How cheap could a new car be built?

frenchyd said:

 Imagine you wanted to dominate the worlds market for cheap cars.  Wouldn't matter where you did it,  robots would do the work. 
  Probably should be Electric because low operating cost. 
    Say 100 mile range max and if lead acid gets you that range  at low cost, great.  
    Maybe use cheap plastic ( recycled) body panels.  Cheapest headlites/ taillights available.  Assume annual production of a million plus . Build them in some abandoned warehouse building, wherever.  Robots won't notice the lack of fresh paint. 
  The office would be a trailer hooked up  to the factory.  Until they get robots to fix robots hire locally.  
 No Engineering/ design staff just use off the shelf designs. Simple 2 door fixed windows, the one option a passenger seat. 

I have not read all 8 pages of comments so far, so might be repeating what has been said.

What you describe is growing a car company organically. Start building in the garage with your friends and expand from there. Everyone here knows you can build a car for $2000. But can you make money doing so?

What is the business model? Who is going to buy this car and how many are you going to sell?

What must the car do other than move itself and  X??? number of passengers from point A to point B? 

Regulatory compliances and quality systems alone are going to run 100s of millions  and you still have not sold one car or given a go ahead for the suppliers to start making parts in contracted volumes.

You need a distribution network even if you are selling direct to customer. Don't forget the service network.

On the flip side, vehicle manufactures are doing what  GM did in the 70s; abandoning an ever growing segment of the population ( youth market)  in order to pursue sales in a more affluent but  ever-diminishing segment of the population. This is what allowed Japan into the market.  They did OK. That means that someone with the infrastructure already in place could build a form of TRANSPORTATION for the proletarian. Addressing the original question, I would estimate that it would be sold for around $29,000 in 2030 dollars.

A more pertinent question might be how low of a monthly subscription rate could they get people into a product? Maybe a shared vehicle transportation contract of some sort?  ( driverless Uber contracts?)I am pretty sure that the days of actually owing a car are on the way out?

In reply to frenchyd :

Perhaps I'm going about the question wrong?  
  Tesla's goal for their cheapest Model 2 is FSD. ( full self driving)  driverless taxi's if you will).  
    The average car is used2-3 bours a day?  If that?    So if instead of buying a $30,000 car plus required electricity and service.  You bought 1/8th of a car, electricity, service, etc.  let's assume it lasts 20 years.  Adding a little profit. That would mean $300 a year?   To own a reliable car that comes when you ask.  If that particular one is in use the nearest available  one comes at your call. 

frenchyd said:

In reply to frenchyd :

Perhaps I'm going about the question wrong?  
  Tesla's goal for their cheapest Model 2 is FSD. ( full self driving)  driverless taxi's if you will).  
    The average car is used2-3 bours a day?  If that?    So if instead of buying a $30,000 car plus required electricity and service.  You bought 1/8th of a car, electricity, service, etc.  let's assume it lasts 20 years.  Adding a little profit. That would mean $300 a year?   To own a reliable car that comes when you ask.  If that particular one is in use the nearest available  one comes at your call. 

There are "car share" plans now, with cars that cost less then $25k when new. These programs are not without issues and being electric or FSD won't solve the majority of them.

Plus, I can't wait to hear the screaming if Tesla releases a sub-$30k car with FSD as standard. People pay $15k for that feature now, plus a monthly subscription for the full features.

In reply to 67LS1 :

I don't think Elon musk will ever take less than $15,000 for the FSD option.    Think of it as a really cheap robot that is 10 times safer  than a human. 
   You do bring up something I hadn't considered.  First I forgot to add the cost of FSD .  
  Second administrative costs .   someone to plug in the charger, clean the car etc.  so maybe it would be $4-500 a year. Even $600 a year would only cost $50 a month.  
     Yes for transportation more expensive cars could be added for a higher price.   We could still own our own cars if we wanted to.  No,  if we wanted ICE cars , they too would be possible.  ( with that FSD) 

The cost to build a fully specced Range Rover is only marginally more than a cheap Ford Focus. One sells for 100k the other 30k.

Customers are difficult, sell more expensive units to less customers-more profit, less trouble

frenchyd said:

In reply to frenchyd :

Perhaps I'm going about the question wrong?  
  Tesla's goal for their cheapest Model 2 is FSD. ( full self driving)  driverless taxi's if you will).  
    The average car is used2-3 bours a day?  If that?    So if instead of buying a $30,000 car plus required electricity and service.  You bought 1/8th of a car, electricity, service, etc.  let's assume it lasts 20 years.  Adding a little profit. That would mean $300 a year?   To own a reliable car that comes when you ask.  If that particular one is in use the nearest available  one comes at your call. 

This is much the vision I see for proletarian transport in the future. The luxury of owning a car is going the way of housing for the next generation and they will have to adjust.

