40 ms·

> 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. 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.

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.