>> Now, explain to me again, *how* can Fiat afford to buy Ferrari??
>
> Errors in your above assumptions:
>
> Volume car makers are generally on about 5% profit (Fiat had 3% in 2010)
> More expensive brands can generate 10% profit (eg BMW/Daimler etc.)
> Ferrari made 15% profit in 2010

Now, do you mean "the company made 15% profit", or do you mean "each 
time the company sells 1 car, 15% of the sale price is profit"?



Really? You can buy an actual Ferrari for that amount of money??

> The development cost for designing and testing a car is HUGE

Well, yes, anything safety-critical usually has very large design and 
test costs. (If you think cars are expensive, try developing drugs for a 
living...)

Presumably the cost of testing a cheap car is exactly the same as the 
cost of testing an expensive car though.

> Manufacturing costs are way cheaper per car if you are making 2 million
> rather than 5000 a year.

As I understand it, set-up cost is usually very large. So if you 
manufacture more units, the set-up cost is divided between more units, 
so the /per unit/ price is lower. Presumably the actual set-up cost 
itself is identical in both cases.

There are things like CDs which cost virtually nothing to manufacture, 
but still cost a lot to set up. So the set-up cost is virtually the 
entire cost. I'm not sure that analysis applies to cars though; they're 
vastly more complicated to manufacture, and they also contain /metal/, 
the most expensive material known to man...

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