I do know that one issue with the plan is that the cars are often used as a substitute for a motel room for busy cash-strapped young couples who need to combine transport and romance. So it gets a bit messy. Probably going to need cameras and some form of AI activity censorship. 

In reply to NOHOME :

  Since the car would need to return to someplace  when it can be plugged in and recharged, wouldn't that also get  a clean up?    Maybe by then there will be robots for that work?    
   Of course, then we need to start talking about a minimum basic income.  

Rigante said:

The cost to build a fully specced Range Rover is only marginally more than a cheap Ford Focus. One sells for 100k the other 30k.

Customers are difficult, sell more expensive units to less customers-more profit, less trouble

Do you have a source for that? I find that kind of hard to believe. A Range Rover SV starts at $210k. With the long wheelbase version starting at $234k. The cheapest one starts at $108k before you start adding any options, none of those prices are with any additional options, just the starting price. So those aren't even "fully spec'd" prices. 

In reply to z31maniac :

There might be an element of truth to that. Not saying it's correct, just that costs of low volume cars are massively higher than high volume cars.  
 

Here's why if you're interested.  
    When Jaguar was selling in the 1960's 30,000 cars a year was a great year for them.  But they only made a profit because Sir Lyons was so frugal.  For example: He bought the assembly line second hand  in the 1930's and Jaguar kept using it until Ford's ownership.  
  But by 1980's they had to sell 60,000 just to stay in business.  Jaguar was losing hundreds of millions of dollars per year.  BMHC actually gave Jaguar their independence  and the old Spitfire factory  to build their own bodies.  Because it would be cheaper for the country if Jaguar went broke on its own dime.  
     I don't know what volume Land Rover needs to stay afloat. I suspect it's more than they are selling now.  

In reply to frenchyd :

The flip side of that is that economies of scale follow the law of diminishing returns, and will only get you so far.

On top of that, being 'frugal' with your capital investments in a competitive industry, the way Jaguar was, is also more often than not a short term gain long term pain situation. The old addage that it takes money to make money is true.

Two of my favorite business sayings seem appropriate here.

"We'll lose money on every one, but we'll make up for it in volume."

"We never have enough money to do it right the first time, but we always have enough to do it twice."

Maybe the spread between a Range Rover and a Ford Focus is wider than stated but there is some truth to the thinking.

It doesn't take vastly different quantities of steel or aluminum or copper, etc or even labor for that matter to build a Ford V6 or a Maserati V6.

Some manufactures use less automation and more skilled labor to build their cars but they choose to that. 

When I was selling engines, we sold by HP. The engine hardware was 100% identical from 210 to 425 HP. Not one part was different. The only difference was calibration in the ECM. But the 425 HP was a LOT more money then the 210 HP.

Driven5 said:

In reply to frenchyd :

The flip side of that is that economies of scale follow the law of diminishing returns, and will only get you so far.

On top of that, being 'frugal' with your capital investments in a competitive industry, the way Jaguar was, is also more often than not a short term gain long term pain situation. The old addage that it takes money to make money is true.

Two of my favorite business sayings seem appropriate here.

"We'll lose money on every one, but we'll make up for it in volume."

"We never have enough money to do it right the first time, but we always have enough to do it twice."

  I think you are confused.  The law of diminishing  returns means that on really high volumes of cars you may only save a Penney each item but  if you build 2 million of something that has  thousands of parts.  That is dome really serious money.  That's why bean counters are such a big deal in volume  manufacturing.  
     As far as being careful about outlays  such as assembly lines.  If you lose a few minutes while it's being repaired.  Yes you may only put out 120 cars that day when your goal is  122.  But you won't have  the overhead cost of a new assembly line.  
      Sir Lyons took a small motorcycle accessory company and turned it into a multi billion dollar company. Desired by Henry Ford.  
      Rather than burden  the budget with expensive development engineers .  Lyons selected components himself  and negotiated the best price based on anticipated volume.  
   Lucas had several price levels based on ultimate use.  For example the Same fuel pump was used in Rolls Royce as Jaguars.  The price difference  was wildly more expensive.  
     Here in America, Mechanics choose go replace one rather then service it because there is far more money in selling a new one and installing it then simply cleaning the points periodically  which is really all that's required.  

frenchyd said:

In reply to NOHOME :

  Since the car would need to return to someplace  when it can be plugged in and recharged, wouldn't that also get  a clean up?    Maybe by then there will be robots for that work?    
   Of course, then we need to start talking about a minimum basic income.  

 

I guess if children are to be relegated to the position of expensive pets that live a long time, then yeah, some way of supporting people that serve no function might be required. Not a conversation to be had on this board though.

