Re: Catering to used car buyers-parts

[Joel Skousen <jskousen@enol.com>]

Fringe Ryder wrote:
> 
> Not necessarily.  The U.S. stock market has returned over 11% over the last
> 90 years, on AVERAGE.  1990s European inflation has been much higher.  For
> sake of avoiding debates, we'll go with the very conservative 11% number.
> 
> Many of the cars on this list are more than a decade old (which means
> 1987).  In one decade, an unused part will almost triple in cost due to
> that 11% inflation. (It will go up to 284%.)  The 15-yr old urQs will
> almost quintuple!
> 
> On top of that, Audi doesn't -know- how many parts to produce.  You're
> asking them to take a very expensive gamble, take a lot of money out of
> capital, and lose the earning benefits of it to provide for a potential
> market that may not materialize.  If demand goes over, you want them to
> restart the line - which is no easy nor inexpensive feat!
> 
> Audi parts may be out of line, but it may actually be CHEAPER for a shop
> set up to do small quantities of parts now to produce them than for you to
> buy an inflation-adjusted part that was produced when your car was.
> 
> Regards, Frank.

I would disagree with your economics.  Remember, that new production and
raw materials costs go up with the inflation rate as well, whatever the
rate may be.  So your argument that parts in storage are way too capital
intensive is not completely valid.  It does tie up captial, yes, but
stockpiling is still cheaper--and all the companies do stockpile
original parts ffrom the original production line.  It is cheaper not
only because of overall production costs, but because the
prognostication of making small parts runs at odd intervals is even more
chancey than stockpiling from the original run--and they would still
have a lot of production facilities standing idle in between runs--which
no company could afford to do.  Warehouses are cheaper than excess
production facilities. Sure Audi has to try and figure out how many
parts to stockpile--that's what every manufacturer does, with some
pretty sophistocated estimating software. But its still cheaper than
runing separate production lines for tens of different models. 
	 The raw fact remains, the alternative market gears up and makes parts
for a fraction of the cost of Audi's prices--but only those parts with a
fairly high volume.  Even supposing that Audi found that new production
was cheaper than stockpiling, then why isn't Audi doing just
that--making new cheap parts?  If they are, then we know that they are
engaging in rip-off pricing--because we have plenty of prices to compare
with theirs.   Best, Joel