Small project underlining difference between cost, price and value. Intended to be a starting point for a greater discussion. How to calculate the cost of something with very limited information.

1. Case study: Costing the Bugatti Veyron
“Since it doesn’t cost a dime to dream, you’ll
never short-change yourself when you stretch
your imagination.” Robert Schuller
Tiago Lopes, Industrial Engineer/Executive MBA, May 2013

2. About the study
• The objective of the study is not so much to be scientifically
correct but to demonstrate the issues surrounding costing
activities and presenting methodologies to close the gap of
knowledge shortage and demonstrate it as a strategic
managerial tool
• It is based on the “National Geographic” TV show on the
Bugatti Veyron, Cost of a Formula 1 and other internet
available resources
• This is an exercise in Cost estimation, with little original
information, intended only to develop acute thinking on
issues at hands
• This is a continuing work in progress and I would be delighted
to receive contributions or suggestions to improve it

3. The product
• The Bugatti Veyron EB 16.4 is a mid-engine grand touring car,
designed and developed by the Volkswagen Group and
manufactured in Molsheim, France by Bugatti Automobiles
S.A.S.
• The Super Sport version of the Veyron is the fastest street-legal
production car in the world, with a top speed of 431.072 km/h
• 0 to 100 Km/ in 2,5 seconds and 100 Km/h to 0 in 2,2 seconds
• Base Price 1,5 Million euros
• …but how much does it costs?

4. “key supply” mapping
Addressing only the main components, we can clearly see that this product is the
result of the coordinated collaboration of several different entities – internal and
external stakeholders coming together to construct something extraordinary
Engine/Gear
Salzgitter
Engine test
Wolfsburg
Breaks
Meitingen
Tyres
Clmt Ferrand
Structure
Büren
Assembly
Molsheim
Sensors
Lüdenscheid

5. Costing estimation table
Based on:
F1 available data
Nat.Geographic doc.
Costing practices
K€ Engine Gearbox Breaks Electronics Structure Wheel& Tyres Assembly Testing Sub-total
RawMaterials& Sub-contracting 290 150 12 50 240 50 172 8 972
DirectLabor 47 12 3 3 17 0 300 11 394
ManufacturingEquip.Depreciation 38 8 2 0 58 1 100 12 219
ManufacturingCosts 1 1 2 0 12 0 4 3 22
IndirectLaborCosts 94 24 6 18 35 1 300 6 483
Otherdepreciations& logisticcosts 116 60 5 16 96 20 69 5 386
R&DCosts 22 17 8 5 14 3 2 13 85
SG&AExpenses 30 14 2 5 24 4 47 28 154
Subtotal 638 286 39 96 496 80 994 85 2714
%oftotalcar 23% 11% 1% 4% 18% 3% 37% 3% 100%
Note: Not considering cost of marketing, publicity or promotion

6. Engine/Gear
924 K€
Engine test
85 K€
Mec.Breaks
39 K€
Tyres
80 K€
Structure
496 K€
Assembly
994 K€
Quick costing overview
R&D costs: 29332 K€/ Production costs: 941763 K€/ Vehicles produced : 347
Total cost per vehicle : 2714 K€
Sensors
96 K€

7. «Teaser»
• Cost 1 million more than selling Price
• You’re getting a «bargain»
• Where is the rest of the cost going? Why is VW loosing
money on every Veyron sold?
• Brand name: Ettore Bugatti sells perfumes, Fashion wear,
Watches & Jewelry, etc.
• VW value: from 1998 (acquisition of Bugatti) to 1999 the
Balance Sheet of VW presented an increase of 24’000
million DM (not only due to the Bugatti brand but it
explains partially) and this impacts positively on market
shares, availability of capital, etc.

8. Conclusions
• Cost, Price and Value are not the same and only with a
deep knowledge of their differences and specificities it
is possible to run a profitable business
• How is value being created? How to make use of all cost
factors to manage scarce resources?
• It is also a question of strategy and leadership!