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Comment by TomMckenny | Hacker News Reader

No it's about money and who gets it. Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size.

That manufacturing becomes more efficient is no surprise: it always has. The question is whether they have fewer workers at the same compensation level, fewer workers at a higher compensation level or the same number of workers with fewer hours.

Owners are pushing for the first, labor wants anything except the first. And while Keynes envisioned the last, that has clearly no been allowed to happen. It is an archetype case of who benefits from technical improvements and forces driving inequality.

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> No it's about money and who gets it.

> Owners are pushing for the first, labor wants anything except the first.

There are two important actors left out of this analysis: consumers and parts suppliers.

It doesn't fit the evil owner narrative, but often these efficiency gains translate largely to reduced prices for consumers. Consumers vote with their wallets, so it is often the case that unless the evil owners conspire against consumers by fixing prices, businesses are often forced to pass on efficiency gains as cheaper prices.

As for suppliers, a very large portion of an electric car price is in the battery. If the size of the pie is remaining the same, then this new player is taking a lot $$ off the table, offsetting efficiency gains.

>There are two important actors left out of this analysis: consumers and parts suppliers.

This is indeed plausible and has happened for other commodities but note: 1) since the model-T, inflation adjusted consumer prices for automobiles have never dropped and 2) car manufacturers have historically replicated or bought any serious profit centers in their supply chain.

>Evil

Shareholders act in their interest, employees act in theirs. Often everyone ends up fairly satisfied. Is that not how the system is supposed to work and is describing it plainly without effusive praise now automatically suspect?

Would it still be legal to produce a model-T? I imagine it would run afoul of all sorts of quality and safety regulations.

That might be linked to the lack of price reductions. I selling a model-T were still legal it would be likely be laughably cheap.

A lot of technology improvements that would have reduced prices are eaten by increased government regulation. The consensus position is that that is a good outcome.

No, it would be unsalable. Emissions, safety, etc. Even if you made it by hand at an art-museum level of fabrication quality...no first-world government would allow its sale as a passenger vehicle.

> This is indeed plausible and has happened for other commodities but note: 1) since the model-T, inflation adjusted consumer prices for automobiles have never dropped and 2) car manufacturers have historically replicated or bought any serious profit centers in their supply chain.

While that may be true, the word 'car' is hiding all of the consumer surplus. Cars are not simply repackaged model Ts. Todays cars are orders of magnitude better in myriad ways than a model T. The fact that the price merely hasn't dropped in inflation adjusted terms really means nothing here. What consumers are getting for their money has increased dramatically.

Yes of course cars now are vastly superior. I was responding to the claim that the shift to electric will reduce gross revenue which reduce the sticker price and so explain any workforce reduction.

So we clearly agree, sticker price has not gone down since the assembly line. So to say it is happening now is not really justified. Especially since, far from say the Yugo approach, electric currently is very much billed as an improvement over petroleum (correctly imo). But while cost of ownership maybe less, nowhere is the sticker price pitched as a cheap alternative to petroleum. And this is what affects manufacturers and the point I was addressing.

>>Evil

> Shareholders act in their interest, employees act in theirs. Often everyone ends up fairly satisfied. Is that not how the system is supposed to work and is describing it plainly without effusive praise now automatically suspect?

Apologies, I think I mistakenly inserted an implied value judgement when reading your original post. Rereading your post I see that your words can be read with a neutral tone.

Nonsense. Did you ever see an i-device get cheaper? Or a cheap car get even cheaper? There is a reason why wealth inequality has grown in recent decades, while manufacturing efficiencies increased.

This is incorrect. The inflation adjusted price of the first smart phone is ~$600. I can get a vastly more capable device shipped to my house for $129 unlocked for any carrier. The most barebones available car has steadily dropped in price relative to average income while becoming drastically safer, more reliable, and lasting longer.

The cheap car isn't the same cheap car though. Try finding a 2-door sedan with manual controls and an AM/FM radio. Even the cheapest new car has bluetooth entertainment controls and backup cameras. It also has airbags in every zone and a decent crash rating.

Nobody produces the cheap base-model car of yore, if they did they could easily do so for well under 10k. But that doesn't support the bottom line especially when you have to cut in the dealership.

The Nissan Versa is about as close as you can get and it comes in at about $10-11k.

To be clear, cheap base-model cars are still being manufactured and sold, just not for the U.S. and other wealthy markets. They’re being sold in droves in India, Africa, Asia, and Central and South America.

The NHTSA has mandated backup cameras in all vehicles sold in the US as of 2018, I believe.

