It is hard to make money selling virtue – especially when your buyers cannot afford it.
General Motors’ net income is down by . . . 40 percent. Its business model is almost as successful as the Biden Thing’s presidency – and for dovetailed reasons. The Biden Thing crippled the supply chains upon which all companies depend in order to make the things they sell. GM has had fewer cars to sell on account of this.
GM’s other problem is the same problem every company selling cars is dealing with, also caused by the Biden Thing. Or at least, by the things behind the Biden Thing. That thing being the devaluation of the buying power of the currency people use to buy everything. The admitted-to devaluation is close to 9 percent; it is probably closer to 12. Either way, it amounts to an equivalent tax on every American’s buying power.
Put another way, it means the price of every new car has increased by whatever the percent actually is – on top of increases caused by scarcity (those supply chain disruptions) and (more subtly but much more fundamentally) the actual increase in the cost of cars, due to the cost of complying with the decrees of the Biden Thing’s regulatory apparat.
As of the 2022 model year, there are only a handful of new cars remaining that are priced under $20,000. Of these, only one or two are viable as family cars. If you have a very small family.
The average price paid for a new car this year exceeded $34,000 – a record high. Costs are going up just as people’s ability to spend is going down. Low, low financing allowed that fundamental problem to be swept under the rug for a time but that time has come to an end as the cost of money – of borrowing it – is now going up.
This brings us to the expense of the virtue-signaling that GM is doing that will be its undoing. Possibly, the entire industry’s undoing.
Electric cars. Hand-built, $300,000 electric cars like the Cadillac Celestiq (which bears an uncanny resemblance to the SUX9000 from the original RoboCop) and the $100,000 electric Hummer and the $50,000 electric Blazer that costs about $18k more than the base price of the non-electric version.
Who does GM expect is going to buy these vehicles? Or – better put, perhaps – how does GM expect people to be able to afford to buy them? Keeping in mind that the putative “$50,000” electric Blazer actually costs closer to $55,000 in terms of how many devalued dollars it takes to buy the thing.
GM is fire-sale’ing the price of its Chevy Bolt, which it says it will sell for about $26k, soon. Probably because the Bolt tends to go up in smoke. The Bolt is also what is known within the business as a loss leader – like the Nissan Leaf – meaning they are “sold” at a net loss each, in order to move as many of them as possible.
This is not a sound business model, assuming you want to remain in business.
Historically, car companies have “sold” loss leaders in order to be able to sell the cars that earn them profits. The loss leaders are a kind of write-off, the cost of doing business, imposed by the regulatory apparat. “Sales” of the Leaf, for instance, improved Nissan’s overall Corporate Average Fuel Efficiency (CAFE) numbers, which the Biden Thing’s regulatory apparat decrees must be 35 MPG – headed toward 50. Each “111MPGe” electric Leaf ups the average – and reduces the cost of fines levied (and pass on) for “noncompliance” – enabling Nissan to continue selling Frontiers and Pathfinders.
But you can only “sell” so many loss leaders before the cost outweighs any offset. It is why Nissan is cancelling the Leaf. It is why GM will eventually be forced to do the same to the Bolt.
GM thinks that a $26k Bolt will sell – when no one is selling anything else for less than $20k – and gas costs $5 per gallon. Or even more than that. This is the Pete Buttigieg Thing’s business model: Increase the cost of buying – and driving – non-electric cars and people will then buy electric cars.
It is a model that dovetails the business model of government, itself. Need more money? Create more money! And then spend it. The fly in the soup, of course, is that unlike government, the people who are taxed to finance government cannot create more money themselves. Are limited – in terms of what they can spend – by the money remaining to them, after government takes from them what it says is a “fair share” of it.
GM – the industry – is banking on $50k (and $300k) electric cars bankrolling the cost of $26k electric cars. It is Tesla’s business model – and it has appeared successful in that Tesla has “sold” a few hundred thousand of its cars. The fly in that soup is that there are only so many people who can buy $50,000 cars – electric or not – and that pool is drying up. It will dry up faster as the cost of money goes up at the same time the value of money goes down.
And then what?
GM’s leather-jacketed CEO Mary Barra says “It is clear we are operating in a dynamic market that presents both challenges and opportunities for our company, and we will continue to rise to them.”
It sounds a lot like the new definition of “recession” uttered the other day by a Biden Thing apologist – and of “vaccines,” by the same apologists.
The theory, apparently, is that by changing usages you change reality. Until reality bites.
If GM – if the industry – were interested in making money, an effort would be made to reduce the cost of cars, in order to offset the reduced buying power of customers. It is a completely doable thing – just as it was (and still is) doable to reduce the cost of gas to half what it currently costs, courtesy of the Biden Thing.
There is no technical obstacle preventing the design, manufacture and sale of $10,000 non-electric cars (with AC and the other necessary amenities) or, for that matter, $10,000 electric cars designed for short hops at very low cost.
But the industry seems more interested in buying the favor of the Biden Thing – and the things behind it – than it does in selling cars to people who can afford to buy them. Which is interesting in that organisms usually are motivated by an instinct to survive – and this includes corporations. At the end of the day, if people aren’t buying – if they are unable to buy – there will soon be no business.
Of course, that is of no consequence to CEOs such as Barra, who is paid staggering money – reportedly, more than $20 million annually, currently, which is several times what her predecessor was paid – – to signal GM’s virtue. She can afford to buy every Celstiq GM makes.
But GM won’t make much money on the deal.
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