Why aren't cars less expensive?

[kevinquinnyo]

Probably because the demand for "cheap rather than good" is served by the used car market in the U.S., while countries like India or China doesn't have the same amount of used cars for sale, so there's still unmet demand.

Well, that's what I was asking in the previous post. Why is that the case?

Are you saying it's because there haven't been cars in India long enough for it to develop a supply of used cars?

 

[I Ratant]

I suspect, though I haven't researched this, that, on top of other factors listed above in other posts, the raw materials of cars have become more expensive and that these raw materials are a forced cost due to safety standards.

.
Particularly the hourly rate of the assemblers.
Nice strong union there.
But today's cars are far superior to those in 1968, in every way you might think of, except maintenance.
I could keep my cars of that vintage running myself.
Today, any problems, it's off to the shop.

 

[Leif Roar]

Well, that's what I was asking in the previous post. Why is that the case?

Are you saying it's because there haven't been cars in India long enough for it to develop a supply of used cars?

In a sense yes, although it's more a matter of improving living conditions and an expanding middle class.

 

[Andrew Wiggin]

In the USA (& to a slightly lesser extent in UK), cars are seen as a status symbol, how much status would a Tata or a Fiat Cinquecento represent?

This just illustrates the problems of a culture that regards a person's vehicle as an extension of their social status/sexual virility. I bet lots of practical folks would drive those, since they're cheap to buy, cheap to operate, and simple to maintain. I would, for one. Maybe that means I'm secure enough in my masculinity and social status that I don't have anything to prove.

In other news, my wife and I saw a 'Smart 4two' bravely slogging through a snowstorm yesterday. It made our day. Now I have to find out who's selling those around here. I want one. It's the ultimate in go go gadget grocery getter.

A

 

[GreenLines]

But at nowhere near the scale of Moore's law.

If cars had shrunk as fast as transistors, a car that weighed a metric tonne in 1970 would weigh a milligram today.

If materials prices had shrunk as fast as transistors, the steel that cost $100/tonne in 1970 would cost a penny for a fully-loaded container ship.

There's literally nothing you can buy at a billionth the 1970 price of steel. Anything worth that little isn't worth shipping.

And to finish the joke:

"Yes, Mr. Gates, but we're not allowed to let our cars crash ten times a day."

 

[Lensman]

This just illustrates the problems of a culture that regards a person's vehicle as an extension of their social status/sexual virility. I bet lots of practical folks would drive those, since they're cheap to buy, cheap to operate, and simple to maintain. I would, for one. Maybe that means I'm secure enough in my masculinity and social status that I don't have anything to prove.

In other news, my wife and I saw a 'Smart 4two' bravely slogging through a snowstorm yesterday. It made our day. Now I have to find out who's selling those around here. I want one. It's the ultimate in go go gadget grocery getter.

A

If you're that certain that those cars would sell well where you are - set up a dealership.

 

[Ethan Thane Athen]

...
Henry Ford once said "you can get one (Model T) in any color you want as long as you want black".They were plain looking but on the hand they were durable and cheap.

General Motors set the trend for custom features, which eventually forced Ford to start offering similar features as well.

Apparently he never said that at all. It's an urban myth. Also the first Fords weren't actually available in black but a variety of colours including green (but not black).

Source: QI.

 

[Travis]

This just illustrates the problems of a culture that regards a person's vehicle as an extension of their social status/sexual virility. I bet lots of practical folks would drive those, since they're cheap to buy, cheap to operate, and simple to maintain. I would, for one.

In the US if you are practical and cheap you just get a certified used car. That's what I do. Nowadays a five year old vehicle is still in "new" condition if it was properly maintained. I bought a used Ford Explorer for $5000 that was essentially identical to a brand new one that was five times the price. I've had the Explorer for seven years now and it's still going strong.

 

[Modified]

Probably because the demand for "cheap rather than good" is served by the used car market in the U.S., while countries like India or China doesn't have the same amount of used cars for sale, so there's still unmet demand.

Right. For $11,000 I could get two used mid-sized cars each with about a third of their relatively-maintenance-free miles gone, or one brand new tin can on wheels.

 

[Tormac]

In the USA (& to a slightly lesser extent in UK), cars are seen as a status symbol, how much status would a Tata or a Fiat Cinquecento represent?

Isn't Fiat planning on selling the Cinquecento here in the states in 2012 under the Chrystler dealerships?

