[LeafItAlone]

> Pardon my ignorance, but if the cost of the hardware is already baked into the cost of the cheapest options, which means they are paying for all of the hardware they have in their cars, including the hardware they can't use, how do they benefit?

The idea is that the “cheaper” models are getting the hardware at a discount. Very simply: are getting $30,000 of hardware for $25,000 because features aren’t active. Others are willing to pay $35,000 for the same hardware with the features active. Obviously this example is over simplification of pricing and value, but that’s the general idea.

[someplaceguy]

It may actually be even better than that.

If the manufacturer hadn't done this, they would have to produce at least 2 versions of the car: one without any extra hardware, and one with all the extra hardware.

It may turn out that doing separate versions of the car could cost $5,000 more per car over its entire lifetime, including production (extra design, assembly lines, etc) and support, rather than simply making one version of the car.

So if the car company hadn't done this, the car might have cost $30,000 anyway without the extra features, and $35,000 with the extra features, so the poorer customers would lose while the rich customers would pay the same.

This works more or less the same if these costs are comparable or higher than the costs of the extra hardware. And I suspect they are higher, as it seems highly likely that the price for these premium features in cars are a lot higher than the actual costs of the hardware itself.

Sure, the company could still engage in the same wealth redistribution / subsidization / price differentiation in the 2-car scenario (and they likely already do), but everyone could still lose anyway because the total costs of all the cars could still be higher in total.