Following on yesterday's "It's Not Easy Building Electric Vehicles, Ford Is Losing Billions Of Dollars In The Attempt (F)".
From The American Prospect, July 31:
What it doesn’t say is that the potential buying public is badly underpaid.
Well there you go, problem solved. Just kidding, here's more:
The planet may be wilting under its hottest month this side of hell, but the obstacles to going greener and getting cooler remain very real.
Last Thursday, Ford announced that it would reduce the number of electric vehicles it had planned to produce, because there weren’t going to be enough customers who could afford to buy them. Ford CFO John Lawler said that because EVs are “too expensive” for most car buyers, the company was “going to balance supply with demand” by reducing its supply. Instead of turning out 600,000 electric cars and trucks by the end of this year, it would hit that mark at the end of next year. Instead of producing two million such vehicles by the end of 2026, it would turn out that many at some later date.
Ironically, it’s Ford, above all other companies, that has a history (or at least a mythology) of dealing with this very problem—the imbalance of supply and demand—not by reducing supply, but by increasing demand. In 1914, founding father Henry Ford created the assembly line and thereby invented mass production of a costly product. Soon thereafter, he did something equally revolutionary: He raised the wages of his assembly-line workers to $5 a day—by the standards of the time, a huge leap in income for unskilled or semi-skilled production workers.
As myth would have it, Ford raised the wage because he understood that his cars needed buyers, and by setting the standard for decently paid production workers, he was giving the working class the ability to purchase his Model Ts. The history is a bit more nuanced: Ford had to be persuaded by his fellow executives to raise wages, not to create buyers but to hold on to his employees. Conditions of work on the early assembly lines were brutal (see, e.g., Charlie Chaplin’s Modern Times), and the turnover rate at the early Ford factories was stratospheric. Ford didn’t consider slowing down the lines, but he did reconsider his pay rates, and by raising them well above the current norm, he managed to stanch the one-way flow of Ford workers though the factory exits. (This same policy is alive and perniciously well at Amazon today, which attracts its warehouse workforce by paying more than local competitors but retains a Modern Times-esque pace of work.)
Nonetheless, when Henry Ford raised the pay at what was quickly becoming one of the nation’s largest employers, he did make it possible for his workers and their economic peers to at least purchase used cars, if not new ones. It was several decades later, when the United Auto Workers organized Ford and his competitors in what was then the nation’s largest industry, and those companies returned to making cars after the end of World War II (when they’d made jeeps, tanks, and planes), that Ford workers could truly afford to buy what they’d made.
The UAW contract of 1950, in which workers won not just raises but annual cost-of-living adjustments, bonuses that matched increases in industry’s productivity, and employer-provided health insurance and pensions, set the standard for other unionized companies, compelled many non-union companies to meet those standards, created a level of broadly shared prosperity never seen before, and created the mass market that mass production had always needed....
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New Hybrids and EVs Fall Below MSRP, Despite Ongoing New-Car Demand
Summary:
- The average new car is priced 8.5 percent above MSRP
- 20 Models are priced within 2 percent of MSRP – with these six priced below MSRP: Chrysler Pacifica Hybrid, Infiniti QX80, Ford F-150 Hybrid, Hyundai Ioniq 5, Chevrolet Silverado 1500 and Hyundai Ioniq 6
- Four of the six models priced below MSRP are hybrids or electric, suggesting a reduced demand for “green” cars
- 20 Models are priced 18 percent or more above MSRP, including the Jeep Wrangler Unlimited, Mini Hardtop and Genesis GV70
Macroeconomic factors, including inflation, interest rates and employment concerns, have had little impact on new car demand, with the average new vehicle priced between 8.4 and 8.7 percent above MSRP for the last five months....
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