[labcomputer]

It’s funny how you assume they need to collude instead of each acting in its own independent selfish interest.

Why does one need to present strong evidence that prices will rise by $7500 when the demand curve suddenly shifts right by $7500 due to government intervention? Surely this is just Econ 101.

[vegetablepotpie]

1. There’s an assumption here that all manufacturers will simultaneously raise prices by $7,500 in response to a demand curve shift. If a single manufacturer steps out of line and lowers prices, they will carry more volume, and therefore more revenue.

2. Manufacturing costs do not increase when subsidies are introduced. EVs, as a result, have higher profit margins. Therefore, this will result in enticing more firms to enter a more lucrative market, resulting in more EV sales, which really, isn’t that the goal of subsidies in the first place?

[username332211]

I don't know if you realize it, but you are making the assumption every EV manufacturer has the capacity to produce vastly more EVs than they currently do. What makes you believe in that assumption?

[vegetablepotpie]

If you believe that firms don’t respond to incentives, then sure. If you believe that people do not innovate to optimize their utility, then sure. If you think America can’t build things, then sure; it’s an invalid assumption.

[labcomputer]

I don't know if you understand this, but factories have a maximum capacity they can produce. You can't just snap your fingers and double the capacity of a factory overnight if you realize that it is too small.

Look at how long it took Tesla to build the Shanghai gigafactory: About two years--and literally everyone who knew anything about auto manufacturing said it would be literally impossible to make that timeline when Tesla announced it in the beginning. People made jokes about it. Oh look at that! Elon Musk is lying again! Hurhurhur.

I mean, why do you think the Model S had zero competition for over 7 years? The first 2 years I understand--everyone thought EVs were a dead market. But why did Mercedes, BMW, Audi, et. al. wait the other 5 years (while Tesla was absolutely destroying their market share in the US) to bring out a competitive product?

Was it because they're a bunch of dumb-dumbs?

Or was it maybe because it takes many years to design a complex product like an EV and build a factory to build the car?

[labcomputer]

> If a single manufacturer steps out of line and lowers prices, they will carry more volume, and therefore more revenue.

How will they do that? Every one of them is production-constrained right now.

> Manufacturing costs do not increase when subsidies are introduced. EVs, as a result, have higher profit margins.

Now you're getting it!

> Therefore, this will result in enticing more firms to enter a more lucrative market, resulting in more EV sales, which really, isn’t that the goal of subsidies in the first place?

Sure, but it takes 5-10 years to design a new EV and spin up a plant. Will the subsidies still exist by then? (Probably not, because we are in the exponential phase of the EV adoption curve, so the subsidy will quickly become unsustainable).

[SubiculumCode]

This seems like a good test to determine the amount of competition in an economic sector. With suficient competition, the price will race to the slimmest sustainable profit margin. I mean you could try to raise your price up by $7500, but if your competitors don't, who will be getting sales?

In any case, EV prices have been dropping over recent years, and I haven't seen a $7500 bump in prices, just in more people being willing to go for a nicer vehicle instead.

[labcomputer]

That only works if the total capacity to produce products for that market is greater than the total demand for products in that market.

If people want 100 units of something, and 5 competing manufacturers can only produce 90 units total (and can only expand to, say, 110 units in a "short" timeframe), offering subsidies doesn't reduce the price.

If the government creates a demand shock, it doesn't matter how much competition exists in the market. They don't need to collude for prices to go up.

Look at what happened to toilet paper during Covid. Were Walmart, Amazon, McMaster and Grainger all colluding on toilet paper prices? Or was there a demand shock?

> In any case, EV prices have been dropping over recent years, and I haven't seen a $7500 bump in prices, just in more people being willing to go for a nicer vehicle instead.

All car prices have been dropping because we're getting past the Covid supply shocks. And if you go back farther, EV price drops are mostly the result of introducing new less-luxurious models (the current base Model 3 still costs more than the first RWD Model 3, and it has been decontented--missing features like parking sensors).