Sustainability in Automotive Pricing

Abstract

This research provides an overview of potential ways how to set prices for certain technologies, features and specifications for passenger cars focusing on the original equipment manufacture’s (OEM’s) view. After a short introduction, the first part presents a decision model whether a feature can be priced at all. Seven questions guide the OEM to the result if pricing is applicable or not. According to the presented decision model, it is not possible to set prices for features which are not part of the actual car. Furthermore, pricing for options is limited to features that provide a higher benefit than disadvantage. For standard functionalities, a price can be set if there is already a price established within the field of competition. Pricing sustainable features is also possible if the OEM acts as the first mover under the condition that the feature which is intended to be priced is not linked to a matter of legislation. If it is a matter of legislation but giving a pricing signal to competitors is possible, assigning a price to the feature is still feasible. The second part of this research addresses the pricing process. The first step to find the optimum price position for a sustainable feature is to set price boarders. Afterwards, various details need to be taken into account. This research presents a set of suitable ways to reflect the corporate strategy, competition, characteristics of the feature to be priced, market and communication within the pricing process. In addition, it sharpens the view on different ways to offer sustainable features by presenting two examples from practice.