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No it's about money and who gets it. Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size.

No it's about money and who gets it. Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size. That manufacturing becomes more efficient is no surprise: it always has. The question is whether they have fewer workers at the same compensation level, fewer workers at a higher compensation level or the same number of workers with fewer hours. Owners are pushing for the first, labor wants anything except the first. And while Keynes envisioned the last, that has clearly no been allowed to happen. It is an archetype case of who benefits from technical improvements and forces driving inequality.

shadowgovt 7y ago
In practice, it won't be quite that simple. Car companies buy components from third parties, and if entire components are no longer needed, there's no "same number of workers with fewer hours" to be had---catalytic converter companies are just going to see business fall off. But in the company core, final assembly? Yes.
Judgmentality 7y ago
> No it's about money and who gets it. Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size. Right now the margins on gasoline vehicles are much better than electric vehicles, partially due to the technology being relatively immature. The internal combustion engine has more than 100 years and hundreds of billions of dollars in R&D behind its infrastructure. Apart from that, most dealerships (which is not the same as the automobile manufacturer, but they are closely related) make most of their money from maintenance and servicing vehicles. One of the big selling points of electric vehicles is that they're simpler and cost less money to maintain. A cursory analysis suggests your opening statement is actually wrong - there will be less revenue if there is widespread shift towards electric vehicles.
- rplst8 7y ago
  There might be other revenue streams like battery recycling. Might not replace ICE maintenance jobs completely, but will hopefully provide some cover.
  - Balgair 7y ago
    When/if the ECs get to be a lot cheaper than the ICEs, I think you'll see a 'fast fashion' in cars. Like with smart-phones, the accessorization will take off too; pop-sockets, cases, backgrounds, etc. Sure, it'll be less money overall, but it'll be good too.
    - jaxn 7y ago
      Or the opposite. Fast fashion increased customer frequency (both by lower cost and lower quality). The retailers used the increased visits to upsell higher margin products. (Notice how H&M, F21, Old Navy have huge accessory sections). Less maintenance and higher reliability means the fear of maintenance is not as strong of a motivator for a new car, resulting in lower customer frequency.
- pnutjam 7y ago
  I don't think "the size of the pie" refers to how much is in the pie, but how it's divided.
  - r00fus 7y ago
    It’s size of pie vs share of pie. The former is most definitely related to absolute size while the latter is % of the whole.
- firethief 7y ago
  > Right now the margins on gasoline vehicles are much better than electric vehicles, partially due to the technology being relatively immature. The internal combustion engine has more than 100 years and hundreds of billions of dollars in R&D behind its infrastructure. American automakers make all their profits on pickup trucks, because they have no foreign competition in the giant gas-guzzling family-mover-with-a-vestigial-tail market. They have little incentive to innovate, and haven't got around to electric pickups yet. There may also be technical reasons EVs would currently be less profitable, but for now in America crony-caplitalism and cultural decay alone would suffice to maintain that dynamic.
- swagasaurus-rex 7y ago
  You say that maintenance is a large part of the pie that will be lost to electric. Here's an unfounded but different perspective: Electric's reliability and return on investment will only make the transportation industry that much more profitable, and the amount of transportation will only increase as time goes on. The total size of the pie will increase. Maintenance will still be needed, especially on many generations of electric transport not limited to cars or trucks.
  - Judgmentality 7y ago
    I am genuinely curious, when has a company deliberately making a stark pivot in offering better reliability for a product line led to better sustained profits? This is not a rhetorical question - I genuinely want people to provide me with examples. I suspect it is very rare that this happens, but hope I'm wrong.
    - momokoko 7y ago
      Mercedes Benz? It's actually very common. It's just that the recent trend in private equity is to cash in past reputation for short term profits.
    - Spooky23 7y ago
      Honda and Toyota are the reference models for this premise. They completely owned multiple segments by offering a better quality product. Hyundai is another more recent-ish example. Hyundai cars were absolute garbage for a long time, they improved but the market didn’t know. So they their money where their mouth was by offering a 100k warranty. (Audi did something similar in the 80/90s). I’d be cautious in assuming that electric cars will be better. Scheduled maintenance is reduced, but there are plenty of quality and repair issues with Tesla as evidenced by consumer reports. Unscheduled maintenance is still a factor of assembly and engineering quality. Also, from a cost POV, franchise laws aren’t going away right away. So the price of that ICE maintenance dealer margin is going to be baked in, or the dealers won’t move the cars.
- windexh8er 7y ago