Apple actually has made new iPhone 11 $50 cheaper than the phone it replaced.

Furthermore smartphones in general _have_ been getting cheaper. It's only top of the line flagships that are getting more expensive while also being much more powerful and with better (AKA more expensive) tech inside them.

By analogy, you might as well be asking if I've ever seen Rolexes get cheaper. Why are you talking about Rolexes and not watches?

Strange you chose something that is essentially a luxury item instead of commodity electronics that are cheaper than ever.

It’s also interesting you chose a segment that is already at the slower end of reaping benefits of improved productivity. Reminded me of a NPR segment this week contrasting items that have room to become cheaper vs those that don’t. https://www.npr.org/2019/10/04/767095401/the-baumol-effect-a...

> No it's about money and who gets it. Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size.

Right now the margins on gasoline vehicles are much better than electric vehicles, partially due to the technology being relatively immature. The internal combustion engine has more than 100 years and hundreds of billions of dollars in R&D behind its infrastructure.

Apart from that, most dealerships (which is not the same as the automobile manufacturer, but they are closely related) make most of their money from maintenance and servicing vehicles. One of the big selling points of electric vehicles is that they're simpler and cost less money to maintain.

A cursory analysis suggests your opening statement is actually wrong - there will be less revenue if there is widespread shift towards electric vehicles.

> Apart from that, most dealerships (which is not the same as the automobile manufacturer, but they are closely related) make most of their money from maintenance and servicing vehicles. One of the big selling points of electric vehicles is that they're simpler and cost less money to maintain.

Good. Dealerships are generally horrible consumer experiences at the best of them. They prey on upselling cars off their lot with lock in maintenance these days. "Oil changes for life" - baked into the cost of the car using the cheapest materials they can source in bulk. And once they have you locked into this built in service plan they incentivize you to come back in the door by giving you an "all other maintenance under your plan is automatically 10% off". Except that 10% doesn't matter when you control the parts and labor chain on a cost that is unknown before the discount. Dealerships are leeches of businesses focusing on the maintenance and repair of overly complex ICE engine and drivetrain. We move from thousands of parts to 10s of parts comparatively by going to electric. Electric cars will have lifespans similar to that of long haul diesel trucks, and better when you consider batteries and electric motors are easy to swap. So the dealers will feel the squeeze in about 15-20 years when those old ICE vehicles are finally in the minority and/or have been banned (hopefully).

Good riddance to the dealerships we know of today. They're there to suck money out of a sold car, almost treating it as a "subscription" model these days.

> Right now the margins on gasoline vehicles are much better than electric vehicles, partially due to the technology being relatively immature. The internal combustion engine has more than 100 years and hundreds of billions of dollars in R&D behind its infrastructure.

American automakers make all their profits on pickup trucks, because they have no foreign competition in the giant gas-guzzling family-mover-with-a-vestigial-tail market. They have little incentive to innovate, and haven't got around to electric pickups yet. There may also be technical reasons EVs would currently be less profitable, but for now in America crony-caplitalism and cultural decay alone would suffice to maintain that dynamic.

You say that maintenance is a large part of the pie that will be lost to electric.

Here's an unfounded but different perspective: Electric's reliability and return on investment will only make the transportation industry that much more profitable, and the amount of transportation will only increase as time goes on. The total size of the pie will increase.

Maintenance will still be needed, especially on many generations of electric transport not limited to cars or trucks.

I am genuinely curious, when has a company deliberately making a stark pivot in offering better reliability for a product line led to better sustained profits? This is not a rhetorical question - I genuinely want people to provide me with examples. I suspect it is very rare that this happens, but hope I'm wrong.

Honda and Toyota are the reference models for this premise. They completely owned multiple segments by offering a better quality product.

Hyundai is another more recent-ish example. Hyundai cars were absolute garbage for a long time, they improved but the market didn’t know. So they their money where their mouth was by offering a 100k warranty. (Audi did something similar in the 80/90s).

I’d be cautious in assuming that electric cars will be better. Scheduled maintenance is reduced, but there are plenty of quality and repair issues with Tesla as evidenced by consumer reports. Unscheduled maintenance is still a factor of assembly and engineering quality.

Also, from a cost POV, franchise laws aren’t going away right away. So the price of that ICE maintenance dealer margin is going to be baked in, or the dealers won’t move the cars.

Mercedes Benz? It's actually very common. It's just that the recent trend in private equity is to cash in past reputation for short term profits.

