I follow the auto industry more closely. What the auto industry is talking about is a permanent discontinuation of their lower priced models, not a temporary situation due to “shortage”.
That’s been going on for much longer than the recent supply chain issues. And it has a very simple reason - complexity. Cars today require all sorts of things that have mostly fixed cost regardless of the size of the car. For example, ABS, airbags, flat screen display, infotainment system, electric windows, sensors out the wazoo, rear view camera, safety stuff, etc. All those things cost money, a LOT of money, and are required in the small $25k sedan and in the large $50k SUV. I’ve read that electronics comprise nearly $5k of cost now and is rising rapidly.
So, if the cost of a small car is -
$15k metals/materials/subassemblies + 5k electronics = $20k, can sell for $25k, that’s a 20% gross margin, but is either not profitable or minimally profitable all in (after G&A and other expenses). And very few people option up a small car like this, so there isn’t much upsell of options with nice higher gross margins.
The cost of a large SUV is -
$30k metals/materials/subassemblies + 5k electronics = $35k, can sell for $50k, that’s a 30% gross margin, so after G&A and other expenses, it can make the company a fair profit. Sometimes, when people buy the optioned up ones, because the options have a higher gross margin, those optioned up models can provide a handsome profit.
So in the end because of the “base” cost of stuff we expect in a car nowadays, small cars can’t really be made profitably anymore. In Europe they still manage some small cars, but that’s mostly because they can charge a lot for them due to demand … because gasoline is SO expensive there, there is much higher demand for smaller cars than for bigger cars. There are hardly any SUVs on the road in Europe because filling them up would cost $270 a pop ($9/gal * 30 gal) and they get much lower mileage than the smaller cars that are so popular and in demand.
And this isn’t going to get better anytime soon. Put aside any of your feelings regarding climate change and what to do about it. The facts are that people worldwide are electing representatives that are slowly “forcing” a move away from ICE to electric, and that will just increase what I described above. The “base” costs of stuff that is required in a car will go up, and not just $25k models will be cancelled (because there’s no reasonable profit in them), but $30k models will also be cancelled. It’s similar to the condo issue - as more “base requirements” get added (safety, maintenance funds, etc), the more expensive they will become, and the less profitable small ones become. So few will build small ones anymore.
There is some leeway in kitchens.
There is (trust me I know, I remodeled mine 20 years ago!) lots of leeway. But it’s still relatively small differences, the kitchen is and always will be the most expensive room by far to construct in an apartment. And when building an 80 unit condo, they aren’t going to bring in 2 kitchen suppliers, one for cheap ones and one for nice ones. For two reasons, one because it increases costs and management expenses, and two, because when they show the apartments, everyone will want the nicer kitchens and the units with the “crappy” kitchens will languish on the market and cause “end of sales period” to last an extra year or more. That means you need to keep an office on site for an extra year, lawyers on call, back office, etc…