[quijoteuniv]

Vertical integration matters. If BYD controls much of the chain from the mine to the ship, they’re not paying everyone else’s margin along the way. That can translate into more car for the money.

I own a BYD Tang, so I’m biased, but the value for money has been hard to beat.

Scale probably helps too. When you sell millions of cars using many of the same parts, availability is better and parts are more likely to stay affordable than on low-volume models with lots of redesigns.

[torginus]

Vertical integration is a double edged sword. When your car is a decade old or more, and stuff starts breaking, the only vendor that makes parts for it is BYD - and its up to them if they bother selling to you, at what price, provided they still make these parts at that time.

Time will tell how cheap and easy will they be to maintain, which affects residual value at the end of the lease, which affects payments.

Nobody pays sticker price for new cars as a lump sum. If BYDs (or whatever car) are impossible to maintain, that means nobody will want them used, and residual value will be low, which means BYDs will cost more to the end user to own than a more expensive car by a different manufacturer.

Which seems to be the case for now in places like Germany, but we will have to wait and see how the situation develops and the second hand market builds up.

[spacebanana7]

Additionally, vertically integrated companies don't get to tag along on innovations produced by upstream suppliers. Many EV companies will effortlessly have their range increase by a couple % each year, with battery costs falling, just because they can adopt the improvements of CATL/Panasonic/BYD etc.

[mjanx123]

The aftermarket would jump after such an opportunity in such case

[vladvasiliu]

> Vertical integration matters. If BYD controls much of the chain from the mine to the ship, they’re not paying everyone else’s margin along the way. That can translate into more car for the money.

This is interesting. Wasn't the idea in Europe (and maybe elsewhere, too, no idea) that outsourcing components would lead to economies of scale? After all, a Mercedes or BMW or VW seat is still roughly a seat?

It's interesting to me that we seem to switch back and forth between the two models, each time saying the new approach is "better".

[hylaride]

Outsourcing to somebody that can drive higher volumes for components can be cheaper, as they can amortize the manufacturing equipment over more widgets. If a car seat is just a car seat, then outsourcing makes sense. However, if you need to customize it or add some other value (heated seats, electronic movement, etc) then unless everybody is doing the exact same thing, you need to bring at least some of the components in house and/or pay for it.

The same is true in many industries. TSMC has dominated fabing chips because they scale wafers over many more customers, whereas intel mostly only focused on its own chips. The results was more expensive all around. (Intel also had to deal with bad western accounting attitudes to CAPEX spending, which IMHO is a huge reason so much manufacturing left North America, though lower costs also played a role).

[hermanzegerman]

VW, Mercedes and BMW also squeeze their suppliers very hard, and they operate with razor thin margins. So I agree and wouldn't say that doing everything in house is always going to be the cheaper way

[avhception]

My family operated a business on exactly these razor thin margins. You always live on the razors edge. You're unable to invest into the future, unable to improve your processes, and god forbid there is even a minor disruption. I don't think it's sustainable. We've since faltered, as have our many of our competitors and suppliers.

[taffronaut]

Having an adversarial relationship with your suppliers is not necessarily the best arrangement. It means that suppliers will nickel-and-dime you for every change and ship minimum possible quality to you. The cost of loss of agility and quality will impact your bottom line.

[bluGill]

The value in being a supplier is you make the replacement parts when they start breaking in 5-10 years. The real money is in selling to every auto parts store in the country.

[alberto467]

It does also just depend at what scale you operate at.

If you're already at a huge scale there isn't really a significant scale advantage by outsourcing to somebody who doesn't just sell to you.

[MagicMoonlight]

And also the simplicity of the products. You don't need to design a different engine for each car, you just vary the number of cells and change the motors. Your battery division can keep pumping out batteries, regardless of what models you make. If you design a new model, you can keep using the existing lines. It's perfect for mass production.