7 ms·

Maybe they need to pay more then? or it's not actually an issue. I wonder what the margin on a car and associated components is. “The problem is, we are lower

Maybe they need to pay more then? or it's not actually an issue. I wonder what the margin on a car and associated components is. “The problem is, we are lower in the chain than companies like Apple and HP,” said one executive. “The automotive industry doesn’t pay that much for its semiconductors.”

aidenn0 6y ago
I have witnessed automotive companies looking at shaving fractions of pennies off of BoMs for ECUs. Obviously cost savings is only somewhat related to margins, but that's a datapoint. It would not surprise me to find out that Apple makes more money per iPhone manufactured than Toyota does per Corrolla, but I could definitely be wrong about that.
- WanderPanda 6y ago
  If I remember correctly VW makes 400 Euro per car they sell in Germany (pre covid). I believe its just another example of Parkinsons Law (https://en.wikipedia.org/wiki/Parkinson%27s_law https://en.wikipedia.org/wiki/Parkinson%27s_law) and hope the legacy oems go bust rather sooner than later to free up the massive ressources they allocated inefficiently all the time.
  - ChuckNorris89 6y ago
    Budget car makers are more like gaming console manufacturers and SaaS subscription services every year. They make almost no money when they sell you the car but they make all of it back from overpriced optional extras, the maintenance services you have to take at the overpriced authorized dealer and through their financing services. I live in Europe and keep pondering moving to a bigger city and downsize just to give up the need of a car since the maintenance and the rest of the costs are going up faster than my pay. I can see a lot of low-middle class people getting screwed by the rising costs of car ownership long term.
  - notJim 6y ago
    How is that Parkinson's law and not a success story of market competition? Isn't it that the highly competitive car market forces legacy manufacturers to accept lower margins? If anything, we should welcome greater competition to drive down the margins of electric car makers.
    - ahepp 6y ago
      Yes, it's true that the margins were low, which is a strong indicator for competition. However, I think the weakness in electrification and software makes it clear that there's little true innovation. Legacy automotive turned into a stable market, and participants were happy to fight over pennies. Eventually US manufacturers realized they couldn't compete and needed to change, but even then decided to retreat into trucks and SUVs rather than truly innovate.
      - the_real_sparky 6y ago
        It seems like anyone that had over 50% of the market share of large SUVs and made 30% profit on each one would probably double down and ride that gravy train to the end? https://www.autonews.com/sales/gm-living-large https://www.autonews.com/sales/gm-living-large
      - imtringued 6y ago
        I see ID.3s everywhere. They are more common than any other electric car. They also tends to blend in with other VW vehicles. >However, I think the weakness in electrification and software makes it clear that there's little true innovation. Legacy automotive turned into a stable market, and participants were happy to fight over pennies If you sell millions of cars you can hire a whole team of penny pinchers who will then save your business 10s of millions dollars. Every penny pays for a $100k salary. If anything the semi conductor shortage is causing downstream issues in VW's ability to produce more ID.3s.
hippich 6y ago
which is weird, because $1k - $2k retail prices per some electronic modules, like ECU, are not unusual (couple friends had issues with their car where the only solution is the replacement of the ECU). That is the price range of pretty decent laptops, which includes not only chips and such, but also display and batteries.
- maxerickson 6y ago
  Huge markup on the ECU. They are sold into a market where $1000 for an ECU restores thousands of dollars of other stuff to working condition. There's also a whole lot of other chips in cars these days.
  - Scoundreller 6y ago
    That's exactly it. Nobody else can duplicate the part, and it turns a brick into something valuable. People will pay up to $WhatTheNonBrickIsWorth to make that happen.
- HeyLaughingBoy 6y ago
  Don't assume that the retail price of a replacement part is the BOM cost used by the manufacturer. It's likely integer multiples (if not an entire order of magnitude) higher. e.g., the replacement cost of a control board in my furnace is around $800, IIRC. I could probably build it for about $30 in parts (ignoring the software in the microcontroller). However, to someone who's evaluating buying a new furnace vs. repair, that $800 is a hell of a lot cheaper than a new furnace.
  - extrapickles 6y ago
    The control board for my furnace is ~$150 (gas/condensing). $800 sounds like that includes labor of installation since they are somewhat annoying to replace as you practically need to take half the furnace apart to do so.
  - bluGill 6y ago
    When you buy a replacement you are paying for their entire replacement parts chain. Try buying a replacement part for a 10year old computer, if you can it will be more than a new computer.

aidenn0 6y ago

I have witnessed automotive companies looking at shaving fractions of pennies off of BoMs for ECUs. Obviously cost savings is only somewhat related to margins, but that's a datapoint. It would not surprise me to find out that Apple makes more money per iPhone manufactured than Toyota does per Corrolla, but I could definitely be wrong about that.

