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gamemanual:pricing_metrics

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Pricing Metrics

When pricing your vehicle, the game provides many different price metrics. We cover these briefly in the World Map GUI page. This page will cover how to properly use these metrics, and the common pitfalls players find themselves running into when they use them.

Material Costs

Material costs are the cost of materials and supplies for one vehicle unit. It only accounts for the material costs of one unit and nothing else. Any price below the material cost is guaranteed to lose you money, as this cost is known and fixed.

Manufacturing Costs

The manufacturing costs take into account one unit’s portion of factory costs and the material costs of that unit.

What does that mean? Say your factories' non-material related costs are $1,000,000.

You use 50% of your production capacity to produce this vehicle model. You produced 1000 units of that model. 50% of $1,000,000 is $500,000. And $500,000 divided by 1000 units equals $500 per unit.

Therefore, the Manufacturing Costs are the Material Costs + $500 in this particular example.

Total Unit Costs

Total Unit Costs uses the variables that make up Manufacturing Costs, and it includes a single unit's portion of ALL other company expenses.

For example, you’re building a new factory at the cost of $750,000 a month. Your branches cost $500,000 a month. Your labor costs another $620,000 per month, and you’re spending another $130,000 on marketing, racing, research, etc. In total, your non-manufacturing-related expenses are $2,000,000 per month. If you're building 5,000 total vehicles of all models per month, company costs per unit are $400. We add this number to the manufacturing costs, and that is your total unit costs.


How **Not** To Use These Metric

A common pitfall many new CEO find themselves in is increasing the price of their vehicles based on the Manufacturing Costs or the Total Unit Costs. This action leads to a demand death spiral. As you increase prices, demand drops. Both the Manufacturing Costs and Total Unit Costs depend on the number of units produced. So if demand drops and you reduce production to match that, your Manufacturing and Total Unit Costs will go up. If you increase prices again to match the new values, the cycle will repeat until you are bankrupt.


How To Use These Metric

You should price your vehicle based on Material Costs. The Manufacturing Costs and Total Unit Costs are indicators of potential profitability if you sold ALL vehicles produced at exactly these prices. You should not be pricing your vehicles with these variables. Instead, use them as indications if your costs are too high or if production is too low.

You should find ways to lower the Manufacturing and Total Unit Costs below your sale price, rather than increase your prices to match them. One common way to decrease both is to increase the number of units you produce. You can also try to reduce your company costs, or increase margins with other models to compensate for the difference.

gamemanual/pricing_metrics.txt · Last modified: 2022/02/15 18:00 (external edit)