MMRCA - has Rafale been illegally subsidised?

[rayrubik]

There are two reported price differences as I see it

1.Unit price - Rafale is cheaper by 5 million euro
2.Total price of deal which includes life cycle costs - Rafale deal is 15-20% less than Ef

[c-seven]

When France orders Rafales, its cost is 52,5 m€ for a F3C version, VAT not included. As simple as that. Anyone can check.

Because the French state has already paid the R&D, the stocks of spare, the simulators, etc, etc.

So every € above those 52.5m are extra costs or bonuses even though it's normal that export of today help to pay the R&D of tomorow.

That's always the confusion between program costs and fly away costs, it could be understable with the Canard who jump to quickly on a subject they don't master but comming from Jackonimo or anything related with Eurofighter it smells the BS.

Anyway Dassault is a private company and everybody know well that the Dassault familly are that kind of people who love to lose money on deals...

BS!

Next story?

[Twinblade]

What's unfair about cost cutting? x and y are 2 dealers who sell tomatoes in a street market. They buy tomatoes at the same price. Both x and y sell for a higher price than the price they pay but dealer x sells at a lower price than dealer y. Is it unfair if dealer x is prepared to make a smaller gross profit than dealer y? I don't think it is unfair commercial practice.

Trading in aircraft is far more complex and India has not been offered the same product by x and y but is it unfair if x and y do not make the same profit margin? I don't think it is. In any case it seems that Eurofighter cannot win on price - they could reduce their profit margin to 0% and Dassault would be able to offer a lower price and still make make a profit.

Although common sense would have us believe that, but such practices amount to dumping which endanger both the vendor and customer in case of unexpected market fluctuation and is detrimental to competition. However we should wait till the contract is inked before commenting on it.

[halloweene]

@jack i havent spoken about NAO report, although i have read it.
Another point is that Rafale GIE funded 25% of R&D dev.
I havent bought this week "Canard", so i cannot state about its content.

[Twinblade]

There are two reported price differences as I see it

1.Unit price - Rafale is cheaper by 5 million euro
2.Total price of deal which includes life cycle costs - Rafale deal is 15-20% less than Ef

I did some calculations based on point 2 earlier.
http://forum.keypublishing.com/showp...&postcount=539

[glitter]

When France orders Rafales, its cost is 52,5 m€ for a F3C version, VAT not included. As simple as that. Anyone can check.

At that price, it's the F2 c version, but I cannot find the price on the asemble-nationale website.

[Sens]

^

Fail to understand how selling the Rafale at "bargain basement" price or at a reduced profit makes the Sale Illegal !

Not difficult to understand in the EU. As long as France is buying something from a national company well above the market price it becomes an issue about not allowed subsidies. So no real problem when further buys of the Rafale by France will come to the Indian level.

[Jackonicko]

When France orders Rafales, its cost is 52,5 m€ for a F3C version, VAT not included. As simple as that. Anyone can check.

Because the French state has already paid the R&D, the stocks of spare, the simulators, etc, etc.

So every € above those 52.5m are extra costs or bonuses even though it's normal that export of today help to pay the R&D of tomorow.

That's always the confusion between program costs and fly away costs, it could be understable with the Canard who jump to quickly on a subject they don't master but comming from Jackonimo or anything related with Eurofighter it smells the BS.

Anyway Dassault is a private company and everybody know well that the Dassault familly are that kind of people who love to lose money on deals...

BS!

Next story?

VAT is included in both Rafale and Typhoon costs quoted by me.

The figure you quote is, in any case, out of date.

I say again, for the purposes of clarity:

Rafale Unit Programme cost is €142 m.
Rafale Unit Production cost is €101 m.
Typhoon Unit programme cost is £99.14 m. That's working on the latest NAO figures, and takes account of Saudi costs.
Typhoon Unit production cost is £70 m.

Anything else is nonsense!

