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Still, there are only 2 options: 1. This scenario makes the car cheaper for the poorer customers, so they benefit from it. Or at least, it doesn't increase the

Still, there are only 2 options: 1. This scenario makes the car cheaper for the poorer customers, so they benefit from it. Or at least, it doesn't increase the price, so they get the added benefits of being able to upgrade their car more easily and cheaply than going to back to the shop to install the extra hardware. 2. Or, this situation makes the car more expensive for the poorer customers, but since they are much more price sensitive, it is very likely that they will choose to go to a competitor who actually sells them a similar car without the additional hardware (therefore cheaper), or without subscriptions. Unless of course, there was a monopoly or cartel, but I don't think we are in that situation. The fact that these companies are going in this direction, indicates that they are able to profit more in this situation, which indicates that they are providing more value (again, unless their customers didn't have a reasonable choice). It's not proof, but it's evidence that there are advantages. That said, it's not as simple as I've just put, because sometimes it can be easy to trick people into making a worse choice for themselves in the long term, e.g. due to marketing, or buying things with credit or as subscriptions instead of one-time payments, for example.... which can definitely apply in this case!

jjulius 3y ago
>1. This scenario makes the car cheaper for the poorer customers, so they benefit from it. Pardon my ignorance, but if the cost of the hardware is already baked into the cost of the cheapest options, which means they are paying for all of the hardware they have in their cars, including the hardware they can't use, how do they benefit? Cost, in that situation, is determined simply by the need to assemble efficiently. I can't see how the consumer benefits in that scenario by paying for something they can't use. Responding to your edit: >Or at least, it doesn't increase the price, so they get the added benefits of being able to upgrade their car more easily and cheaply than going to back to the shop to install the extra hardware. Again, pardon my ignorance, but it feels disingenuous to call it "an upgrade" if the car already has the equipment, especially to be charged more to use what you've already paid for. Am I crazy?
- fnordpiglet 3y ago
  For 1, pricing in these scenarios assumes a portfolio effect on the total cost of production for all units sold. Premium features are built into every car, which enables customers to enable them at a later date, but the cost isn’t passed on. Instead the premium feature is marked up to cover costs plus profit for all cars sold with that build. As mentioned elsewhere there are mass production efficiencies involved as well, reducing the unit cost for all cars as there aren’t N variants being built but a single mass production line that’s invariant. The residual costs are covered by the minority who buy the premium features for every unit, enabled or not, and it’s priced that way. This translates into overall cheaper cars for people without the feature enabled, and cars with a better resale value because those features can be still enabled in a secondary market sale. It also translates into cheaper cars for the premium car purchaser as well even though they subsidize the feature build in all cars enabled or not.
- someplaceguy 3y ago
  I don't think I understand your question. The customer can be receiving extra hardware and still be paying a cheaper price due to the assembly line efficiencies you mentioned, as well as the support costs of having just one new car model every year instead of 10 slightly different car models every year. In other words, the additional hardware costs might be lower than the other cost reductions due to the increased efficiency. Furthermore, even if the customer is paying exactly the same as before for the car (but now they are getting additional hardware which they can't use), it would be cheaper and much easier for these customers to upgrade their car if they so choose. This would also mean higher profits for the car manufacturers, which allows them to reduce the initial purchase price of the cars to compete more effectively in the market. And if it turns out that the car is more expensive due to having to buy the additional hardware, since these customers are price-sensitive they can just go to a competitor who would sell them a car without the additional hardware, therefore cheaper. EDIT: > Again, pardon my ignorance, but it feels disingenuous to call it "an upgrade" if the car already has the equipment, especially to be charged more to use what you've already paid for. Perhaps that's because you're only considering the cost of the hardware and not all the other costs of producing and supporting all the different car models for every combination of hardware features each customer would choose? I mean, yeah, sure, car companies could just sell a car with all the hardware features enabled and charge all customers the same, but then the price of the cars would be higher for those who don't need all those features, as the company wouldn't be able to charge higher prices for premium customers to subsidize the cars for the "poorer" customers.

jjulius 3y ago

>1. This scenario makes the car cheaper for the poorer customers, so they benefit from it. Pardon my ignorance, but if the cost of the hardware is already baked into the cost of the cheapest options, which means they are paying for all of the hardware they have in their cars, including the hardware they can't use, how do they benefit? Cost, in that situation, is determined simply by the need to assemble efficiently. I can't see how the consumer benefits in that scenario by paying for something they can't use. Responding to your edit: >Or at least, it doesn't increase the price, so they get the added benefits of being able to upgrade their car more easily and cheaply than going to back to the shop to install the extra hardware. Again, pardon my ignorance, but it feels disingenuous to call it "an upgrade" if the car already has the equipment, especially to be charged more to use what you've already paid for. Am I crazy?

fnordpiglet 3y ago
For 1, pricing in these scenarios assumes a portfolio effect on the total cost of production for all units sold. Premium features are built into every car, which enables customers to enable them at a later date, but the cost isn’t passed on. Instead the premium feature is marked up to cover costs plus profit for all cars sold with that build. As mentioned elsewhere there are mass production efficiencies involved as well, reducing the unit cost for all cars as there aren’t N variants being built but a single mass production line that’s invariant. The residual costs are covered by the minority who buy the premium features for every unit, enabled or not, and it’s priced that way. This translates into overall cheaper cars for people without the feature enabled, and cars with a better resale value because those features can be still enabled in a secondary market sale. It also translates into cheaper cars for the premium car purchaser as well even though they subsidize the feature build in all cars enabled or not.
someplaceguy 3y ago
I don't think I understand your question. The customer can be receiving extra hardware and still be paying a cheaper price due to the assembly line efficiencies you mentioned, as well as the support costs of having just one new car model every year instead of 10 slightly different car models every year. In other words, the additional hardware costs might be lower than the other cost reductions due to the increased efficiency. Furthermore, even if the customer is paying exactly the same as before for the car (but now they are getting additional hardware which they can't use), it would be cheaper and much easier for these customers to upgrade their car if they so choose. This would also mean higher profits for the car manufacturers, which allows them to reduce the initial purchase price of the cars to compete more effectively in the market. And if it turns out that the car is more expensive due to having to buy the additional hardware, since these customers are price-sensitive they can just go to a competitor who would sell them a car without the additional hardware, therefore cheaper. EDIT: > Again, pardon my ignorance, but it feels disingenuous to call it "an upgrade" if the car already has the equipment, especially to be charged more to use what you've already paid for. Perhaps that's because you're only considering the cost of the hardware and not all the other costs of producing and supporting all the different car models for every combination of hardware features each customer would choose? I mean, yeah, sure, car companies could just sell a car with all the hardware features enabled and charge all customers the same, but then the price of the cars would be higher for those who don't need all those features, as the company wouldn't be able to charge higher prices for premium customers to subsidize the cars for the "poorer" customers.