Replies

We’re all driving Saturns now, right? Big success.

BTW, it does not matter how the accounting is done, amortization is simply a way of reducing the near-term impact of expenses (capital expenses). So, your logic is ill-founded.

If we just used a simplistic cash accounting approach, the losses would have been much larger per car now. However, future losses would be much less since the losses would have been accounted for up front.

Treating capital expenses using amortization dampens the losses. It is not exacerbating them by any means. Quite the opposite.

So, your logic is ill-founded.

Saturns weren't a huge success, but the plant and tooling (Saturns started out 100% separate) were FAR more expensive than a new model of an existing Olds Cutlass or Chevy Celebrity. Eventually Saturn became stable, though GM messed things up by the impatience of not sticking to the original vision. (They started using Saturn R & D in other brands, removed features that made Saturn distinctive (e.g. plastic panels), etc.

My point was that the $130K number was misleading because those initials costs won't always be there. The article doesn't say if the costs are being spread, or by how many years. Tesla would lost money early on, and would have lost even more without massive government subsidies, both direct ($7,500 refund) and hidden (selling carbon credits), but eventually the company wound up making plenty of money even with reduced subsidies.

To get a number like $130K per car, there had to either be a massive unforeseen expense on the production side, which didn't happen as far as I know (save for those recalls for those Chevy EVs that liked to catch fire), or a lack of sales that inflates the cost per unit number until the cars are sold. These things are not exactly world-beaters in sales. But some here think if Ford sold 10,000 more of these things it would cost them $13 billion dollars, and that is not the case.

My fear is that Biden, with the cooperation of Congress, will keep on twisting the screws on production of ICE cars and petrol supplies, which is what GM/Ford are responding to. Toyota has been pushing a compromise where ICE/EV hybrids are the norm, and never went in with both feet.

Regular folks will have to prepare to go "Full Cuban", preferably with pre-2020 cars as obsolete electronics are the hardest to repair/replace. If I were an industrial magnate, I would look into manufacturing rust resistant body panels and undercarriage parts for old Camrys, Impalas, Mustangs, and pick-up trucks, and where possible, by-passes and substitutes for older vehicles electronics.