But I don't think its fair to compare the Tata to the 500, the 500 is a very nice car from what I've read,
its just realy small.

 

[stevea]

They're very special cases, due to an extremely unusual circumstance called Moore's Law.

Maybe I give you more credit than you deserve - but naming a phenomena. like "Moore's law" does not explain anything. The question is why some prices decrease while others are more or less static in "real terms".

I can't think of anything that's CNC'd on a production car? A couple small parts in the engine? Everything is pretty much cast and stamped.

What are you thinking about ? Every moving part in your engine is machined - the pistons, piston pins, cylinders or inserts , sleeves, cams, cranks, mating surfaces, valves, the bearings even the bolts. Typically the cam and crank bearings are inserts - machined separately and inserted. Sheesh - buy a clue or read a book ! Precision casting isn't close to the tolerances needed. Stamping (which is neither machining nor casting) is used for oil pans and cover plates but not part of the drive system. You certainly have well above 1 sq.meter of machined surfaces in the drive train.

Actually, from about 1980 through around 2000, the cost of a high-end desktop PC stayed pretty much constant -- you just kept getting more and more for that price. It's only in the last few years that the actual price has dropped significantly.

Funny - a friend was showing off a 1980s PC catalogue and the prices haven't changed much - tho the capacities have increased radically.

===

It's certainly true that high density ICs (CPUs and memory for example) have decreased in price per transistor or price per performance or capacity, but why ?

There is a vast capital cost in setting up an IC "fab" manufacturing line (several billion today), it takes several years, the engineering costs to design a modern CPU is huge as well, but once the line is in production the recurring costs (labor, chemicals, high purity silicon wafers) are tiny compared to the value of the product. So *IF* you can make good use of that fab you can make decent money. If you can't - if the competition tops your products - then you lose on that huge infrastructure investment.

So the interesting thing is that decreasing line size (the 65nm, 45nm or 32nm feature size of an IC surface structure) both increases the number of chips per recurring cost (chips/wafer, chips/unit laborand) also increases the potential chip speed and decreases the chip poewr requirement - but also at least initially increases the part failure rate. So there is an interesting balancing act; smaller is better except you must account for more failures.

Of course bonding out ICs and making/assembling circuit boards is currently labor intensive and is farmed out to 3rd world countries.

Back to Moore's law - every time you decrease the linewidth by ~30% you can double the number of parts and improve their characteristics. It's a very rare thing that these "incremental" improvements can cause such an improvement in production and quality.

Disk storage has also increased radically in capacity/$ since it has a similar economics. If you can polarize smaller magnetic domains on the disk and space tracks closer - then you get higher capacity AND faster prefromance as a adirect result of this one-dimensional improvement.

Back in the 1980s there was popular chatter that an ideal workstation (new concept) would have the "3Ms" 1 MIPS, 1 Megabyte and 1 Megapixel (sometimes 10MB of disk was added to the list). I just upgraded a PC (~$400) to ~7GIPs, 4096Megabytes, ~1.5Megapixel, and 1000000MB of disk. So it's notable that this common system beats the 3M by factors of 7000,4000,1.5 (and disk by 100,000). Clearly display technology has languished while IC and disk have improved tremendously.

More typically in production (cars for example and perhaps computer displays) there are many disparate parts and many separate steps and each one has separate price/production issues. Someone mentioned a car engine is ~$3k - so even driving the engine price to zero has only a modest impact on price. Improving one of these has only a small impact. The fact that a semiconductor wafer is a homogeneous surface and tho' the processing is detailed and occurs in several common steps. It's an ideal situation to look for incremental optimizations. Similarly for disk surfaces and heads.

So one way that we get improvement in industrial production of these complex parts is to simplify the design ... use standard modules, stamped or cast pasts wherever possible, remove assembly steps, reduce the number of parts. Reduce the labor costs. We see this trend all the time. If you look at a electric toothbrush, vacuum cleaner a home furnace fan motor or a hose spigot you'll see the design consists of an minimal number of parts. If you examine the manufacture of a KB or mouse from the 1990s vs today the simplification is clearcut. Modern cheap coffee makers have far fewer simpler parts than the pre- Mr.Coffee units. The simple modular design means the potential for repair is greatly reduced. Repair consists of replacing a whole module or the whole unit. This is one of the trade-offs that makes it somewhat undesirable to do larger scale modularize of high expense items like an auto. Current auto design has too many parts - too complex to become cheap.