In reply to NOHOME :

Agreed!  Plus luckily I won't see the effects.  In fact any realistic event such as that might not even be in my children's future. 

frenchyd said:

     As far as being careful about outlays  such as assembly lines.  If you lose a few minutes while it's being repaired.  Yes you may only put out 120 cars that day when your goal is  122.  But you won't have  the overhead cost of a new assembly line.  
 

From here: The True Cost of Downtime 2022

"Breaking the costs down by sector, the cost of a lost hour now ranges from an average of $39,000 for factories producing Fast Moving Consumer Goods, to more than $2m an hour in Automotive."  Since parts for a 1930s assembly line probably aren't available at your local industrial supply shop, I'm guessing it would be down for more than just a few minutes.

About the law of diminishing returns and economies of scale, if you have a stamping die that can produce 100,000 frame rails a year, yes, the price per part decreases the closer you get to a production of 100,000/yr, but if you need to produce 150,000/yr now you need two dies, two presses, more employees, etc all operating at 75% efficiency.  The price per unit going from 100,000 to 150,000/yr in this case isn't going to drop much, if at all, it depends on how much administrative, design and other costs are also baked in to the cost of the part.  Yes this is a loaded example I just pulled out of my butt, but it's not an uncommon situation in the high volume production.

In reply to z31maniac :

some insider knowledge, bit of a generalisation, but not much. 

In reply to Schmidlap :

Tooling costs are a huge part of the cost of any vehicle, Chevette or Rolls-Royce. I worked in the automotive industry, supplying interior components and the tooling costs were impressive. It takes lots of tooling and capital investment to supply a single assembly plant. And when their sales increase, the OEMs will fight tooth and nail over paying for additional tools.

Rigante said:

In reply to z31maniac :

some insider knowledge, bit of a generalisation, but not much. 

If building a $160k (fully spec'd out base Range Rover) is THAT much more profitable........it would have to be if it's only "marginally" more expensive to produce than a $30k car. 

That just makes me wonder why Range Rover has such a hard time remaining consistently profitable? 

Schmidlap said:

frenchyd said:

     As far as being careful about outlays  such as assembly lines.  If you lose a few minutes while it's being repaired.  Yes you may only put out 120 cars that day when your goal is  122.  But you won't have  the overhead cost of a new assembly line.  
 

From here: The True Cost of Downtime 2022

"Breaking the costs down by sector, the cost of a lost hour now ranges from an average of $39,000 for factories producing Fast Moving Consumer Goods, to more than $2m an hour in Automotive."  Since parts for a 1930s assembly line probably aren't available at your local industrial supply shop, I'm guessing it would be down for more than just a few minutes.

About the law of diminishing returns and economies of scale, if you have a stamping die that can produce 100,000 frame rails a year, yes, the price per part decreases the closer you get to a production of 100,000/yr, but if you need to produce 150,000/yr now you need two dies, two presses, more employees, etc all operating at 75% efficiency.  The price per unit going from 100,000 to 150,000/yr in this case isn't going to drop much, if at all, it depends on how much administrative, design and other costs are also baked in to the cost of the part.  Yes this is a loaded example I just pulled out of my butt, but it's not an uncommon situation in the high volume production.

Since Lyons acquired it used, chances are spare links, rollers, bushings, etc. are kept handy.   Besides that was a period when labor strikes  cost massively more than any down time.  
    30,000 cars a year between sports cars, small sedans, and big sedans?   And that was a good year! 

z31maniac said:

Rigante said:

In reply to z31maniac :

some insider knowledge, bit of a generalisation, but not much. 

If building a $160k (fully spec'd out base Range Rover) is THAT much more profitable........it would have to be if it's only "marginally" more expensive to produce than a $30k car. 

That just makes me wonder why Range Rover has such a hard time remaining consistently profitable? 

You are right to question Range Rover ( and Jaguar's)  ability to make a profit.  
  It's not as simple as it would seem.   
  The major problem is the dollar/pound exchange rate. 
  To deal with that they are forced to pre buy dollars/pounds. Sometimes they really get it wrong.   Then even if they sell at a profit they can lose because of exchange rates. 
   It's not easy to understand. John Egan had a section in his book, Saving Jaguar .  Talking to Paul Volcker  Chairman of the US Fed, John Egan tried to explain the process.  
     Eventually Paul said" so you're making them in pounds  you don't have  and someone is paying for them with dollars they don't have? 
  Further explanation was the Jaguar tried to have at least a billion dollars covered at all times. 
Paul, " is your business worth a Billion dollars? " 

John, " no and what's worse we need to sell $100 million every month". 
  "The market is only 2% real and 98% speculation."

  When Jaguar moves they stir up $5 billion of froth. 
  The remarkable thing was Hohn Egan  was telling Paul  Volcker  about exchange rate hedging  and not the other way around.