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Comment by AlotOfReading | Hacker News Reader

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.

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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.

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.

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.

Scarcity means that you require more work to mine the same amount of material.

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.

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.

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.

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.

Yes, I would assume that certainly correct by weight/per kg. I was thinking more about per $ i.e. a gram of gold costs $100 I’m too lazy to look for exact figures but I would bet that labor costs (maybe even combined with energy costs) make up a very small proportion of that.

Edit: well I’m kind of wrong: https://www.gold.org/goldhub/gold-focus/2024/05/higher-gold-...

Profit margins seem to be about 50-70% currently but historically it was closer to 30% (of course that’s still many times higher than for steel production)

The profitability will depend on the production costs for each mine. Those at the margin set the price. If it stays high long enough new mines will open or too low and unprofitable mines will close. The excess profits earned by those that have easily accessible high quality ore are known as 'resource rents' but eventually they will be fully exploited and have to close.

Apparently a great uncle of mine found gold on his family farm in Scotland, but it was never profitable to exploit so saw no benefit from it!

You forgot energy.

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.

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

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.

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.

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

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