In praise of cash cows

Every automaker aims to make money on its vehicles, but which ones stand out? Which are the most profitable vehicles in modern times?

An interesting question that Hilton Holloway of British magazine Autocar posed. And Max Warburton, senior analyst at BernsteinResearch in London, challenged his team to find the answer.

Max is a serious fellow. I've appreciated his research since we met when I was based in London a decade ago. So his top 12 most profitable vehicles list is focused on long-term profits, ones generated over complete product lifecycles, often multiple generations of vehicles. That captures the benefits of carryover parts, systems and technologies, including engines and transmissions, so he went back two decades.

Max didn't use these words, but it was a quest for the industry's biggest cash cows. Really fat cash cows, indeed. By his count, since 1990 these dozen vehicles have generated $2.2 trillion in revenue and about $230 billion in earnings before interest and taxes (EBIT).

These are the cash cows that make successful automakers. A lifeline in hard times, a gravy line in good times. The kind of money that funds research and product development, that allows healthy risk taking and nurtures growth.

The formula

Distilling the 21-page report, here's Max's cash-cow formula: strong price points, high annual volume and long product cycles.

It's simple on paper: margin, volume and continuity.

But really hard to execute. For example, no small cars qualified -- price points are too low no matter how many you sell, so sorry, French, Italian and Korean small-car specialists.

On Warburton's list, most took one of three paths to the honeypot.

One is the Japanese mid-sized sedan -- the No. 12 Toyota Camry and No. 10 Honda Accord have big volume, continuity, and just enough per-unit margin.

German luxury sedans finished 4th, 5th, 6th and 7th. The BMW 5 and 3 series and Mercedes S and E class have margin, continuity, and squeak by on volume by exporting globally.

The pickups cash in

But American full-size pickups nailed all three parts of the formula, grabbing the top three spots on the list. The Ford F series, General Motors's Silverado-Sierra twins and the Dodge Ram used huge volume, double-digit margins and carryover systems to generate about $110 billion in pre-tax profit the past two decades. Holy cow.

Not so incidentally, all 12 vehicles are U.S.-market products, or sell well here.

Here's the Bernstein most profitable list, along with the company's estimate of the global revenue and EBIT profits each has generated since 1990.

Most profitable vehicles, 1990-2011 (U.S.$ billions)
1. Ford F Series$350$50+
2. GM pickups$300$40
3. Dodge Ram$180$18
4. Mercedes S class$100$15
5. BMW 5 series$260$24
6. BMW 3 series$290$17
7. Mercedes E class$200$13
8. Lexus RX SUV*$64$12
9. Jeep Grand Cherokee$90$7
10. Honda Accord$200$11
11. Porsche 911$40$10
12. Toyota Camry$150$9
* Sold 1998-2011
Source: BernsteinResearch

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