WanderPanda 6y ago
If I remember correctly VW makes 400 Euro per car they sell in Germany (pre covid). I believe its just another example of Parkinsons Law (https://en.wikipedia.org/wiki/Parkinson%27s_law https://en.wikipedia.org/wiki/Parkinson%27s_law) and hope the legacy oems go bust rather sooner than later to free up the massive ressources they allocated inefficiently all the time.
- ChuckNorris89 6y ago
  Budget car makers are more like gaming console manufacturers and SaaS subscription services every year. They make almost no money when they sell you the car but they make all of it back from overpriced optional extras, the maintenance services you have to take at the overpriced authorized dealer and through their financing services. I live in Europe and keep pondering moving to a bigger city and downsize just to give up the need of a car since the maintenance and the rest of the costs are going up faster than my pay. I can see a lot of low-middle class people getting screwed by the rising costs of car ownership long term.
- notJim 6y ago
  How is that Parkinson's law and not a success story of market competition? Isn't it that the highly competitive car market forces legacy manufacturers to accept lower margins? If anything, we should welcome greater competition to drive down the margins of electric car makers.
  - ahepp 6y ago
    Yes, it's true that the margins were low, which is a strong indicator for competition. However, I think the weakness in electrification and software makes it clear that there's little true innovation. Legacy automotive turned into a stable market, and participants were happy to fight over pennies. Eventually US manufacturers realized they couldn't compete and needed to change, but even then decided to retreat into trucks and SUVs rather than truly innovate.
    - the_real_sparky 6y ago
      It seems like anyone that had over 50% of the market share of large SUVs and made 30% profit on each one would probably double down and ride that gravy train to the end? https://www.autonews.com/sales/gm-living-large https://www.autonews.com/sales/gm-living-large
    - imtringued 6y ago
      I see ID.3s everywhere. They are more common than any other electric car. They also tends to blend in with other VW vehicles. >However, I think the weakness in electrification and software makes it clear that there's little true innovation. Legacy automotive turned into a stable market, and participants were happy to fight over pennies If you sell millions of cars you can hire a whole team of penny pinchers who will then save your business 10s of millions dollars. Every penny pays for a $100k salary. If anything the semi conductor shortage is causing downstream issues in VW's ability to produce more ID.3s.

hippich 6y ago

which is weird, because $1k - $2k retail prices per some electronic modules, like ECU, are not unusual (couple friends had issues with their car where the only solution is the replacement of the ECU). That is the price range of pretty decent laptops, which includes not only chips and such, but also display and batteries.

maxerickson 6y ago
Huge markup on the ECU. They are sold into a market where $1000 for an ECU restores thousands of dollars of other stuff to working condition. There's also a whole lot of other chips in cars these days.
- Scoundreller 6y ago
  That's exactly it. Nobody else can duplicate the part, and it turns a brick into something valuable. People will pay up to $WhatTheNonBrickIsWorth to make that happen.
HeyLaughingBoy 6y ago
Don't assume that the retail price of a replacement part is the BOM cost used by the manufacturer. It's likely integer multiples (if not an entire order of magnitude) higher. e.g., the replacement cost of a control board in my furnace is around $800, IIRC. I could probably build it for about $30 in parts (ignoring the software in the microcontroller). However, to someone who's evaluating buying a new furnace vs. repair, that $800 is a hell of a lot cheaper than a new furnace.
- extrapickles 6y ago
  The control board for my furnace is ~$150 (gas/condensing). $800 sounds like that includes labor of installation since they are somewhat annoying to replace as you practically need to take half the furnace apart to do so.
- bluGill 6y ago
  When you buy a replacement you are paying for their entire replacement parts chain. Try buying a replacement part for a 10year old computer, if you can it will be more than a new computer.