The Infantry Squad Vehicle shares 90% of its components with a Chevy Colorado. The top Trim Colorado costs $30K usd or so, but the the ISV costs $330k. What makes up the 10% difference between the Colorado and the ISV?

Question

Not trying to hate. Maybe it’s armour, maybe it’s guns, but that is a big difference.

In: Economics

Answer 1

Well first of all 90% of component is a very vague statement. What component mean exactly. Do they count each screws as one component and the whole military grade/air drop capable chassis as one component? In that case the screw cost a couple of cents, but the chassis is for sure super expensive. The 90% seem like a marketing tool and nothing else. You can’t extrapolate out of it, because it can anything.

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Second, the 330 thousand $ isn’t the price per vehicle, it’s the price of contract divided by the number of vehicle. Military contract doesn’t include just the vehicle. First of all there is basic cost like R&D. The civilian version could spread those cost over the 1.5 millions they sold over the last 16 years. The military version have to recover those cost in 649 vehicle, maybe more depending on future contract, but they can’t be sure. There is also support for the entire life cycle of those vehicle which could last decades. All the spare parts that the army need to keep their fleet in working condition for their life cycles, etc.