Long time ago in a century far far away there used to be a rule of some about landing houses basically it was something like 1 to 5 or one to 10 or one to three if you spent for example $10,000 on a lot for a house and you were gonna build a house on it. You needed to build a house that was $50,000 so that you would have a $60,000 sale when you got done if you didn’t follow this formula you ended up with too much house for the neighborhood or two little house for the neighborhood that formula has changed over the years, but the idea remains the same.
When we consider EV‘s in cars in general, I think we have the same type of thing going on. I cannot put my finger on it, but the cost of the engine and drivetrain is gonna be like the land. It’s a base that you can only build around. It makes sense when you think about it because engines and transmissions are extremely complex now for internal combustion engine cars so you have to drive the cost. The total cost of the car up by a certain factor whenever the cost of the engine goes up the same thing for batteries I believe this is why Tesla started off with the roadster and then the model S and then the model X the cost of the battery was so high that they had to drive the value or the expense of the car up high enough to bury the cost of the battery. We’re seeing lower cost EV’s now were also seeing lower cost batteries. I believe that the battery prices will continue to fall and at some point they will get low enough for somebody to be able to sell a low cost EV at a profit.
So when we see Chinese car companies not making money, especially on their low in cars, we can understand that the margin is being eaten up by a drivetrain that refuses to fall in price with the size and cost of the car, but as the cost of the drivetrain falls we should see margins at the bottom, expand a little bit.
Cheers
Qazulight