So the unit economics of electric cars are quite different from gas cars (ICE = internal combustion). Electric car companies don't make money on low cost cars -- and neither can ICE cars!
Basic ICE cars are essentially sold at cost, sometimes as loss leaders, because the manufacturers make a long-tail of money supplying parts and maintenance for the cars over their lifetime; for 10-20 years they now have a (variable) recurring revenue stream. So a lot of automakers' incentives are to get as large of a fleet as possible.
Electric cars inherently have much less of a maintenance burden because there are way fewer moving parts in a motor versus an engine. For example, there's no oil changes ever 3k miles or timing belts to replace ever 30k miles.
That means, for electric car companies, business model options are
a) introduce SaaS subscriptions for electronic features (a - la Tesla Autopilot premium, supercharger network subscriptions)
b) introduce unnecessary complexity to increase maintenance revenue (gullwing doors)
c) sell at a profit margin off the factory. Can have higher margins and higher total profit for luxury cars versus basic cars
And Tesla's recent push towards robotaxis of their existing fleet would be a totally killer disruption of the unit economics by generating recurring revenue off their fleet.
So all the incentives for electric cars point towards high tech luxury, not basic eco-cars. There may be an exception to the rule in some countries, and those may be related to government subsidies.
> Basic ICE cars are essentially sold at cost, sometimes as loss leaders, because the manufacturers make a long-tail of money supplying parts and maintenance for the cars over their lifetime
Not just that but fuel economy regulations, (like CAFE in the USA) mandated average fleet fuel economy that must be met for automakers to avoid fines. GM had to sell a bunch of Cavaliers to be able to sell a bunch of (profitable) Silverados and Suburbans. With hybrids and EVs these days, regulations no longer favor the small car.
> a) introduce SaaS subscriptions for electronic feature
All the manufacturing are talking about is the need for the 'vehicle as a platform' to sell subscriptions, services and driver data. I've seen so many PowerPoints about this, it's nauseating.
> Electric cars inherently have much less of a maintenance burden because there are way fewer moving parts in a motor versus an engine.
A modern ICE outlasts the rest of the car. You might replace the alternator or water pump, but those are made by third parties not the OEM. You will replace the oil, but again, the OEM doesn't make that.
The dealers make a lot of money on after sales, but (except Tesla) those are independent third parties. The manufacture doesn't get much after sales.
OEM parts do sell for more than third party. And so there is money in OEM parts, but after 5 years most people are buying replacement parts from the third party (the OEM doesn't make those parts - they are buying from a third party and putting a markup on them). Sometimes people will buy OEM parts instead of a third party as OEM tends to give much higher quality vs random third party.
Basic ICE cars are essentially sold at cost, sometimes as loss leaders, because the manufacturers make a long-tail of money supplying parts and maintenance for the cars over their lifetime; for 10-20 years they now have a (variable) recurring revenue stream. So a lot of automakers' incentives are to get as large of a fleet as possible.
Electric cars inherently have much less of a maintenance burden because there are way fewer moving parts in a motor versus an engine. For example, there's no oil changes ever 3k miles or timing belts to replace ever 30k miles.
That means, for electric car companies, business model options are
a) introduce SaaS subscriptions for electronic features (a - la Tesla Autopilot premium, supercharger network subscriptions)
b) introduce unnecessary complexity to increase maintenance revenue (gullwing doors)
c) sell at a profit margin off the factory. Can have higher margins and higher total profit for luxury cars versus basic cars
And Tesla's recent push towards robotaxis of their existing fleet would be a totally killer disruption of the unit economics by generating recurring revenue off their fleet.
So all the incentives for electric cars point towards high tech luxury, not basic eco-cars. There may be an exception to the rule in some countries, and those may be related to government subsidies.