this post was submitted on 09 Sep 2024
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@Delta_V going back many years I've heard the description of the automobile industry problem as "overcapacity."
Too many companies in too many countries are fighting for too few buyers, compared to that production capacity. Like, if you ran all plants atlnd all shifts it would be way too many cars.
Now that's happening in EVs right?
To make money, on specifically the Mustang, Ford it has to sell a lot of Mustangs. Unfortunately everyone else is trying the same thing at the same time.
I'm skeptical of the problem being that simple. I think if that were the only issue, we would have cheaper cars.
Part of the rational for producing high margin trucks and SUVs is that investors demand the most margin possible out of every unit of production capacity. If a factory can only turn out 100 vehicles a year, its more profitable to turn out an expensive SUV that only 100 people can afford, compared to selling 100 cheap sedans that thousands of people want but you just can't produce enough of them.
If there were overcapacity, then in a vacuum, it would make sense to put it to work turning out low margin cars that are in high demand and making some money with that capacity instead of no money.
But its hard to predict years in advance when your factories are going to have excess capacity, and to know when to begin years long engineering projects so the vehicles you're going to want to produce will have their designs finished in time to fill those gaps. And its extra risky to begin those kinds of long range projects during times of rapidly changing regulations of ICE vehicles, and rapidly advancing tech for EVs that might invalidate years of engineering and factory tooling investments because you can't sell the vehicle you planned to produce for a long enough time to make back your investment and start seeing a profit. Not that I'm anti-regulation - I like breathing clean air and drinking clean water.