  > Apart from that, most dealerships (which is not the same as the automobile manufacturer, but they are closely related) make most of their money from maintenance and servicing vehicles. One of the big selling points of electric vehicles is that they're simpler and cost less money to maintain. Good. Dealerships are generally horrible consumer experiences at the best of them. They prey on upselling cars off their lot with lock in maintenance these days. "Oil changes for life" - baked into the cost of the car using the cheapest materials they can source in bulk. And once they have you locked into this built in service plan they incentivize you to come back in the door by giving you an "all other maintenance under your plan is automatically 10% off". Except that 10% doesn't matter when you control the parts and labor chain on a cost that is unknown before the discount. Dealerships are leeches of businesses focusing on the maintenance and repair of overly complex ICE engine and drivetrain. We move from thousands of parts to 10s of parts comparatively by going to electric. Electric cars will have lifespans similar to that of long haul diesel trucks, and better when you consider batteries and electric motors are easy to swap. So the dealers will feel the squeeze in about 15-20 years when those old ICE vehicles are finally in the minority and/or have been banned (hopefully). Good riddance to the dealerships we know of today. They're there to suck money out of a sold car, almost treating it as a "subscription" model these days.
woodandsteel 7y ago
>Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size As battery prices continue to fall, electrics will get cheaper than ice's, so there will be less revenue. Beyond that, fsd means many people who now own a car will use robotaxis instead, which means many fewer autos needed. In addition Tesla is working on making its cars last a million miles. So total auto industry revenue is due to go way down.
- pnutjam 7y ago
  Don't believe the hype.
  - woodandsteel 7y ago
    If you think I am wrong, then it would be helpful if you explained what you think the truth is.
    - pnutjam 7y ago
      Self driving cars and rental instead of ownership is at least 15 to 20 years out.
      - ctdonath 7y ago
        Self driving is big. Like digital photography replacing film, once people see the value they'll switch to it seemingly overnight instead of decades. (Long drives go from painful to trivial.) Rental is overrated. When I need to drive, there better be a car in my driveway with my gear in it already. Rental may work for urban, but not suburban/rural.
      - kevin_thibedeau 7y ago
        Much longer for something that is safe outside the So-Cal weather environment.
- toss1 7y ago
  The move motivated by Full Self Drive away from full-time ownership and towards robotaxis should indeed reduce the number of personally owned vehicles, but would it really reduce the number of vehicles? Instead of vehicles driving 150K miles over 11 years (~~ average car age now in US) a robotaxi could burn through 500 miles in a day or 500K miles in 2.7 years. They'd certainly need the interior replaced several times in that period. Overall miles driven, could it increase with robotaxis, if the cost per mile is less than for owned cars? I'd think so, since it would open up car usage to whole new classes of people who don't use cars much, since they can now 'buy' the usage of the car a lower rates and in the smallest package, of only the miles they need. Anyone have some data that points more strongly in either direction?
zizee 7y ago
> No it's about money and who gets it. > Owners are pushing for the first, labor wants anything except the first. There are two important actors left out of this analysis: consumers and parts suppliers. It doesn't fit the evil owner narrative, but often these efficiency gains translate largely to reduced prices for consumers. Consumers vote with their wallets, so it is often the case that unless the evil owners conspire against consumers by fixing prices, businesses are often forced to pass on efficiency gains as cheaper prices. As for suppliers, a very large portion of an electric car price is in the battery. If the size of the pie is remaining the same, then this new player is taking a lot $$ off the table, offsetting efficiency gains.
- sheeshkebab 7y ago
  Nonsense. Did you ever see an i-device get cheaper? Or a cheap car get even cheaper? There is a reason why wealth inequality has grown in recent decades, while manufacturing efficiencies increased.
  - cglace 7y ago
    Strange you chose something that is essentially a luxury item instead of commodity electronics that are cheaper than ever.
  - swashbuck1r 7y ago
    It’s also interesting you chose a segment that is already at the slower end of reaping benefits of improved productivity. Reminded me of a NPR segment this week contrasting items that have room to become cheaper vs those that don’t. https://www.npr.org/2019/10/04/767095401/the-baumol-effect-and-rising-health-care-and-education-costs https://www.npr.org/2019/10/04/767095401/the-baumol-effect-a...
  - okcando 7y ago
    By analogy, you might as well be asking if I've ever seen Rolexes get cheaper. Why are you talking about Rolexes and not watches?
  - CDSlice 7y ago
mr_toad 7y ago
> No it's about money and who gets it. You’re overlooking many points. Firstly, it’s not just a question of management vs labour. Capital needs to be compensated, or no-one will provide it. Secondly, not all labour is equal. With increasing automation, some labour will become more productive, and more highly compensated. Other labour will become obsolete. The total size of labour compensation could go either way. The size of the cake is not fixed. Greater efficiencies could lead to greater margins, greater sales and more for some, or more for all. Or it could simply lead to the same product being delivered more cheaply (and at this point, the world needs more efficient transportation, it doesn’t need even more cars). No-one, not management, not the investors, not the labour force is entitled to a particular stake in the future by virtue of the status quo. If personal automobiles were magicked out of existence by some revolutionary new device, I’d say good riddance.

shadowgovt 7y ago

In practice, it won't be quite that simple. Car companies buy components from third parties, and if entire components are no longer needed, there's no "same number of workers with fewer hours" to be had---catalytic converter companies are just going to see business fall off. But in the company core, final assembly? Yes.

