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It's amazing how naive people are about the car business.

One EV hobbyist, expressing amazement, stated, "...I know how to make $1 Million in the EV business...you start with $2 Million!".

It's a tough business, as those companies whose allegorical bones litter the annals of automotive history -- Packard, Kaiser, Nash, on and on -- might attest, if you ran a seance.

Here's the secret: volume.

After a century of cost-reduction and volume campaigns, the auto makers have reduced the physical cost of making a car to a small fraction of the retail price.

Just as with wheat (15 cents/lb) and bread ($2/lb), the cost of the ingredients has become a very small part of the marketed package.

Most people trying to compete with major auto makers don't understand this; they have ZERO chance of competing until they do.

The labor to make a car: 11 hours to 19 hours. This does NOT include the dullards stacked in ranks of buildings that are on overhead for GM and other traditional auto companies.

The material that goes into making a car: about $4,000 to $8,000, from horn to muffler.

That's it. The rest of the cost is overhead, middleman-profit, and other loose expenses. If you know the retail price, you can work out the gross margins.

Why would auto companies join up with the oilies

You can see one real reason why the auto makers fought so hard beside the oil companies to kill the EV program. You come to these IE and ME types, who have spent a career lowering the cost of a bolt from 50 cents to 40 cents, and the cost of a bracket from $3 to $1.70 (over 10 M cars, that's a lot), and the EV Engineers blandly inform them that there's a new cost item, a battery pack, that essentially blows their costing model OUT of the bathtub!

Putting even a $4000 battery pack in a car, when they have the cost of the gas engine-drivetrain down below $1000, is a non-starter.

Yes, you can make money with Electric car production; but first, you have to realize that ANY kind of competition with the majors is going to be difficult, because they can do things you can't (e.g., build 100 test articles, or bring the cost of a motor down to $100). Secondly,
you have to contend against these four factors:

1. DEALER NETWORK. Electric cars threaten the dealer network, built up painstakingly since the 1920's. The dealer is the heart of auto sales, and actually makes more of a markup than it costs to make the car (except for Toyota!). Electric cars are a threat because they sell themselves, and need far less maintenance.
2. ECONOMIES OF SCALE. Each Electric car decreases the volume of common parts that are essential for lowering costs to the bone. Thus, the car company is competing against itself, in a sense.
LOGISTIC SUPPORT. Far from the legend of "we don't want to supply parts, it's a problem", which GM lamely babbles, it's maintenance and repair that yields more profit than the original car sale. The same is true, btw, in airplane sales. Electric cars threaten the support structure built up over the years. Think about the zillions of niche and aftermarket businesses affected, from Midas to Snap-on.
REVENUE MODEL DIFFERENT. Electric cars yield more dollars up front, and less down the line. Hence, you have to extract even MORE than they do with gas cars -- and gross margins are already up to 80%! This doesn't leave much room for the overhead guys, especially at over-stuffed companies like GM.

And the 5th reason, that most auto makers are deathly afraid of change.

After all, that's how GM got itself into the box it's in. Almost tragic, the major US car maker, really the premier industrial company in the world, is now a marginal player.

GM has lots of cash, and lots of hidden assets; but its prospects, as mirrored by its market value, has dimmed. While the number of shares is pitifully small for a major corporation, only 500M, the company is leveraging hundreds of dollars per share in debt, revenue and cash; not a stable situation. I estimate the breakup value of the company exceeds $100/share (maybe much more, have not studied the real estate holdings), yet the stock market, cannily estimating what the company will actually do, gives it a value only a third of that even though it pays $1B in dividends each year, or about 5%.

Yes, GM could have made a profit on the EV1, but understand the economics (and the internal politics) at stake here; then you will begin to understand how Toyota turned the program to a profit, and how Honda made out.

In the former case, Toyota made, by vin number, 2400 RAV4-EV! And the design process took no more than 2 years, start to finish, maybe shorter. They would NOT have made so many RAV4-EV except for ONE reason: to spread the design costs over enough EVs so that they would show a profit from the program. The reason is simple. Toyota is a responsible car company, but it's also a tough business partner; their primary driver is whether they
can do a job advantageously.

Toyota, unlike GM, does not do random, unplanned, sporadic activities.

So think about that one thing, all ye who think that you cannot make a profit on an EV (especially ye who work for GM!): try to figure out, in your pitiful cost models, why Toyota made so many of those RAV4-EV, when it was only obligated to build a small fraction thereof...

Then you may be able to work out the political and psychological reality of why they were the ONLY car company to SELL a reasonable EV on the open market, however briefly (they only had 300 car bodies!).

GM has been rebuked, in a sense it does not understand, for its own failings, which have been used to help it trip itself up. The tumbling mess is staggering on, hors de combat before the smarter player.

