic car posed another problem: the basic car was rubbish. It was boring to look at, cheap-feeling inside, and on the road it was heavy, slow, dull and not particularly comfortable. As a result, sales bombed all across Europe, and by the time sales stopped, Fiat ended up £1.7 billion out of pocket. Ouch.

Peugeot 1007

What you might notice from this list is that huge losses are usually made when a carmaker decides to do things a little differently to the norm. That’s because the costs of development are usually much greater, yet the customer can’t clearly see much in the way of benefit. Enter the Peugeot 1007 as a cautionary tale.

No doubt, the car’s large powered sliding doors were a novelty, especially in the supermini class. However, it’s questionable whether the buying public ever really wanted them in the first place. What’s more, these doors were the root of a variety of pretty crippling problems.

They meant that a conventional car’s six-pillar bodyshell design was traded – in the 1007’s case – for a four-pillar design, which required lots of very pricey from-scratch re-engineering. They also made the car enormously heavy, and as a result, slow, thirsty and poor to drive. These factors – plus the fact that the car was hideously expensive compared with other superminis – meant its resale values were disastrous, meaning that buying one was borderline financial suicide.

Unsurprisingly, given all that, Peugeot didn’t sell very many 1007s. And this little rotter made a big dent in the firm’s coffers, losing almost £13,000 on each one sold and more than £1.5 billion overall.

Smart City Coupe (later called the ForTwo)

According to Bernstein’s research, the Smart car only ranks seventh on the list of losses-per-unit, with a hit of around £3,700 on each one. But, that’s because they managed to sell quite a few, clawing a chunk of the up-front investment back. If you look, however, at the amount that a model lost overall, then the good old Smart car ranks at number one. Championes!

That’s because the initial investment needed to get the Smart car – a project originally started by Swatch watch founder Nicholas Hayeck and then taken over by Merc – off the ground, was, well, off the scale.

Why so expensive? Well, nothing like the car existed already, so it needed a brand new platform, brand new three-cylinder engines, a brand new factory, new manufacturing techniques and processes, all sorts. None of that comes cheap, and when you’re introducing such innovations on a car at the smaller – and thus, cheaper – end of the market, it’s always going to be more of a risk.

And so it proved. Like we say, they shifted a fair few Smarts and the car gained something of a cult following, but Bernstein reckons the car still fell short of its sales target by around 40%.

Three. Billion. Quid. That’s how much Bernstein’s analysts reckon Mercedes ended up losing on the Smart car. And all because sales didn’t live up to their Hayeck-spectations.

Ahem.

Sorry.

Volkswagen Phaeton

The Phaeton comes second to only the Veyron in the amount of money lost per unit sold. It’s some way shy of the Veyron’s £4 million-per-car figure, but almost £24,000 per unit is still pretty eye-watering.

The Phaeton was the pet project of then-Volkswagen-Chairman Ferdinand Piech, whose dream was to build a flagship Volkswagen-badged luxury limousine to surpass all others in the class, including the BMW 7 Series, the Mercedes S-Class and the VW Group’s very own Audi A8. As such, no expense was spared in its development. It used the same platform as the Bentley Continental GT, and featured all sorts of newfangled tech such as draftless four-zone climate control, adaptive radar cruise control and adaptive air-suspension with continuous damping control.

But although VW probably didn’t expect to sell vast numbers of Phaetons, it’s doubtful they expected the numbers sold to be quite as low as they were, hence VW’s catastrophic losses. Still, if you can find a used one, it’s arguably the ultimate bargain because you can pick one up for beer money.

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Comments (29)

  • Peter is spot on. Though we all just thought the Stilo and 1007 were shithouse

      1 year ago
  • Bugatti Veyron, VW Phaeton and the unlisted Lexus LFA are meant to be valueless engineering pinnacles, rather than a financial success.

      1 year ago
    • Was surprised the LFA didn’t make the list since Toyota/Lexus absolutely lost their asses on that car.

        1 year ago
  • Phaeton is a car you buy when you have money, but don't want others to know it. Touareg is just that today.

      1 year ago
    • I agree

      But the phaeton is known to be owned by people who have money and you notice it

      The Touareg on the other hand really doesn’t look that expensive

      Read more
        1 year ago
  • Oh yeah, that 5 cylinder on the Stilo sure was slow...

      1 year ago
  • Renault had big misses with Vel Satis, Laguna 3 and Avantime. And they sacked that. Interestingly, Benz had huge losses on 1gen A-Klasse, but sticked to next generation in same concept.

      1 year ago
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