Electric vehicles drive train and braking have considerably better potential for modularization than IC engines, transmissions with 2/4 WD and independent braking. Even moreso for fuel cell technology.

So ultimately, IMO, the costs of production are driven by complexity and non-homogeneity (of a sort) which results in high production and assembly costs. I'm sure there is a way to caprure the issue in information theoretic language, but it escapes me for the moment.


Interesting.

 

[Soapy Sam]

I doubt the premise of the OP. I suspect it may be true in the US, where car prices forty years ago had already dropped due to consumer demand and resulting economies of scale, but false in countries where this was not the case.
In terms of real cost as a percentage of average earnings, cars probably hit their cheapest in Europe around 1980, as judged simply by the economic stratum of society who could afford one. In the former Soviet Union and much of Asia, that point has not been reached yet. Once the cheapest possible commodity price is reached, the many other factors listed by other posters come into effect, relentlessly forcing prices up.
It's the same reason US and European manufacturing moved to the far east twenty years ago; cheap labour., low wages, low costs , few available consumer goods. That very act started the wage / price inflationary rise and resulting currency revaluations that destroyed many of the so-called "tiger economies".

 

[Furcifer]

@steve- you obviously don't know the difference between machining and CNC.

 

[drkitten]

Maybe I give you more credit than you deserve - but naming a phenomena. like "Moore's law" does not explain anything. The question is why some prices decrease while others are more or less static in "real terms".

Perhaps I I'm giving you more credit than you deserve, but I figured that if you didn't know what Moore's Law was, you could look it up or something.

Moore's law in the strictest formalism says that transistor density for electronic circuitry has been doubling every eighteen months or so (it used to be every year, but it's slowed down somewhat), which is a testament to our educational system and electronics industry. It's an empirical observation that electronics technology has been in a sustained state of nearly unheard-of progress that is not shared by any other type of technology today -- and is also more or less unique in human history.

Technology makes things cheaper --- that's its job. The development of the assembly line and mass production, for example, made hard goods much cheaper because labor costs dropped dramatically. The Green Revolution (and specifically the development of HVY maize ["corn"], wheat, and rice) made food much cheaper. The development of antibiotics (and before that, sulfa drugs) made antibacterial treatment more effective, and hence made "health" much cheaper.

But all three of these were relatively one-off events; we haven't really seen the sort of continuous geometric improvement in antibacterial drugs; modern antibiotics aren't 1000x cheaper and more effective than pencillin (as penicillin was over its competition).

We could probably develop a new unobtainium-based alloy (or plastic or something) that cut the cost of cars in half if we worked on it long enough and were very lucky. What we couldn't expect to do is to develop another alloy that cut costs in half again only two years later, and yet another cost-cutting alloy two years after that.

That's the significance of Moore's law in this context. Technology tends to dominate inflation, but technology rarely has such a long and productive run.

 

[rwguinn]

@steve- you obviously don't know the difference between machining and CNC.

Now days, pretty much all machining is CNC

 

[Meadmaker]

And keep in mind that although the new car costs as much as it did in the 1960s, you only have to buy one half as often.

When I was growing up, 100,000 miles was pretty much what you would expect to get from a new car. Today, 200,000 miles is considered normal. That durability is purchased with a lot of engineering time, and with more expensive materials.

 

[dropzone]

Add in lots of things that are now standard that used to be optional: Power steering, power brakes, power windows, air conditioning, bucket seats, 6 channel surround sound, etc...

Air conditioning? Forty years ago HEATERS were often optional.

 

[Travis]

And keep in mind that although the new car costs as much as it did in the 1960s, you only have to buy one half as often.

When I was growing up, 100,000 miles was pretty much what you would expect to get from a new car. Today, 200,000 miles is considered normal. That durability is purchased with a lot of engineering time, and with more expensive materials.

I've got 240,000 miles on my Explorer. Once upon a time any car hitting 150k+ was a big deal.

 

[corplinx]

http://en.wikipedia.org/wiki/Chicken_tax

Like most things done to protect a handful of workers, things like the chicken tax fail to protect us and instead make the poor pay more to get a cheap south korean car.

Screwing the poor is the typical result of tariffs like the chicken tax.

 

[dropzone]

So we should make crappier cars so the current poor can be fired because they were stranded on their way to work because us first-world folk had to accept crappy cars 30-some years ago? Look at the GD improvements before comparing the costs then and those now, without accounting for inflation.

And that doesn't touch the safety or environmental issues.