[glitter]

I say again, for the purposes of clarity:

Rafale Unit Programme cost is €142 m.
Rafale Unit Production cost is €101 m.
Typhoon Unit programme cost is £99.14 m. That's working on the latest NAO figures, and takes account of Saudi costs.
Typhoon Unit production cost is £70 m.

Anything else is nonsense!

When reality is annoying, change reality.

[eagle1]

I don't want to look polemic but your figures are completely wrong Jackoniko. The rafale is nowhere close to 101m€ flyaway. 60M€ would be more realistic. Your figure must encompass other things.

As for the article I bet you that it will make pschiiiiit...In the sense that it will not ignite any controversy. It is far too inacurate (comparing apple and oranges) and undocumented to create any public outcry.

You can find dozens of article that want to be controversial but only a handfull manage to make an "affair". I fear that you will be disappointed.

The right ingredients are lacking obviously to make a cake of this inacurate report.

[TooCool_12f]

in any case, the deal with india includes only 18 airframes "as in the frech market"

the rest is parts, setting up construction facilities (the french providing the knowhow, mostly), etc

so, in any case, you can't just take the number of airframes and divide the total sum with it. it's a completely different matter

[snafu352]

Jack, what is the source you have quoted from as it is clearly not Le Canard Enchainé?

Not the dismal mail perchance or maybe the torygraph?

"France has proposed to India to sell its Rafale at bargain prices, writes the French magazine Le Canard Enchainé"

It helps to read things...

snafu352, the source is named, you should read again
(I don't assess its validity, having not bought it)

Thank you; perhaps i could suggest you read my original post and then re-assess your responses.

Fully expecting AlphaZulu to appreciate the point i make, not so sure the new resident troll will.

[Corran]

Don't forget huge price tag on Mirage-2000 upgrade.

[eagle1]

Don't forget huge price tag on Mirage-2000 upgrade.

And the mica deal was not cheap either...I read at least one report where it was mentioned that it was to ensure a Dassault win. In this case it means the IAF really wanted the rafale over the typhoon.

So we have rafales that :

-will be mostly manufactured in India
-that perhaps beneficiated from previous indian deals

How is it possible to compare with french price ? Unless you have a real thorough study on cost comparison the debate will remain superficial and subject to speculation. That's why Jackoniko's/Jon Lake will to inquire in rafale and typhoon price will remain at the stage of partisan work and that is also why the canard enchainé attempt to make a controversy will fail.

[H_K]

Rafale Unit Programme cost is €142 m. €119 m excl. VAT
Rafale Unit Production cost is €101 m.€84.5 m excl. VAT

So the Indians are reportedly paying "80 to 87 million"... (presumably excluding the odds and ends such as training, infrastructure, and ToT) same as the French unit production cost.

Where's the illegal dumping? Fighters are like the printing business - the printer is cheap, but the paper, cartridges and services are where the sellers make up their margins.

[Mildave]

Don't forget huge price tag on Mirage-2000 upgrade.

Spread over 10 years with full ToT and the upgrade to be done in India, to make what in essence will be new planes and you still stick with propaganda about the "huge" price tag ?

Same goes for the MICA deal.

[snafu352]

Typhoon Unit programme cost is £99.14 m. That's working on the latest NAO figures, and takes account of Saudi costs.
Typhoon Unit production cost is £70 m.

Anything else is nonsense!

According to the NAO report the above is nonsense.

Typhoon overall costs for the 160 aircraft are GBP 20.2 billion as per the NAO report.

That gives GBP 126.2 million per aircraft.
That is equivelent to EUR 152.35 million at todays exchange rate.

Given that the overall r&d plus production figure you state is a factor of 21.45% inaccurate this gives us a figure of at best GBP 85.02 million for the cost excluding r&d, equivelent to EUR 102.64 at todays exchange rate.

Here are the links where the 20.2 is stated.

http://www.nao.org.uk/publications/p...1/1011755.aspx

http://www.nao.org.uk/publications/1...n_project.aspx

Why does the figure requiring massaging for Saudi costs?
Is it to make it look better?
NAO doesn't make any mention of it...

