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Comment by objclxt | Hacker News Reader

> Electric cars are considerably more expensive to make and manufacturers are making big losses on the sale of each car.

This is rather disingenuous. The Model 3 was one of the most popular new cars sold in the UK last year, Tesla isn’t losing money on those sales. You can’t do a market analysis that ignores the main competitor.

If I had to hazard a guess, the real reason James Dyson pulled the plug is a) EV development and tooling for manufacturer is hugely expensive, and b) Dyson is private, and James Dyson doesn’t want to accept investment or inject his own capital into the effort.

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I agree that the comment is disingenuous, however, I believe the problem for Dyson was that the car he wanted to make was just too expensive. It's not necessarily the case that all electric vehicles are too expensive (and clearly when you look at the EVs in SE Asia, there are some pretty cheap cars). I'd be surprised if he didn't already anticipate the upfront costs. I think it's more that having made the prototype, he realised he couldn't make a product that will disrupt the market at a reasonable price and therefore threw in the towel.

> he realised he couldn't make a product that will disrupt the market at a reasonable price

Dyson's whole lifelong strategy is to disrupt the product and the price. When his vacuum cleaner came out the price was astronomically expensive. People were dumfounded - who would pay so much? But the product was better and people accepted the new price. It still seems high today but it was so successful it somewhat permanently moved the needle on what people think was reasonable.

He also tried this with: fans, washing machines, hair dryers, hand dryers. Some less successful, but an unexpectedly or apparently unreasonably high price is probably deliberately part of his approach.

The crucial difference between those markets and the auto market is that consumers already have an idea of the value of autos across the range of prices. Even a teenager tooling around in a used Civic could tell you why his car cost $4000 and why a Lambo is 6 figures. Meanwhile, while I'm sure there were luxury or industrial vacuums, fans, etc., before Dyson's, most couldn't tell you their cost, nor what features justified that cost, to Dyson's advantage. With cars, though, he can't just say, "These are the features you'll get, and this is what I'll sell it to you for," because people will just point to other, similarly-priced cars and say, "How come it doesn't have [premium feature] like this one?".

Maybe the problem is that cars can't be compared to household appliances when it comes to consumer behavior. Spending more for an appliance that you believe will last longer and be more powerful then a cheaper variation might feel like a smart buy. There are so many more variables when buying a car however.

I think the scale of the products also plays a big part. A $500 hair dryer is really expensive (and for a hair dryer!), but $500 is the kind of money a lot of people have around, or could pull together if they wanted to. If you have a car that's 10x more than a 'normal' car you're looking at $200k+ which is not a price that's accessible to a huge majority of people. In other words, the dyson model of 'make something better and charge way more for it' doesn't seem to fit particularly well to cars because you end up with no market.

This is very true: and it's also the Tesla strategy. Which is a problem for Dyson because there's already an expensive premium product in the market.

> he realised he couldn't make a product that will disrupt the market at a reasonable price

Most likely because of batteries. He doesn’t have volume to build his own battery factories, but buying in small quantities makes his cars expensive. Now if car you are trying to sell is more expensive than Model X or Cybertruck, customers naturally would ask “Why?”

"The Model 3 was one of the most popular new cars sold in the UK last year"

I think that's overstating things a bit, it's not even in the top ten?

https://www.autocar.co.uk/car-news/industry/10-best-selling-...

NB They did do very well in April this year, but that's perhaps a bit of an unusual situation!

One could interpret that as "one of the most popular newly-available cars"? If I understand correctly, Model 3 only became available to buy in the UK mid-2019. It's an odd reading, but not impossible.

Tesla has certainly lost money on every sale to date when you consider what they have spent designing the cars and creating the capacity to mass produce them. They may now have unit costs that will allow them to eventually recoup that money and make a profit, but that doesn't just mean you can disregard all the initial capital.

That's the same for any economy of scale operation, ICE powered cars included.

That's not the way you consider manufacturing and accounting. You consider gross margins. You don't disregard the initial capital, you consider depreciation.

Right, but while Tesla has positive gross margins, they have never turned an annual profit (Positive GAAP Net Income).

This is the same as the people who complained that Amazon never turned a profit for many years. But it wasn't because they weren't making money per unit, it was because they were spending it all and then some on expansion.

If you make profitable cars and you want to make profitable cars and trucks then you spend all your car profits building a truck factory. In cash-based accounting that looks like losing money right up until the point that it turns into making twice as much.

Amazon did turn a profit for many years on an EBITDA basis. They reinvested that profit in R&D, but they could also have chosen to send those profits to the shareholders as dividends.

Tesla has not achieved profit on an EBIDTA basis, so it's not even remotely the same thing.

TSLA had positive EBIDTA in 2016, 2018 and 2019 (and Q1 2020).

https://www.marketwatch.com/investing/stock/tsla/financials

Tesla had positive non GAAP EBITDA, which means nothing.

Then there is also Elon's bonus, which is actually bigger than all of the profit Tesla has ever made during its entire existence.

But remember folks, we love Elon. That's not evil capitalism or greed, it's Elon. He launches rockets! That's the model for model CEOs to follow. We need more Elons!

> Dyson is private, and James Dyson doesn’t want to accept investment or inject his own capital into the effort.

I think this is it. It's not that Dyson couldn't have made an EV. It's more that this would have been an iPhone or Tesla moment for the company where they would have had to bet the farm and that's something only two billionnaires so far have shown any ability to stomach. Pity, (armchair quarter-backing here) I think they could have done it, but it would have taken years off James Dyson himself to get the thing over the line.

Agreed, a couple of billion will give you a nice EV design but a car is a hugely more complex and expensive product to manufacture at scale at a competitive price than a fan or cleaner.

Fully laden cost, cancer treatment etc, its cheaper but consumers and governments don't think like that. We will continue to treat cancer with socialism and car exhaust with capitalism but some day I hope they converge.

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