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The complete abandonment of budget models in the US is completely foreseeable from market dynamics and how the industry is structured. 1. Economies of scale ar
by AlotOfReading 1y ago
The complete abandonment of budget models in the US is completely foreseeable from market dynamics and how the industry is structured.
1. Economies of scale are the only way to build a budget car.
2. The incremental costs of adding features are nearly zero. The vast majority of price comes from the basic costs of building a legal vehicle.
3. Buyers generally won't reject a car for having features they don't care about, but they'll frequently reject a car for lacking a feature they deem important.
4. Buyers have different preferences.
In order to sell at a low price, automakers have to sell as many as possible to hit massive economies of scale. In order to sell that many, they need to please a huge number of buyers, which means they add a whole bunch of cheap features to satisfy as many buyers as they can without cannibalizing their higher-tier offerings.
The other side of this is the price point that western OEMs can actually hit with economies of scale has climbed significantly in recently decades, in part due to inflation / wage pressures, but mainly due to massive institutional inefficiencies. Mary Barra's compensation alone adds several dollars to the price of each GM vehicle. Legally mandated dealer margins and fees add tens of percent to the price that consumers pay. The inefficiencies of spreading production for tax purposes across state and international borders adds more cost. So on and so forth, and the market feedback mechanisms to correct these issues are intentionally hampered by policy decisions to favor the current status quo.
Change in the market needs support at the regulatory level.
- lenerdenator 1y agoDon't forget the way we handle fuel economy standards in the US... or did, given the way those regulations are being repealed for some reason. Petroleum is a critical resource and most countries manage its use in automobiles for fuel in a fairly direct way: They tax the living shit out of gasoline and diesel. If you use more, you pay more. You have incentive to buy a smaller, more basic car because they will ultimately cost you less. But not here. We gave exceptions on light trucks because that's all the big three could competently produce back when fuel economy standards were being introduced and we were getting our brains beaten in by the Japanese. Making more fuel-efficient vehicles requires R&D, and R&D spend is money not sent to a shareholder. Since the bigger vehicles don't count towards CAFE and smaller vehicles do, guess which vehicles the big three push harder to consumers?
- AlotOfReading 1y agoThat's a factor, though it's worth pointing out that California and Canada both have fuel taxes substantially higher than other parts of North America and light trucks/SUVs continue to outsell sedans significantly. Fuel taxes aren't irrelevant (sedans sell relatively better there than in other regions), but it's overwhelmed by buyer preference.
- Henchman21 1y agoIt’s beginning to feel like a survival tactic. I’ve driven an Accord since ~‘08 and I am actively considering a huge truck just so I can see what’s happening on the road again.
- shaftway 1y agoThe cost of living in California makes the gas taxes irrelevant. Let's compare them. I've picked Vallejo, CA versus Wheeling, IL. Both are about 30 miles from the nearest major city (San Francisco / Chicago). Both are pretty suburban. Gas in Vallejo is about $4.09 / gal, versus $3.49 (according to GasBuddy.com). The average house in Vallejo is about $539,000, versus Wheeling at about $307,000 (according to Zillow) The "minimum annual income to live comfortably" in Vallejo is $96,120, versus $46,080 in Wheeling (according to BestPlaces.net). Side note: crime in Wheeling is significantly lower than Vallejo. These places were chosen essentially at random, but meant to be comparable, and the differences are pretty stark. Houses are slightly less than twice as expensive in Vallejo, but the cost of living is more than twice as expensive by a comfortable margin. In terms of living costs, for them to be comparable, Vallejo's gas would need to be a little over $7 / gal, just for you to start seeing meaningful effects. TL;DR - California's gas taxes are basically meaningless when it comes to guiding buyers' decisions.
- hobofan 1y ago5. Americans widely have a high willingness to (over)spend on cars paired with a high affinity for debt
- afavour 1y agoIn addition to this I think financing plays a huge factor. If an extra feature adds $2,000 to the cost of a car people will think twice. If it adds $5 to a car payment (that's already astronomical if you add it up, which they won't) they'll shrug and sign on the line.
- csours 1y ago> 3. Buyers generally won't reject a car for having features they don't care about, but they'll frequently reject a car for lacking a feature they deem important. 4. Buyers have different preferences. Yup. I don't care about the radio, and you don't care about manual windows, but you care about the radio, and I care about manual windows.
- Gibbon1 1y agoMy theory is in the US light vehicle sales have been flat for 40 years. Yeah sales fluctuate depending on how confident people are. Only way then to increase revenue is to sell more car.
- jopsen 1y agoIf you care are about cost, you buy a used car -- not a basic model. If you buy a new car, you're already paying a premium. If you're willing to pay a premium, you were probably not looking for a basic model in the first place.
- jopsen 1y agoEdit: I'd be interested in a more basic car, even new, not because of cost. But because I don't want my car to be a gadget that is outdated in 3 years. I'll buy a new phone for the fun of it. Not a new car. So don't put a tablet in my car :) Sadly, I'd suspect a tablet is actually cheaper than physical buttons.