It is not really very surprising that the Rafale costs of EUR 101 per aircraft excluding r&d can be reduced when more are ordered.

Simple manufacturing economics and mathematics. If Typhoon was getting more orders () the cost excluding r&d could be reduced as well.

Storm in a stained teacup jack.

Ps you still haven't let us know which French (aviation?) magazine the quotes from Le Canard have come from.

Edit: H K's point re vat is very pertinent as well

[Mildave]

VAT is included in both Rafale and Typhoon costs quoted by me.

The figure you quote is, in any case, out of date.

I say again, for the purposes of clarity:

Rafale Unit Programme cost is €142 m.
Rafale Unit Production cost is €101 m.
Typhoon Unit programme cost is £99.14 m. That's working on the latest NAO figures, and takes account of Saudi costs.
Typhoon Unit production cost is £70 m.

Anything else is nonsense!

Where I come from we call that intellectual dishonesty.

So from what you quote the comparison should be:

Rafale Unit Programme cost is €142 m.
Rafale Unit Production cost is €101 m.
IN EUROS !
Typhoon Unit programme cost is ~€120.6 m.
Typhoon Unit production cost is ~€85 m.

Note that the price of the Rafale is for the F3 standard with full AtA, AtG and Nuclear capabilities PLUS the naval version.

The cost given by our friend for the Eurofighter is highly inacurrate and AFAIK the true cost for the UK is classified due to "national security" !

I would also add that the price for the Rafale for export would not include the development cost of the nuclear capability.

I also add that you need to add the cost of program development from Germany, Italy and Spain to have the true cost of the total program itself.

Now anything else is indeed nonsense and intellectual dishonesty..

EDIT: thanks snafu352 for more accurate figures.

[Mildave]

The cost of buying the land and setting up the factory facility is the responsability of HAL and the Indian govt.

The price for the Rafale in India would not have included man power for assembling the plane and we know France has one of the highest wages rate in the world. The differences in prices between India, UAE and Brazil is that UAE aircraft will be assemble in France AND they were asking for upgrades.
Brazil is going to buy only 36 so obviously the cost of ToT spread between 36 platform will be higher than spread between 126+.

The tooling etc. will be quite similar between Dassault and Eurofighter and India is likely to buy them were they cost less so I don't see that as been an argument. And since most of the tooling for Rafale will have to be bought for the M2k upgrade anyway so that's a +1 for Dassault...

Then If I understand correctly in India Dassault's strategy was to price an aircraft answering the Indian specification. No more. Now within that price tag the IAF will have to choose what exactly they need or not. If they want more they will have to pay for it. The IAF made it clear that they were looking for aircraft that meet the minimum requirement, not necessarily exceeded them.

I think that's where the Eurofighter messed up. They tried to propose a version of the Typhoon that doesn't exist yet, with wonderful (yet unproven) capabilities that could only be but expansive if they ever made it to the realm of reality.

Dassault was smart. Since their aircraft passed the technical tests they proposed a bid that cut all expanses to the bone, rather than some miraculous but expansive gadgets.

[Jackonicko]

According to the NAO report ....
Typhoon overall costs for the 160 aircraft are GBP 20.2 billion as per the NAO report."

No. The £20.2 Bn figure is UK total programme cost, and includes the 72 Saudi aircraft. It therefore needs to be divided by 232, and not by 160, even though the RAF is receiving only 160 aircraft.

If you want to divide by 160, then you need to take account of the receipts for the 72 Saudi aircraft (estimated at £4-5 Bn for the aircraft purchase price).

Because the NAO report figure includes the cost of the Saudi aircraft, but not the earnings from them, it is flawed.

The figure requires 'massaging' for Saudi costs because otherwise it is inaccurate. If you have a cost for 232 aircraft, then you need to divide that cost by 232. This is not rocket science.

And if you want the most accurate unit production cost for Typhoon then look no further than the Tranche Two global production contract, which was was "worth €13 Bn" for all 236 Tranche 2 aircraft. That’s €55.08 m each.