There might be other revenue streams like battery recycling. Might not replace ICE maintenance jobs completely, but will hopefully provide some cover.

When/if the ECs get to be a lot cheaper than the ICEs, I think you'll see a 'fast fashion' in cars. Like with smart-phones, the accessorization will take off too; pop-sockets, cases, backgrounds, etc. Sure, it'll be less money overall, but it'll be good too.

Or the opposite. Fast fashion increased customer frequency (both by lower cost and lower quality). The retailers used the increased visits to upsell higher margin products. (Notice how H&M, F21, Old Navy have huge accessory sections).

Less maintenance and higher reliability means the fear of maintenance is not as strong of a motivator for a new car, resulting in lower customer frequency.

I don't think "the size of the pie" refers to how much is in the pie, but how it's divided.

It’s size of pie vs share of pie. The former is most definitely related to absolute size while the latter is % of the whole.

In practice, it won't be quite that simple. Car companies buy components from third parties, and if entire components are no longer needed, there's no "same number of workers with fewer hours" to be had---catalytic converter companies are just going to see business fall off.

But in the company core, final assembly? Yes.

>Unless electric cars are going to generate less revenue than petroleum based, which they won't, the pie is the same size

As battery prices continue to fall, electrics will get cheaper than ice's, so there will be less revenue. Beyond that, fsd means many people who now own a car will use robotaxis instead, which means many fewer autos needed. In addition Tesla is working on making its cars last a million miles. So total auto industry revenue is due to go way down.

The move motivated by Full Self Drive away from full-time ownership and towards robotaxis should indeed reduce the number of personally owned vehicles, but would it really reduce the number of vehicles?

Instead of vehicles driving 150K miles over 11 years (~~ average car age now in US) a robotaxi could burn through 500 miles in a day or 500K miles in 2.7 years. They'd certainly need the interior replaced several times in that period.

Overall miles driven, could it increase with robotaxis, if the cost per mile is less than for owned cars? I'd think so, since it would open up car usage to whole new classes of people who don't use cars much, since they can now 'buy' the usage of the car a lower rates and in the smallest package, of only the miles they need.

Anyone have some data that points more strongly in either direction?

Robotaxis will quickly become highly durable (well, maintenance become cheap), since for the first time incentives mostly align. The car will be produced and maintained by the same one of few powerful corporations.

The bigger problem will be aligning incentives with the customer. Especially regarding safety, since riders can hardly evaluate that by themself.

>>Especially regarding safety,

Yes, that's a big one, and indeed may be setting up a commons problem, if not strongly regulated.

For the short term, and for each individual company, cutting corners for safety will be in their interest (save funds now at no cost).

But for the industry and the long term, the entire concept could be destroyed by a relatively small but tragic number of safety failures. A few high-profile passenger deaths will probably be covered in the volume of terrorist attacks, and even if the actual risk is still small, give the impression of horrible widespread risk.

I'd like to hope that all the players are responsible and far-sighted, but the experience with Uber killing the cyclist in Arizona does not bode well -- they had many lapses and corner cutting, only reforming a bit when they killed someone.

> Overall miles driven, could it increase with robotaxis

Perhaps, but when robotaxis are a thing then robobuses will be too, which can drive vehicle-miles down even as passenger-miles go up.

Don't believe the hype.

If you think I am wrong, then it would be helpful if you explained what you think the truth is.

Self driving cars and rental instead of ownership is at least 15 to 20 years out.

Self driving is big. Like digital photography replacing film, once people see the value they'll switch to it seemingly overnight instead of decades. (Long drives go from painful to trivial.)

Rental is overrated. When I need to drive, there better be a car in my driveway with my gear in it already. Rental may work for urban, but not suburban/rural.

Much longer for something that is safe outside the So-Cal weather environment.

> No it's about money and who gets it.

You’re overlooking many points.

Firstly, it’s not just a question of management vs labour. Capital needs to be compensated, or no-one will provide it.

Secondly, not all labour is equal. With increasing automation, some labour will become more productive, and more highly compensated. Other labour will become obsolete. The total size of labour compensation could go either way.

The size of the cake is not fixed. Greater efficiencies could lead to greater margins, greater sales and more for some, or more for all. Or it could simply lead to the same product being delivered more cheaply (and at this point, the world needs more efficient transportation, it doesn’t need even more cars).

No-one, not management, not the investors, not the labour force is entitled to a particular stake in the future by virtue of the status quo. If personal automobiles were magicked out of existence by some revolutionary new device, I’d say good riddance.

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