Judgmentality 7y ago

> No it's about money and who gets it. Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size. Right now the margins on gasoline vehicles are much better than electric vehicles, partially due to the technology being relatively immature. The internal combustion engine has more than 100 years and hundreds of billions of dollars in R&D behind its infrastructure. Apart from that, most dealerships (which is not the same as the automobile manufacturer, but they are closely related) make most of their money from maintenance and servicing vehicles. One of the big selling points of electric vehicles is that they're simpler and cost less money to maintain. A cursory analysis suggests your opening statement is actually wrong - there will be less revenue if there is widespread shift towards electric vehicles.

rplst8 7y ago
There might be other revenue streams like battery recycling. Might not replace ICE maintenance jobs completely, but will hopefully provide some cover.
- Balgair 7y ago
  When/if the ECs get to be a lot cheaper than the ICEs, I think you'll see a 'fast fashion' in cars. Like with smart-phones, the accessorization will take off too; pop-sockets, cases, backgrounds, etc. Sure, it'll be less money overall, but it'll be good too.
  - jaxn 7y ago
    Or the opposite. Fast fashion increased customer frequency (both by lower cost and lower quality). The retailers used the increased visits to upsell higher margin products. (Notice how H&M, F21, Old Navy have huge accessory sections). Less maintenance and higher reliability means the fear of maintenance is not as strong of a motivator for a new car, resulting in lower customer frequency.
pnutjam 7y ago
I don't think "the size of the pie" refers to how much is in the pie, but how it's divided.
- r00fus 7y ago
  It’s size of pie vs share of pie. The former is most definitely related to absolute size while the latter is % of the whole.
firethief 7y ago
> Right now the margins on gasoline vehicles are much better than electric vehicles, partially due to the technology being relatively immature. The internal combustion engine has more than 100 years and hundreds of billions of dollars in R&D behind its infrastructure. American automakers make all their profits on pickup trucks, because they have no foreign competition in the giant gas-guzzling family-mover-with-a-vestigial-tail market. They have little incentive to innovate, and haven't got around to electric pickups yet. There may also be technical reasons EVs would currently be less profitable, but for now in America crony-caplitalism and cultural decay alone would suffice to maintain that dynamic.
swagasaurus-rex 7y ago
You say that maintenance is a large part of the pie that will be lost to electric. Here's an unfounded but different perspective: Electric's reliability and return on investment will only make the transportation industry that much more profitable, and the amount of transportation will only increase as time goes on. The total size of the pie will increase. Maintenance will still be needed, especially on many generations of electric transport not limited to cars or trucks.
- Judgmentality 7y ago
  I am genuinely curious, when has a company deliberately making a stark pivot in offering better reliability for a product line led to better sustained profits? This is not a rhetorical question - I genuinely want people to provide me with examples. I suspect it is very rare that this happens, but hope I'm wrong.
  - momokoko 7y ago
    Mercedes Benz? It's actually very common. It's just that the recent trend in private equity is to cash in past reputation for short term profits.
  - Spooky23 7y ago
    Honda and Toyota are the reference models for this premise. They completely owned multiple segments by offering a better quality product. Hyundai is another more recent-ish example. Hyundai cars were absolute garbage for a long time, they improved but the market didn’t know. So they their money where their mouth was by offering a 100k warranty. (Audi did something similar in the 80/90s). I’d be cautious in assuming that electric cars will be better. Scheduled maintenance is reduced, but there are plenty of quality and repair issues with Tesla as evidenced by consumer reports. Unscheduled maintenance is still a factor of assembly and engineering quality. Also, from a cost POV, franchise laws aren’t going away right away. So the price of that ICE maintenance dealer margin is going to be baked in, or the dealers won’t move the cars.
windexh8er 7y ago
> Apart from that, most dealerships (which is not the same as the automobile manufacturer, but they are closely related) make most of their money from maintenance and servicing vehicles. One of the big selling points of electric vehicles is that they're simpler and cost less money to maintain. Good. Dealerships are generally horrible consumer experiences at the best of them. They prey on upselling cars off their lot with lock in maintenance these days. "Oil changes for life" - baked into the cost of the car using the cheapest materials they can source in bulk. And once they have you locked into this built in service plan they incentivize you to come back in the door by giving you an "all other maintenance under your plan is automatically 10% off". Except that 10% doesn't matter when you control the parts and labor chain on a cost that is unknown before the discount. Dealerships are leeches of businesses focusing on the maintenance and repair of overly complex ICE engine and drivetrain. We move from thousands of parts to 10s of parts comparatively by going to electric. Electric cars will have lifespans similar to that of long haul diesel trucks, and better when you consider batteries and electric motors are easy to swap. So the dealers will feel the squeeze in about 15-20 years when those old ICE vehicles are finally in the minority and/or have been banned (hopefully). Good riddance to the dealerships we know of today. They're there to suck money out of a sold car, almost treating it as a "subscription" model these days.