On 17 December 2004, when that contract was signed, the €/£ rate was 0.68545, so €55.08 = £37.76 m.

[merlin2]

There have been whispers that EU competition authorities have been looking into MMRCA.

And now this:

"Rafale to India at bargain prices

France has proposed to India to sell its Rafale at bargain prices, writes the French magazine Le Canard Enchainé.

Always very well informed about the background of French politics scenario, the newspaper said India has recently chosen to launch 'exclusive negotiations' for the purchase of 126 Rafale made by the French group Dassault Aviation but that the aircraft had been chosen because of the extraordinary 'discount' offered by Paris.

For France - The Canard said, citing data from the French Court of Auditors - Rafale cost "some 150 million Euro." While to the Indians a proposal was made at "80 to 87 million Euro". "A huge difference in price," commented Le Canard, questioning the reasons for this discount:

"Either Rafale is sold at an inflated price for the French, or this is dumping, special discount under cost" states the magazine. Rafale has been offered at a much higher price to the United Arab which is interested in 60 aircraft. Now UAE could ask for an explanation as to why Rafale has been offered at a much higher price than to India?

A similar "game" has been played by the French in Brazil, where the aircraft has been offered at around 100 million each.

The real question raised by the article is if Rafale costs around 142 million Euro each for France, how can Dassault offer the aircraft to India for only 80-87 millions Euro? Who pays the difference in cost? The French taxpayer? Or maybe other Arab countries, interested in Rafale, will be financing the discount offered by the French to the Indians?"

Of course Rafale doesn't cost €142 m (unless you count R&D and other 'whole programme' costs) so the subsidy isn't as large as this report indicates. But figures from France’s Assemblee Nationale and the ‘Cour des Comptes’ (the French NAO) that indicate a programme unit cost of €142.3 m ($188.68 m) for Rafale, also give a unit production cost of €101.1 m ($134 m). You'd expect the export price to be at around this level, perhaps with a small profit margin and perhaps an export levy. Lower than this and it does look as though there has been a subsidy.

Still, what cost getting your first export order?

We don't know at this stage if this is true or just speculation but the actual cost of ToT of RBE2 AESA and eventually SPECTRE along with Rafale's complete EW kit to INDIA will be enourmous.

[Sintra]

According to the NAO report the above is nonsense.

Typhoon overall costs for the 160 aircraft are GBP 20.2 billion as per the NAO report.

That gives GBP 126.2 million per aircraft.
That is equivelent to EUR 152.35 million at todays exchange rate.

No

Acording to the latest NAO report the Typhoon overall costs for the 160 aircraft are GBP 18.159 billion.

The GBP 20.2 billion was taken from the NAO "Ministry of Defence: Major Projects Report 2010", that amount was reduced to GBP 18.159 billion, this number his present on the NAO "Ministry of Defence: Major Projects Report 2011", more precisely on the "Volume II: Appendices and project summary sheets", page 188.

Cheers

[c-seven]

The worst I can find is a parliament exercise where they divided the total cost of Rafale purchases up to now with the 180 piece ordered up to now.

It gives 94m€ excluding VAT

http://www.marianne2.fr/blogsecretde...rce-_a452.html

(By the way the article compare with EF and F35 costs and the journalist is much more credible than the Canard Enchainé's folks on those issues to say the least...)

But anyway this 94m€ figure is just a virtual exercise, it isn't accurate because there will be 286 Rafales ordered by France only and the R&D as well as the infrastructures are already paid. So the unit price fall accordingly.

The program unit cost on the 286 pieces is 112m€ HT per planes

Un récent rapport du Sénat estime le cout global du programme Rafale pour les finances publiques à 43,567 milliards d'euros sur toute la durée du programme (en tenant compte de l'inflation depuis le lancement en 1989) et cela, sur la base d'une commande prévue de 286 avions. Soit 152 millions TTC l'unité (ou 112 HT).

