Mercedes’ tiny Smart Fortwo city car project made the biggest losses of modern times, according to figures from the automotive analysts at BersteinResearch.
The analysts say that although ‘catastrophic losses are rare’ in the auto industry, they have complied a list of which they think uncovers the biggest product failures of recent times.
Perhaps the two themes running through these results are, firstly, the risks associated with making big technological leaps (and the accompanying big investments) and, secondly, the risks associated with rolling out a vehicle that seriously fails to convince buyers in its market niche.
The Smart project is a good example of the former. Mercedes took over a project developed by Swatch founder Nicholas Hayeck and turned it into a technological tour de force. Smart got a brand new platform, brand new three-cylinder engines and a new factory at Hambach, near the French-German border.
Berstein’s analysts estimate that Mercedes sank nearly £3 billion into building Smart from scratch, a huge risk on a car at the cheaper end of the market. In the event, it also undershot its sales targets by over 40 per cent.
The Fiat Stilo, Renault Laguna, Peugeot 1007 and Jaguar X-type are, they say, examples of cars that simply missed their intended markets and massively undershot sales estimates, by an average 70 per cent in the case of the Fiat, 88 per cent in the case of the 1007 and 74 per cent in the case of the Jaguar.
The Bugatti Veyron and VW Phaeton may be in the top ten, too, but the analysts point out that while the VW management knew that the Veyron would lose money, the car was a technical showcase for the VW Group. The Phaeton is, of course, personally backed by VW’s powerful chairman, Ferdinand Piech, arguably putting it outside normal financial considerations.
See below for the full results.
Overall losses
1997-2006: Smart Fortwo – £2.82bn
2001-2009: Fiat Stilo – £1.77bn
2001- : Volkswagen Phaeton – £1.68bn
2004-2009: Peugeot 1007 – £1.59bn
1997-2004: Mercedes A-class – £1.44bn
2005-2013: Bugatti Veyron – £1.43bn
2001 – 2009: Jaguar X-type – £1.43bn
2006 – 2012: Renault Laguna – £1.30bn
2000 – 2005: Audi A2 – £1.2bn
Join the debate
Add your comment
I cant see how the X-Type
I cant see how the X-Type could have lost so much money, it was effectively just a re-bodied Mondeo, most if not all of the development cost would have already been paid by Ford, so it may not have made the profit margins expected, but I cant see how it lost £1.43bn when it will not have even cost that much to develop. I suspect the figures need taking with a pinch of salt.
Citytiger wrote:I suspect
Same could be said about the Fiat Stilo. Although based on a brand new platform, it was then used by the 2007 Fiat Bravo. Whilst not a big seller either, have the Stilo's platform costs been amotised across the Bravo's to create a 'true' cost figure? I doubt it - more salt required.
I guess the analysis is of
I guess the analysis is of surviving manufacturers of the last 10 years..
Otherwise the list, sadly, would surely be full of SAABs and Rovers
Aw! Shame!
... But ... Phaeton is the only VW I like - followed by the Touareg but that's mainly because of the road presence it offers for the money.
Yet VW bosses can take heart from the fact that it could be worse. Mercedes has sunk twice as much in Smart Fortwo than VW in Veyron!
Another hurray for Mr Holloway for writing yet another informative article. And also for the one on the possibility of VW missing profit targets.