woodandsteel 7y ago

>Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size As battery prices continue to fall, electrics will get cheaper than ice's, so there will be less revenue. Beyond that, fsd means many people who now own a car will use robotaxis instead, which means many fewer autos needed. In addition Tesla is working on making its cars last a million miles. So total auto industry revenue is due to go way down.

pnutjam 7y ago
Don't believe the hype.
- woodandsteel 7y ago
  If you think I am wrong, then it would be helpful if you explained what you think the truth is.
  - pnutjam 7y ago
    Self driving cars and rental instead of ownership is at least 15 to 20 years out.
    - ctdonath 7y ago
      Self driving is big. Like digital photography replacing film, once people see the value they'll switch to it seemingly overnight instead of decades. (Long drives go from painful to trivial.) Rental is overrated. When I need to drive, there better be a car in my driveway with my gear in it already. Rental may work for urban, but not suburban/rural.
    - kevin_thibedeau 7y ago
      Much longer for something that is safe outside the So-Cal weather environment.
toss1 7y ago
The move motivated by Full Self Drive away from full-time ownership and towards robotaxis should indeed reduce the number of personally owned vehicles, but would it really reduce the number of vehicles? Instead of vehicles driving 150K miles over 11 years (~~ average car age now in US) a robotaxi could burn through 500 miles in a day or 500K miles in 2.7 years. They'd certainly need the interior replaced several times in that period. Overall miles driven, could it increase with robotaxis, if the cost per mile is less than for owned cars? I'd think so, since it would open up car usage to whole new classes of people who don't use cars much, since they can now 'buy' the usage of the car a lower rates and in the smallest package, of only the miles they need. Anyone have some data that points more strongly in either direction?

zizee 7y ago

> No it's about money and who gets it. > Owners are pushing for the first, labor wants anything except the first. There are two important actors left out of this analysis: consumers and parts suppliers. It doesn't fit the evil owner narrative, but often these efficiency gains translate largely to reduced prices for consumers. Consumers vote with their wallets, so it is often the case that unless the evil owners conspire against consumers by fixing prices, businesses are often forced to pass on efficiency gains as cheaper prices. As for suppliers, a very large portion of an electric car price is in the battery. If the size of the pie is remaining the same, then this new player is taking a lot $$ off the table, offsetting efficiency gains.

sheeshkebab 7y ago
Nonsense. Did you ever see an i-device get cheaper? Or a cheap car get even cheaper? There is a reason why wealth inequality has grown in recent decades, while manufacturing efficiencies increased.
- cglace 7y ago
  Strange you chose something that is essentially a luxury item instead of commodity electronics that are cheaper than ever.
- swashbuck1r 7y ago
  It’s also interesting you chose a segment that is already at the slower end of reaping benefits of improved productivity. Reminded me of a NPR segment this week contrasting items that have room to become cheaper vs those that don’t. https://www.npr.org/2019/10/04/767095401/the-baumol-effect-and-rising-health-care-and-education-costs https://www.npr.org/2019/10/04/767095401/the-baumol-effect-a...
- okcando 7y ago
  By analogy, you might as well be asking if I've ever seen Rolexes get cheaper. Why are you talking about Rolexes and not watches?
- CDSlice 7y ago

mr_toad 7y ago

> No it's about money and who gets it. You’re overlooking many points. Firstly, it’s not just a question of management vs labour. Capital needs to be compensated, or no-one will provide it. Secondly, not all labour is equal. With increasing automation, some labour will become more productive, and more highly compensated. Other labour will become obsolete. The total size of labour compensation could go either way. The size of the cake is not fixed. Greater efficiencies could lead to greater margins, greater sales and more for some, or more for all. Or it could simply lead to the same product being delivered more cheaply (and at this point, the world needs more efficient transportation, it doesn’t need even more cars). No-one, not management, not the investors, not the labour force is entitled to a particular stake in the future by virtue of the status quo. If personal automobiles were magicked out of existence by some revolutionary new device, I’d say good riddance.