There’s a development within the auto world that drives me a bit nuts. When an organization comes out with a brand new mannequin, it takes time — nicely, a sure variety of gross sales, which take time to attain — earlier than all the prices that went into designing, growing, and producing the automotive receives a commission off. I’ll use some easy numbers to show the purpose. Say {that a} new mannequin accounted for $1 billion of R&D. Say that the automaker makes $10,000 of revenue on every unit it sells — simply subtracting the price of components/supplies, labor, and different marginal prices related to producing one unit, not subtracting these R&D prices or firm overhead or something. Assuming all of that revenue goes into paying off these preliminary R&D prices (and assuming 0% curiosity for the sake of simplicity right here), the automaker would wish to supply and promote 100,000 items of that new mannequin with a purpose to repay the R&D prices and begin making an precise revenue on the mannequin.
The issue within the auto world — or a minimum of automotive and enterprise media — is that folks dramatize this and fear-monger by writing headlines like “EV Makers Shedding A whole bunch of Hundreds of {Dollars} On Each Automobile.” That’s a headline from a serious auto magazine republished on yahoo!life. Years in the past, this type of line was used repeatedly with reference to Tesla. That’s after we began digging in and highlighting how illogical and deceptive such headlines are. Such “stunning discoveries” have additionally been pushed concerning the Chevy Bolt EV, Lucid’s EVs, XPeng’s EVs, and different EVs. I don’t see this type of headline regarding something however EVs, however possibly I simply miss these different tales.
If automakers had been shedding a whole bunch of 1000’s of {dollars} (and even 1000’s of {dollars}) on each electrical automotive they bought, they’d clearly simply cease promoting electrical vehicles, or increase costs. Why would somebody spend $300,000 to make a automotive after which promote it for $30,000? Digging into the declare for one second reveals how silly it’s. But, these tales proceed to exit. They proceed to persuade folks passing by that electrical automobiles are cash losers and a foul enterprise concept. They proceed to suggest that electrical automobiles can’t be the longer term — silly hippies. The unfavourable connotation is obvious on one other spherical of “stunning” revelations about clear electrical vehicles.
Briefly, can we lower this out please? As a lot as this tactic was used with Tesla and hyped as much as an excessive diploma when Tesla was struggling by Mannequin 3 “manufacturing hell,” Tesla is now a massively worthwhile firm with a number of the greatest gross margins within the automotive market. All of that superficial fear-mongering scared away loads of Tesla consumers (and TSLA consumers), however who needs to now remind folks of their articles about how a lot cash Tesla was “shedding” per automotive?
The article does spotlight that EV firms are going by some powerful instances financially, however let’s preserve it to that relatively than the clickbait however false declare that automakers lose cash every time they promote an EV. The important thing bits Jalopnik/yahoo!life highlighted from a Reuters article had been as follows:
“Lucid’s value of income surged to $492.5 million within the July-September quarter from $3.3 million a yr earlier, and its losses widened as clients canceled orders fearing lengthy wait instances.
…
“Canoo Inc (GOEV.O) mentioned in Might it had “substantial doubt” about remaining a going concern. On the finish of September, it had $6.8 million in money and equivalents, down sharply from $415 million a yr earlier.
…
“Rivian, backed by Amazon.com (AMZN.O) and Ford Motor (F.N), had $13.8 billion money readily available on the finish of September. It additionally has a contract to produce 100,000 electrical supply vans to Amazon. However its value of products bought was about $220,000 per automotive versus a mean promoting worth of $81,000 within the quarter, CFRA estimated.”
Including onto the Reuters piece, Jalopnik writes, “Based on Rivian’s most up-to-date SEC filings, the corporate’s third-quarter prices jumped from $83 million in 2021 to just about $1.5 billion in 2022. That’s an absurd soar in prices, however not an unbelievable one — lithium costs have blown up like an earthbound asteroid.”
Sure, lithium costs are up, however they aren’t resulting in that soar. That is an accounting situation associated to win firms must log sure prices. So, whereas the article was getting in path after the headline, it once more took a deceptive flip there. No, electrical automotive producers usually are not spending 4 instances extra constructing electrical vehicles than they’re promoting them for. And, significantly, CleanTechnica shouldn’t be the positioning that has to say that.
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