The fly away price paid for each new Rafale isn't very easy to compute because the DGA order the plane, the engines, even the OSF to different suplyer. But we are more around 60m€, that's certain.

[Breguet]

http://www.marianne2.fr/blogsecretde...rce-_a452.html

c-seven beats me to it.

94m€ excluding VAT for the 1st tranche.

Get your facts straight Mr. Lake, or ruin what's left of your credibility as a defense journalist.

[Mildave]

Euh... the DGA orders the engines, FSO etc. to different suppliers ? Can you explain please ?

I think the actual cost of Rafale that is been advertised (with AESA etc.) is closer to €80-90 range by the way. But since most countries that are today considering the Rafale will want ToT with it...

@ merlin2 : the ToT on spectra, RBE etc. might not come cheap but apparently it was still cheaper and more extensive than for the Typhoon...

[Sintra]

We don't know at this stage if this is true or just speculation but the actual cost of ToT of RBE2 AESA and eventually SPECTRE along with Rafale's complete EW kit to INDIA will be enourmous.

I would go for speculation.
I think its just the typical article on the generalistic press, probably full of mistakes and wrong assumptions. For starterrs, where did the "Le CE" journo got those "80 to 87 million Euro" unit price?

[Nicolas10]

10-11 billion / 126...

Very scientific. Nevermind that the contract hasn't been signed and that cost negociation haven't occurred yet.

Nic

[Mildave]

I would like to add never mind that the more accurate prognostics state 15-20b and that we will likely never know the true cost of the contract...

[Jackonicko]

No

Acording to the latest NAO report the Typhoon overall costs for the 160 aircraft are GBP 18.159 billion.

The GBP 20.2 billion was taken from the NAO "Ministry of Defence: Major Projects Report 2010", that amount was reduced to GBP 18.159 billion, this number his present on the NAO "Ministry of Defence: Major Projects Report 2011", more precisely on the "Volume II: Appendices and project summary sheets", page 188.

Cheers

That would give a Unit Programme Cost of £113.49 m (cheaper than €142 m for the Rafale).

Except that it's still for 232 aircraft, as it includes the costs of the 72 Saudi aircraft, but not the receipts for their sale.

That gives a Unit Programme Cost of £78.27 m.......

[Jackonicko]

http://www.marianne2.fr/blogsecretde...rce-_a452.html

c-seven beats me to it.

94m€ excluding VAT for the 1st tranche.

Get your facts straight Mr. Lake, or ruin what's left of your credibility as a defense journalist.

Breguet and C-Seven,

Firstly, I'm not Mr Lake.

Secondly, TMor, on his website, has published comprehensive information about rising Rafale cost estimates.


http://rafale.freeforums.org/a-topic...-costs-t7.html

2010 updates :
See next message.
Total programme cost (Cour des Comptes includes the industrial part usually) : €40.69Bn.
Unit production cost : €101.1M (this is not the unit "flyaway" cost)

2011 updates :
See here.
Total programme cost to State : €43.567Bn
This figure is nearly the same as the previous, the differences being 2011 costs actualisation (inflation), and this time, the industrial participation (25 % of the R&D).

Note his unit production cost of €101.1 million.

2010 update :

Good news : the "Cour des Comptes" (the French NAO) published its latest analysis. Unfortunately they still lack the details.
http://www.ccomptes.fr/fr/CC/documents/ ... mement.pdf

Quote:
Quantité initiale : 320
Quantité actuelle : 286

Coût initial : 39,073 M€
Coût actuel : 40,690 M€

PU initial : 122,1 M€
PU actuel : 142,3 M€
augmentation en % du PU : 16,5%

I'm grateful for your input, though, as I notice that the total programme cost includes only 25% of the R&D, and not all of it, unlike the UK Typhoon figure.

The true total programme cost is therefore more than €40.6 Bn.

It's more, even, than €43.567 Bn - a figure which already makes the unit programme cost €148.187 (for 294 aircraft). That's already a bit more than the €142.3 m quoted by the magazine.