Analysts compile a list of the top loss-making cars of recent times, with the Smart Fortwo being responsible for losing Mercedes billions of pounds
27 September 2013

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

2001-2009: Renault Vel Satis – £1bn

Losses per unit

2005-2013: Bugatti Veyron – £3,887,051 per unit 

2001- : Volkswagen Phaeton – £23,655 per unit

2001-2009: Renault Vel Satis – £15,751 per unit.

2004-2009: Peugeot 1007 – £12,947 per unit

2000 – 2005: Audi A2 – £6340 per unit

2001 – 2009: Jaguar X-type – £3945 per unit

1997-2006: Smart Fortwo – £3762 per unit

2006 – 2012: Renault Laguna – £2986 per unit

2001-2009: Fiat Stilo - £2297 per unit

1997-2004: Mercedes A-class  - £1214 per unit

Our Verdict

Bugatti Veyron

The Bugatti Veyron redefines what's possible in a road car, but does it justify its eye-watering price?

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Comments
20

27 September 2013

Interesting study...although I would have expected the Nissan GT-R and Lexus LF-A to make an appearance somewhere in the list (the GT-R is relatively 'cheap' compared to its rivals and if I'm not mistaken Lexus say that they make a loss on each LF-A...perhaps they were lying?).

So now, what about the top profit-making cars? Smile

 

- Follow your own star -

27 September 2013

Where is the original Audi A8? I understood with the aluminium body construction, they were making a loss on every one, add in huge technical development costs for the platform and 4.2 V8 engine and would have thought it would be here. I am really surprised the Laguna is there, bearing in mind that 4 Samsung/Nissan/Renault models use the same architecture, perhaps this doesn't take into account platform sharing or joint development.

27 September 2013

That must have lost a bundle. It misjudged the market completely and killed off Matra. Still quite fancy one in a strange way though...

27 September 2013

Big French cars have always been famous for costing their manufacturers (and owners) big-time. But weirdly I too have always fancied owning one.

27 September 2013

So Mercedes Built a factory that can only build a Smart FourTwo.

Once production stops they have to demolish the factory and all destroy equipment inside it..

OR

Do they still have a factory that can build different cars and engines with some retooling costs?

Thus the investment n the factory has been added to the "cost" of the Smart car, and thus the value arrived at here is a nonsense, irrespective of disappointing sales.

I love the way numbers and stats can be manipulated!

27 September 2013

One thing not really mentioned in the article is the concept of brand/image building for new manufacturers. Lexus reputedly spent $1 billion on developing their LS400. Surely, as a stand-alone car, it can't have made a profit. But this hasn't harmed Lexus in the long-term has it?

27 September 2013

Halo cars for a marque could be better value than advertising or sponsorship, so a loss can be considered marketing cost.

But the Veyron cost too much, and the general public do not associate Bugatti with the volume VW brands.

Interesting cars in limited production runs can do more for a brand than Formula 1 sponsorship, yet it isn't done often enough. Hopefully Volvo will make the Volvo Concept Coupe, and others will also follow up on their concept cars.

27 September 2013
Andy_Cowe wrote:

Halo cars for a marque could be better value than advertising or sponsorship, so a loss can be considered marketing cost.

But the Veyron cost too much, and the general public do not associate Bugatti with the volume VW brands.

Interesting cars in limited production runs can do more for a brand than Formula 1 sponsorship, yet it isn't done often enough. Hopefully Volvo will make the Volvo Concept Coupe, and others will also follow up on their concept cars.

Most people think Bugatti is Italian and linked to Lamborghini.

27 September 2013

Veyron project did all the R&D for the DSG boxes, how much didn't that cost Bugatti? Technology that went straight into VW, future bread and butter projects for example GOLF, POLO etc etc.

Yes it's true that the Bugatti's project leader has told the media that in the future Bugatti must make a profit on each and every car that would leave Molsheim factory.

With other words, VW could save approx £4 billion pounds. 3 projects that would be needed to improve, Veyron, A2, and Phaeton. It must be a bit more worrying that the A2 and Phaeton does make a loss, since they are sold in big numbers.

Bugatti is easier to improve though.

 

 

 

27 September 2013
Voodoo wrote:

Veyron project did all the R&D for the DSG boxes

Ricardo developed the DSG transmission for the Veyron, VAG group cars licensed the DSG transmission developed by Borg Warner.

Voodoo wrote:

It must be a bit more worrying that the A2 and Phaeton does make a loss, since they are sold in big numbers

The Phaeton isn't sold in large numbers, and that project wasn't designed to make a profit either - it was a vanity exercise by VW to show what was possible. A2 was no great surprise either; it was too ahead of its time in being a city car from a premium manufacturer whilst pioneering new materials and fuel saving ideas. Fondly remembered though.

Seems to be an interesting split between manufacturers who can afford to make the loss in pursuit of long term goals and those who are now struggling and these loss-making gambles helped drop them in it.


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