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Autoworker salaries have very little effect on the price of cars. The final assembly labor costs are a single digit percentage of the sale price. The corporate

Autoworker salaries have very little effect on the price of cars. The final assembly labor costs are a single digit percentage of the sale price. The corporate workers (myself included) are about the same again, despite being a much smaller percentage of the workforce. The majority of costs are just the price of raw materials and manufacturing anything, whether in the US or abroad. What Chinese OEMs are doing isn't anything secret, it's just optimizing the other things to hit those price targets. Cutting out dealerships, better value engineering, lower executive/corporate salaries and benefits, cheaper electronics, limited features, vertical integration, and most importantly being willing to sell lower margin vehicles.

sandworm101 2y ago
And much reduced dividend payments. It is the difference between prioritizing market share over profits. Where an American company sees profits as an end goal, a Chinese manufacturer sees profits as a tool to enable expansion and development. One is working for shareholders, the other to advance national goals.
- nickff 2y ago
  Many American companies have reinvested their revenue into R&D; notable large examples include Google and Amazon. I rode a Waymo today!
Mengkudulangsat 2y ago
Every single expense in your P&L is ultimately salaries. If it's not salaries in your P&L, then it's salaries in your supplier's P&L, or salaries your supplier's supplier's P&L.
- AlotOfReading 2y ago
  Once you get more than a couple layers down in the supply chain, it's the same workers being paid the same wages for both American and foreign OEMs. The "labor price" of the same grade steel isn't vastly different for BYD and GM.
- Fruitmaniac 2y ago
  Raw materials costs are mostly based on scarcity, not salaries. If it weren't, steel would cost more that gold because it goes through more processing.
  - adrianN 2y ago
    Scarcity means that you require more work to mine the same amount of material.
    - ivell 2y ago
      There is also economies of scale. Steel is much more useful than gold. This means investments on improving mining and processing will lower the costs in the long run.
      - wqaatwt 2y ago
        Is processing and manufacturing steel actually cheaper than gold at any scale? Gold is a very easy metal to work with. While iron into steel especially on a large scale isn’t trivial. I doubt the cost of labor has a meaningful impact on the price of gold.
    - wqaatwt 2y ago
      I’m not sure that’s necessarily true (or at all relevant) for a lot of precious or rate materials like gold. I don’t really know but I’d bet that gold requires much, much less labor to process than steel. It’s just much more scarce so the people who own the mines can charge more for it.
      - laurencerowe 2y ago
        Even high grade gold deposits are only around 10g/tonne or 1 part per 100,000 so you have to process a huge amount of material to recover a tiny amount of gold. Total world gold production was just 3000 tonnes in 2023. By contrast a tonne of steel requires about 2 tonnes of iron ore and 0.8 tonnes of coal and 0.1 tonnes of limestone, all bulk minerals dug out of the ground. Total world steel production was 1.9 billion tonnes in 2023.
- Epa095 2y ago
  You forgot energy.
xnx 2y ago
GM's health-care costs average $1500 per vehicle.
- AlotOfReading 2y ago
  Those numbers are two decades old. Shortly after they were made public there was a union negotiation with UAW where new employees were permitted to have far fewer healthcare and retirement benefits. It's been 20 years and GM has maintained a regular cadence of layoffs and buyouts for tenured workers, so the modern workforce is almost entirely those much cheaper employees.
mattmaroon 2y ago
It's not just that, though I'm sure the American/European car makers are still in the $1,000+ range in extra labor costs. China's subsidized their EV market with tens of billions directly. On top of that, they subsidize critical components and materials. They also keep their currency artifically devalued. An American comnpany could do everything BYD does and still not come remotely close on price.

sandworm101 2y ago

And much reduced dividend payments. It is the difference between prioritizing market share over profits. Where an American company sees profits as an end goal, a Chinese manufacturer sees profits as a tool to enable expansion and development. One is working for shareholders, the other to advance national goals.

nickff 2y ago
Many American companies have reinvested their revenue into R&D; notable large examples include Google and Amazon. I rode a Waymo today!

Mengkudulangsat 2y ago

Every single expense in your P&L is ultimately salaries. If it's not salaries in your P&L, then it's salaries in your supplier's P&L, or salaries your supplier's supplier's P&L.

AlotOfReading 2y ago
Once you get more than a couple layers down in the supply chain, it's the same workers being paid the same wages for both American and foreign OEMs. The "labor price" of the same grade steel isn't vastly different for BYD and GM.
Fruitmaniac 2y ago
Raw materials costs are mostly based on scarcity, not salaries. If it weren't, steel would cost more that gold because it goes through more processing.
- adrianN 2y ago
  Scarcity means that you require more work to mine the same amount of material.
  - ivell 2y ago
    There is also economies of scale. Steel is much more useful than gold. This means investments on improving mining and processing will lower the costs in the long run.
    - wqaatwt 2y ago
      Is processing and manufacturing steel actually cheaper than gold at any scale? Gold is a very easy metal to work with. While iron into steel especially on a large scale isn’t trivial. I doubt the cost of labor has a meaningful impact on the price of gold.
  - wqaatwt 2y ago
    I’m not sure that’s necessarily true (or at all relevant) for a lot of precious or rate materials like gold. I don’t really know but I’d bet that gold requires much, much less labor to process than steel. It’s just much more scarce so the people who own the mines can charge more for it.
    - laurencerowe 2y ago
      Even high grade gold deposits are only around 10g/tonne or 1 part per 100,000 so you have to process a huge amount of material to recover a tiny amount of gold. Total world gold production was just 3000 tonnes in 2023. By contrast a tonne of steel requires about 2 tonnes of iron ore and 0.8 tonnes of coal and 0.1 tonnes of limestone, all bulk minerals dug out of the ground. Total world steel production was 1.9 billion tonnes in 2023.
Epa095 2y ago
You forgot energy.

xnx 2y ago

GM's health-care costs average $1500 per vehicle.

AlotOfReading 2y ago
Those numbers are two decades old. Shortly after they were made public there was a union negotiation with UAW where new employees were permitted to have far fewer healthcare and retirement benefits. It's been 20 years and GM has maintained a regular cadence of layoffs and buyouts for tenured workers, so the modern workforce is almost entirely those much cheaper employees.

mattmaroon 2y ago

It's not just that, though I'm sure the American/European car makers are still in the $1,000+ range in extra labor costs. China's subsidized their EV market with tens of billions directly. On top of that, they subsidize critical components and materials. They also keep their currency artifically devalued. An American comnpany could do everything BYD does and still not come remotely close on price.