The loss of efficiency between the crank and the rear wheels is due to several things so it's not just a random number somebody pulls out of thin air. The hp number the factory gives you as the rated engine horsepower is the power at the crank with the engine sitting on a test bench. If you install that engine in a car and then put the car on a dyno, the hp the dyno is showing is the power that's actually making it to the rear wheels. It will be less than the rated factory engine power.
Everything in the drivetrain that's between the engine and the rear wheels absorbs a certain amount of power. The first thing attached to the engine is the flywheel and it's weight takes power to get it moving. The next thing is the clutch and it's weight takes power to get moving. It also has a friction surface that has to grip the spinning flywheel so there's a small amount of lost power there due to friction converting it to heat.
Then you have the transmission. All the gears in the trans have weight and resistance, as well as they're sitting in a heavy oil that also has resistance. It takes power to move all that and get it spinning.
Next you have the driveshaft which is connected to the end of the trans by a coupling joint and another one at the other end connecting it to the differential. In the case of our cars there is also a third joint in the middle. Each joint has a certain amount of resistance which takes power to overcome. The spinning balance issue of two tubes connected by 3 multi-link coupling joints in the driveshaft also comes into play and results in a resistance to being spun. The weight of the driveshaft is also something that has to be overcome to get it spinning.
Then you have the differential which is transferring a gear spinning in one direction to another set of gears spinning in a competely different direction. There's loss due to friction and weight there too. Inside the differential, like the transmission, the gears are spinning through a pool of thick oil which creates resistance. Have you ever run down to the water at the beach and the moment you hit the water your forward motion becomes slower and more difficult because the water is resisting your movements? That's the effect thick oil has on gearing inside a trans and diff. It takes power to push through that. On both sides of the differential are driveshafts which have their own coupling joints that have a certain amount of resistance that has to be overcome with power. At the end of the driveshafts they sit inside a bearing housing that is packed with thick grease and all that has resistance that needs to be overcome.
Finally after all that you get whatever power made it through to the rear wheels.
All that resistance in the drivetrain absorbs a certain amount of power and that's rated as a loss percentage. It's not a fixed amount; it is in fact a percentage. On a stock 2010 SS with LS3 it was rated at 426 hp at the crank. On a dyno an SS was typically getting about 370 rwhp give or take a couple of hp. That's a loss of 56 hp or a loss percentage of roughly 13% (13.145%). These engines are SAE certified which means they have to be within 5 hp of the rated amount, so any change in the rwhp means the resistance in the drivetrain was changed in some way.
If you increase the power the loss percentage might actually get worse due to additional factors such as metal distortion and the issues caused by heat. The factory components are chosen to perform safely within the amount of power the stock engine produces. However they typically have an extra 20-25% of safety margin so things aren't working right at the edge of breaking. This is why you can make some increases in power and still be okay. However the more you increase power and use up that safety margin, the more components begin to experience distortion due to friction and heat, which can result in a loss of performance efficiency and actually increase the resistance to the point where things can start to malfunction and break.
When you're slamming hundreds of pounds of torque through the drivetrain the metals are actually twisting and distorting to various degrees. At a certain point the assemblies begin to lose efficiency and performance actually starts to decrease and if you keep pushing it, they'll fail. This is why you'll see a dyno chart where power and torque go up as rpm's go up until they reach a certain point and even though the rpm's continue to go up, the power and torque begin to go down. Once you cross over the peak power point, the loss percentage is starting to increase. The red line value for rpm's is the maximum you can safely spin that engine crankshaft assembly before damage and/or failure is about to happen.
The thing to remember is a car is a system; not just an engine. If you increase the performance of the engine you need to look at improving the efficiency and performance of everything connected to it as well. If you add 80 hp and torque at the engine, you're still losing 13% to the rear wheels and that may increase if the metals and assemblies are distorting beyond what they were designed to handle because of the increased stress. So going from 426 crank hp to 500 crank hp means you're gonna get about 435 rwhp and are losing at least 65 hp.
You can improve efficiency by reducing resistance. Lighter flywheels, lighter and more efficient clutches, better trans fluids, better driveshafts (1-piece instead of a 2-piece), better diff fluids. If you can reduce resistances by even a small percentage with better fluids and the loss percentage goes from 13 to 12%, that will increase rwhp without ever touching the engine.
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1SS/RS LS3 M6 IBM