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The details are important, though. The industry factors R&D in to gross margin, and typically reports of per unit losses include it. If you spend $1bn to devel
by reitzensteinm 6y ago
The details are important, though. The industry factors R&D in to gross margin, and typically reports of per unit losses include it.
If you spend $1bn to develop a car you sell 100k of break even, you just lost $10k per car. But that doesn't mean you're going to lose twice as much if you double the production.
If they were going to lose 10-15k per incremental unit, that's horrific and I'd love to know the details, that's why I'm asking.
- cptskippy 6y agoI honestly don't know how to reconcile R&D costs but I dislike how they're applied per unit today. R&D is a sunk cost and the technology gained from it can be applied beyond the original scope. I get it because bean counters want to point fingers when it comes to penny pinching. It's not as if GM goes back and adjusts the R&D % applied to the 97 Corvette when they sell an LS engine. The R&D cost of every subsequent vehicle that reuses something off the shelf is going to be cheaper.
- reitzensteinm 6y agoI'm not defending the way they amortize, but if you don't take it in to account, it can lead to some poor conclusions. Tesla R&D is so ridiculously efficient. I wouldn't be surprised if a Model 3 from scratch costs traditional auto companies an order of magnitude more to develop. So the first EV models inevitably come out, amortizing a large amount of R&D over a limited run, and it looks like an absolute disaster for margins. It doesn't necessarily mean things aren't going well - although it certainly can!