Hacker News Reader

1000% agreed -- I worked for Ford and GM and now work for a different vehicle software company, and the salary I made starting out + the employee discount meant that vehicles were affordable, but not fun to afford. Now, I can't upgrade my F150 to something with more towing capacity and couldn't even while working at GM with their employee discount and somewhat lower truck prices in general compared to the other Big Three. The problem is corporate culture related, but it's also contributed to by the safety regs requiring every car to have a bunch of driver assist things that drive up total cost even on low end cars, meaning that the mid and high end need to be super profitable for overall fleet profit to be acceptable.

This comment laments about the rising prices of cars, but it doesn't offer anything to explain why they're getting more expensive.

"Greed" isn't the answer - we have greedy companies in every area of the economy, yet somehow the prices of phones, computers, desks, large appliances, televisions, and many other types of goods hasn't skyrocketed in the same way as cars.

What makes cars different? I know that the cost of labor has significantly increased (which partially motivates the stratospheric increases in education and healthcare costs), but I thought that cars were mostly manufactured in an automated manner.

Several things that aren't regularly talked about: to meet increasingly stringent emissions standards without massive losses in engine power (and resulting customer dissatisfaction), companies spend heavily on powertrain R&D to eke the remaining emissions improvements out (99.9% reduction to 99.99% reduction). To meet increasing safety standards, manufacturers have to have much more complicated base models than before, which drives up even the lowest car prices -- backup cameras, automatic emergency braking cameras and logic, immobilizer standards, etc. Then, for the products that everyone wants, some manufacturers aren't even making the new CAFE standards, so they buy "indulgences" (EV offset credits) from Tesla, which is literally a regulatory tax for the incorrect outcomes, but customers don't want GM and Ford EVs at the moment. Beyond that, some solutions to the above problems (hybrids) are simply insanely expensive (ballpark $20k extra manufacturing cost for a hybrid powertrain on some high end hybrid SUVs vs the identical engine without the electric components). All of that shifts parts of the curve to the right, some of it only shifts the high end, some of it shifts the entire curve.

Auto company profit margins provide further evidence supporting your hypothesis (modern car requirements are just inherently more expensive).

The auto companies whose profit margins I checked are in the single-digits, sometimes negative. If it was just greedy price gouging, we'd expect them to see much healthier profit margins.

I don't understand why people don't check these figures more often for these publicly traded companies when offering the 'companies are being greedy' narratives.

Thank you for detailed response!

100% Agree, We could have $10k electric cars in the US, specifically made in China. It's not going to happen anytime soon for enough reasons that could fill a HN comment section.

What are the basics? The "front end" (demand side) is that cars are effectively subsidized by cheap and widely available financing, but at a high level where is that money actually going on the "back end" (supply side) that makes cars expensive to manufacture?

How is that average calculated though? If everyone switches from buying the $40k Camry to the $85k F150, prices didn't have to change for the "average price of a new car" to increase. This isn't a dismissal since we can compare every model year to the previous and see an increase YoY in prices without serious improvements to the underlying product. We have also seen everyone going from sedans to trucks though.

>It would mean financial ruin to borrow two-thirds of your income for a car. The automakers have forgotten Henry Ford's lesson. He payed his workers enough so they could each afford the products he was selling.

I agree but the problem is that business owners don't like how much money comes from that system and prefer competing for people's lines of credit, because an economy where everyone has $40k in debt literally has more money sloshing around it than one where everyone buys their car outright, and that means more profit, which is the entire goal of every CEO everywhere, so of course every CEO wants you to go into debt for them. Unfortunately, a lot of people can leverage themselves farther than they can actually afford for long enough that some CEO can extract profit before the entire system collapses.

A shitload of profit and CEO salary was made in the run up to 2008, and none of the people who extracted that wealth from the system went to jail, so why are we surprised they're trying to do it again?

Scientology managed to distill this down to the bones; They simply had people sign up for credit cards and max them out buying scientology stuff. Since the penalty for debt goes to the people who took it, instead of the place the money the debt went, there's infinite incentive to do this. CEOs look at that system and get extremely jealous.

> I agree but the problem is that business owners don't like how much money comes from that system and prefer competing for people's lines of credit, because an economy where everyone has $40k in debt literally has more money sloshing around it than one where everyone buys their car outright

It's even simpler than that, and "greed" doesn't come into the equation anywhere: any market where goods/services are subdized will lead to more expensive goods and services, by simple economics.

Even industries where companies are "good", and try to provide quality goods to customers at an affordable price point (while still turning a small profit) will see this happen, because the excess capital will push the apparent "affordable" point up - its effective, unwitting collusion for entire markets.

This is happening in healthcare (insurance that has transformed from being actual insurance in case of catastrophic injury, into cost-sharing), home prices (cheap mortgages), cars (cheap financing), and education (cheap student loans).

Debt needs to be more expensive. Insurance needs to only be for catastrophic events.