There‘s a word for that „Greedflation.“ This is what western car makers do. Luckily, the Cinese car makers grasp their chance and disrupt the market
While that is part of it, the other, bigger part is that Western countries actually do have higher labour costs: better salaries and conditions for our workers.
When China was outcompeting us on undesirable, low productivity, jobs, we accepted that. It was better to raise a billion Chinese out of poverty than to protect our lowest productivity factory workers. And those workers mostly transitioned to other jobs with higher productivity.
But now China is richer and their labour force is shrinking, so they will compete with highly productive factory jobs.
Politically, it is unlikely that car workers will accept unemployment. Nor will other highly paid workers.
So a trade war is brewing, you better brace yourself for it.
China wasn’t “outcompeting us on undesirable, low productivity, jobs”. Corporations were shipping jobs to China to undercut highly productive factory jobs back then, too, so they could save on labor costs. It’s only now that China is undercutting corporate profits that these same corporations come crying and shitting their pants. That’s also why you see a ramping up of negative media pieces on China. It was never about charitably raising people out of poverty. It was always about corporations undercutting labor to gain greater profits. Fuck 'em, bring on the cheap cars.
I hate it when corpos use the “oh we can’t lower prices because our staff is getting paid too much”-narrative. What about the CEO who takes half the profits for himself?
It’s the workers who create value for a company, they don’t take it away by getting paid for their work.
Dude, I’m old enough to have lived through it.
Making toys and other plastic shit was never a high paying job in the West.
And no, it wasn’t charity, it was a win-win that increased living standards on both sides.
But it did have an impact on low paying manufacturing jobs in the West and that impact was accepted by Labour unions for the two reasons I gave: we (rightfully) concluded there were enough other, better jobs available and didn’t want to keep Chinese workers poor.
Don’t think labor costs is a big factor. Car production is the sector that is most automated. Just think of this endless bands of hanging cars with robot arms working on it. Tesla even topped this.
It’s mainly the unwillingness to design and sell cheap cars due to less profits. In Germany we had electric cars for 20k€ or even combustion cars under 15k€. But they stopped building it. Although it was sold out in weeks.
In my region there was a Startup by the Aachen University RWTH (which is an elite university in Germany) bulding small EVs for around 20k€. They simply bought all parts from suppliers and just assembled it. And engineered and designed it first. Unionized and still competitive. Unfortunately, they didn’t fly.
EV building is rather simple. The software is key. And this is the missing part at car makers capabilities.
I second your thoughts on trade war. However, I guess it will be much simpler with high taxes, high quality regulations, and may be less support by car workshops. We will see…
There is still a shit ton of people working in a car factory. Tesla had to scale back their amount of robot workers since humans could work much faster. Tesla expects to have 60,000 people working in their Gigafactory in Texas when the production of the Cybertruck ramps up.
Chinese manufacturers are being heavily subsidised and even making a loss on their cars.
They’re trying to kill off our domestic car industries.
No reason why western countries also can’t subsidize EV car companies to remain competitive.
Like…what are we supposed to do? Be content with ridiculously priced EVs and be willing to pay a small fortune for them? Fuck off with that noise.
Western corporations have had no problems fucking over the average consumer for decades or laying off thousands of employees at the first sign of trouble. Let them adapt or die I say. Competition is always good. Western corporations have the smarts and the resources to compete, they just need to be forced to.
Controversial take: the problem isn’t car prices. They haven’t increased that much when compared to inflation, and you’re getting far more and far better cars for your money when adjusted for inflation.
The problem is wages haven’t risen and housing prices have risen too much, meaning people have less to spend on a car.
E: I googled. In the US the cost of a median house was 18k in 1953. An average car cost 3.5k.
Now, the median house costs 400k.
400k/18k x 3.5k = If car prices had risen as much as house prices, the median car would cost 77k.
A lot of western countries are subsidizing EV sales. Most western auto companies just waited a decade longer than they should have to start making EVs and are in the thick of developing technology when the early movers are hitting maturity.
On top of subsidies at the national level, most legacy automakers are selling their EVs at a significant loss, but that is because they haven’t reached economies of scale yet… not because they are trying to undercut competition. It’s hard to develop new products and even harder to get them to scale production. Ford has been making cars for 120 years, but that isn’t the same thing as making an EV. They effectively have to start over in a new field… a decade behind companies that invested early.
A lot of the press you hear about EV manufacturers cutting back because demand is low has to do with them cutting back because they are losing $50-70k per vehicle they are selling and can’t stomach the losses. The demand is there, they just can’t make an EV at a price that generates profit. They trim commissions at dealerships to try to help defray cost, but that minimizes incentive for sales teams to try to move them and exacerbates the problem. On top of that, their ICE sales are diminished due to high interest rates and an overall market slowdown in large purchases so every vehicle they sell at a loss hurts the bottom line that much more.
They’re trying to wait to push the cost involved in getting to scale until interest rates go down and it’s more affordable to invest in new technology. They are fucked. Tesla is currently the only American company that is profitable at scale and Elon can’t shut the fuck up on eX-Twitter long enough to stop pissing off the marketplace. The table is set for Chinese EVs to flood the US market, but I don’t think people will be as open to Chinese vehicles with the current data privacy issues and the tense geo-political position between the US and China.
I’m thinking that, if it gets bad enough, the federal government will disincentivize Chinese EVs with tariffs to offset the Chinese gov’t subsidies… if the current US EV tax incentives don’t do enough to spur legacy automakers to kick it into high gear… which it doesn’t seem to be doing. It’s going to be a rough decade for legacy automakers.
That‘s a terrible idea. Just because China throws irresponsible amounts of cash at cars doesn‘t mean we have to do the same mistake. We can simply say it‘s not OK to sell products under manufacturing costs to gain market share and that‘s that. Let‘s not inflate the already oversized car market even more.
Selling at a loss to enter a market or gain market share is a time honored tradition at this point.
It is, but as the article mentions some manufacturers are making a loss of 35k per car.
If those cars are then sold for 5k less than the US/EU/Japanese equivalent, despite lower wages and environmental standards, you have to ask yourself questions.
Yep. They‘re doing exactly what we usually call hostile underbidding to heavily inflate prices later when they‘re a top dog. A practice that is not quite legal in most parts of the west. And whoever wants to know when things still don‘t work out for the car maker because subsidies dry up: Search for Chinese manufacturer ‚Weltmeister‘. That will make you think thrice about ever coming near a Chinese EV.
It’s also called dumping:
https://en.wikipedia.org/wiki/Dumping_(pricing_policy)
The kind of thing usually results in a trade war, sanctions and tariffs.
The problem in Europe, is that our manufacturers are so reliant on Chinese parts and manufacturing, that they’ve asked our government NOT to intervene. China has them by the nuts, because they’ve outsourced too much. IRC they can’t even make batteries without using Chinese parts.
