The withering dream of a cheap American electric car

Something has to disconnect here. Everyone complains that everything costs so much, but the average Americans' paycheck is not rising the same way, so they can try all they want to sell $95k electric vehicles because of thin margins for cheaper products, but if purchasing power doesn't rise with inflation, then that market that "sucks" is going to be the only real market one day...

Increasingly expensive products are afforded through innovations in financing.

Yeah, I think the pendulum swings back and forth. My recollection of the 2007-2009 recession, with $4 gas and the failure of GM, was that it spurred a lot of interest and innovation in smaller, more efficient, economy cars after many years of the automakers pushing (and people buying) larger and less efficient trucks and SUVs. I think we're at an extreme point in the cycle again now with American automakers all but abandoning the compact and midsize economy car segments. At some point, things will dry up and they'll need to compete with the Toyota Corolla and Honda Civic again.

I think you're right about pendulums here, but we might be about to see a US auto maker vs China auto maker inflection point like I read about in the 1980s with US vs Japan.

I watching this video which lays out some fundamental diffs between US companies, like GM and Chinese companies, like BYD: https://www.youtube.com/watch?v=PXvcwM977D0 * Short term vs long term focus * .gov subsidies stronger in key markets in CN * CN companies extremely rapid in development (as low as 1.5 yr vs 6 yr in the US) * Lower wages and input costs

Things will probably have to get worse before they get worse. Corporate people know the machine (public traded US auto makers) keeps lumbering forward without change until it can't, and all handouts, bailouts, and other tricks have been played.

I think the disconnect is maybe just in the title: Lucid is obviously just trying to be the next Mercedes. Duh, of course they don't make a cheap car (how much did Lucid pay for this ad in the WSJ?); but their competitors kind of do. Tesla literally told their shareholders during the most recent earnings call that "more affordable models are coming in the first half of 2025". Jim Farley has spoken on how one of the reasons Ford's EVs are still rather expensive is because they clean-roomed much of the assembly for them to better compete with Tesla, so while ICE cars have a century of process optimization behind them, their EVs aren't at that same level... yet.

Its just clickbait paid by Lucid to make their $90,000 cars seem reasonable because, well geeze, no one is making cheap EVs anyone. Wrong: Everyone is trying to, and its very obvious that this is direction the market needs to go in (just look at the depreciation on modern Teslas, new cars cannot compete with what is happening in the used market).

There's only one reason why US cars are more expensive than CN cars: People will pay it. All that other stuff is window dressing. The US is way, way better at financial engineering than China; we can sell an $80,000 Tahoe to a single mom between jobs on zero down and 10% APR, somehow she'll take that deal, and somehow the system doesn't explode into a fiery deathball; so you get $80,000 Tahoes. That's it.

Short-term vs long-term focus means nothing. Government subsidies run out. Rapid development is easy when its a first generation product with no customers. Lower wages means fewer of your own people can afford it (though it does help with export pricing to richer first world countries... what's that word I'm looking for... it starts with a T, I heard an orange man say it recently. eh probably nothing)

The 2008-2023 US economy was basically the strongest national economy in the history of humanity; but, obviously, that's changing. And no, I'm not doomering about a mother-of-all-crashes. The world is just getting more realistic, as it should.

I wouldn't pay for anyone to write this, if I were Lucid...

Mercedes sold their cars by having better engineering (perceived by customers). Does Lucid have better batteries? Almost certainly not.

> Short-term vs long-term focus means nothing.

Manufacturing, generally? Solar? Batteries? Semiconductors? Cyber espionage/warfare? I think those are more than nothing that China has had a demonstrable long term strategy in which benefits them at our expense.

Also, great point about financialization in the US. Do you think if that dam breaks, US auto makers come back to planet Earth instead of chasing what seems to be exclusively high-margin cars only affordable by credit?

I'm pretty sure they do, though. Lucid owns Atieva, the company supplying the batteries for Formula E. What they've learned through the many seasons directly goes back into the vehicle's battery.

https://lucidmotors.com/media-room/atieva-powers-season-6-fo...

Tesla has kind of been lying about "more affordable models are coming" for about as long as they've been in business, though.

The problem IMHO is a variety of US policies have artificially taken out that cheap market in all kinds of domains through protectionist policies like rent seeking, monopolies, and tariffs. So, for example, tariffs hurt the emergence of a cheap EV market.

The solutions for this in general don't line up nicely with any of the major party platforms, at least in the US — major deregulation of certain areas in certain ways, aggressive antitrust enforcement, and dismantling of tariffs, possibly combined with government incentivizing of competition in certain areas, at least for awhile. It feels like candidates and parties demonize one or more of these things and overemphasize other things, or implement some of these things in the wrong ways, like they're all mutually exclusive.

In general, I’m not an anti-regulation person. But American regulations on cars add cost compared to other countries.

One specific example: mandatory back up cameras (and a monitor to watch them on).

Maybe their strategy will pan out, but generally any economy which critically depends on a restless and despondent class of basically slave labor (and, in some cases, actual slave labor) isn't going to sustain itself. As they said in Silicon Valley (the HBO show) like 8 years ago: "There's no New Bangladesh; there's just Bangladesh."; China's population wants upward social mobility in a way that's basically just westernization. On the flip side, they have a government that wants the economic benefits of a cheap labor pool, they want to be a cheap western manufacturing destination, and they have the surveillance and police state to push the issue further than western democracies would; a scary combo.

The other unrelated point I try to impress on people: You can assert that China's lead in manufacturing solar panels, batteries, etc is indicative that they're "ahead" of us, or whatever. You sure? I don't know what job you have right now, but the US was a destination for high tech manufacturing many decades ago. We largely moved past that. We make poorer countries do that for us now. How is it desirable that America become better at, I don't know, mining lithium? Are those jobs that we want our population to have? Versus what are clearly higher-margin email jobs? China manufacturing solar panels to sell us is our benefit, their expense; their economy is built on attaching a 2% margin on physical goods, ours is attaching a 200% margin on services, software, and financialization we build on top of those physical goods. Every economist on the planet would agree, you want to live in the second one. Lithium mines suck. Assembly lines suck.

But even looking beyond that: The US has an unemployment rate of like 3% right now. You can open the world's biggest solar factory out in Iowa; good luck finding workers to staff it. The US is not "behind" on manufacturing; we LEFT it behind, for good reason.

> Do you think if that dam breaks, US auto makers come back to planet Earth instead of chasing what seems to be exclusively high-margin cars only affordable by credit?

It doesn't seem to me like the problems that the automotive world are going to face over the next five years will be isolated to US manufacturers; its going to be global. Its going to get harder to financially-engineer your way to higher margins and revenue. That means prices need to come down. But, prices are higher because consumers want these nicer cars, nicer materials, there's a lot of cost in mandated safety features and safety engineering as well, not to mention all the export controls and tariffs Trump is threatening. So, how do they get cost down? That's the challenge.

With the size of American vehicles these days and the reduced visibility inherent, I'm all for mandatory backup cameras. Some trucks even have forward cameras now because their front-ends are so tall that they have a large front blind-spot.

I am a bit skeptical of Lucid's ability to grow into profitability, but they do have excellent engineering. Their EVs have some of the best efficiency and range on the market.