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Back to EV1.org, Electric cars for everyone

It's amazing how naive people are about the car business.
One EV hobbyist, expressing amazement, stated, "...I know how to make $1 Million in the EV business...you start with $2 Million!". It's a tough business, as those companies whose allegorical bones litter the annals of automotive history -- Packard, Kaiser, Nash, on and on -- might attest, if you ran a seance. Here's the secret: volume. After a century of cost-reduction and volume campaigns, the auto makers have reduced the physical cost of making a car to a small fraction of the retail price. Just as with wheat (15 cents/lb) and bread ($2/lb), the cost of the ingredients has become a very small part of the marketed package. Most people trying to compete with major auto makers don't understand this; they have ZERO chance of competing until they do. The labor to make a car: 11 hours to 19 hours. This does NOT include the dullards stacked in ranks of buildings that are on overhead for GM and other traditional auto companies. The material that goes into making a car: about $4,000 to $8,000, from horn to muffler. That's it. The rest of the cost is overhead, middleman-profit, and other loose expenses. If you know the retail price, you can work out the gross margins.

Why would auto companies join up with the oilies
You can see one real reason why the auto makers fought so hard beside the oil companies to kill the EV program. You come to these IE and ME types, who have spent a career lowering the cost of a bolt from 50 cents to 40 cents, and the cost of a bracket from $3 to $1.70 (over 10 M cars, that's a lot), and the EV Engineers blandly inform them that there's a new cost item, a battery pack, that essentially blows their costing model OUT of the bathtub! Putting even a $4000 battery pack in a car, when they have the cost of the gas engine-drivetrain down below $1000, is a non-starter. Yes, you can make money with Electric car production; but first, you have to realize that ANY kind of competition with the majors is going to be difficult, because they can do things you can't (e.g., build 100 test articles, or bring the cost of a motor down to $100). Secondly, you have to contend against these four factors:
1. DEALER NETWORK. Electric cars threaten the dealer network, built up painstakingly since the 1920's. The dealer is the heart of auto sales, and actually makes more of a markup than it costs to make the car (except for Toyota!). Electric cars are a threat because they sell themselves, and need far less maintenance. 2. ECONOMIES OF SCALE. Each Electric car decreases the volume of common parts that are essential for lowering costs to the bone. Thus, the car company is competing against itself, in a sense. LOGISTIC SUPPORT. Far from the legend of "we don't want to supply parts, it's a problem", which GM lamely babbles, it's maintenance and repair that yields more profit than the original car sale. The same is true, btw, in airplane sales. Electric cars threaten the support structure built up over the years. Think about the zillions of niche and aftermarket businesses affected, from Midas to Snap-on. REVENUE MODEL DIFFERENT. Electric cars yield more dollars up front, and less down the line. Hence, you have to extract even MORE than they do with gas cars -- and gross margins are already up to 80%! This doesn't leave much room for the overhead guys, especially at over-stuffed companies like GM. And the 5th reason, that most auto makers are deathly afraid of change.
After all, that's how GM got itself into the box it's in. Almost tragic, the major US car maker, really the premier industrial company in the world, is now a marginal player. GM has lots of cash, and lots of hidden assets; but its prospects, as mirrored by its market value, has dimmed. While the number of shares is pitifully small for a major corporation, only 500M, the company is leveraging hundreds of dollars per share in debt, revenue and cash; not a stable situation. I estimate the breakup value of the company exceeds $100/share (maybe much more, have not studied the real estate holdings), yet the stock market, cannily estimating what the company will actually do, gives it a value only a third of that even though it pays $1B in dividends each year, or about 5%. Yes, GM could have made a profit on the EV1, but understand the economics (and the internal politics) at stake here; then you will begin to understand how Toyota turned the program to a profit, and how Honda made out. In the former case, Toyota made, by vin number, 2400 RAV4-EV! And the design process took no more than 2 years, start to finish, maybe shorter. They would NOT have made so many RAV4-EV except for ONE reason: to spread the design costs over enough EVs so that they would show a profit from the program. The reason is simple. Toyota is a responsible car company, but it's also a tough business partner; their primary driver is whether they can do a job advantageously. Toyota, unlike GM, does not do random, unplanned, sporadic activities. So think about that one thing, all ye who think that you cannot make a profit on an EV (especially ye who work for GM!): try to figure out, in your pitiful cost models, why Toyota made so many of those RAV4-EV, when it was only obligated to build a small fraction thereof... Then you may be able to work out the political and psychological reality of why they were the ONLY car company to SELL a reasonable EV on the open market, however briefly (they only had 300 car bodies!).
GM has been rebuked, in a sense it does not understand, for its own failings, which have been used to help it trip itself up. The tumbling mess is staggering on, hors de combat before the smarter player.
top
Back to EV1.org, Electric cars for everyone