> > >> GM has already paid the R&D costs, so stopping now certainly won't >> recover them. At any rate, economically speaking, the R&D costs are >> now irrelevant. All that counts is whether or not they can build >> them for less than they can sell them. > > > That assumes that R&D on a product ceases just as soon as the > production line gets rolling. To the best of my knowledge, that > rarely happens, if ever. It seems particularly unlikely with a > product that has a couple of glaring disadvantages in comparison to > the established product line. Actually reducing the disadvantages is > just as important as good marketing to minimize the customer > perception of those limitations. If the product line is going to > endure, R&D efforts are bound to continue.
Many people would be happy to own an EV1 in it's present configuration. If they choose to continue R&D that's a seperate issue and has nothing to do with whether or not the CURRENT EV1 is economically viable or not, at least in the short term. > > Moreover, those already-invested costs are not "economically > irrelevant." R&D costs get taken into account when pricing a product, > since the company needs to recoup the investment. And R&D not only > acts to build the technological foundation, but it also serves as a > predictor of future expenses. As the R&D begins to reveal that the > product price is likely to rise past the projected sustainable range, > the company will cut their losses by terminating the project. It is > cheaper at some point to just eat the cost outright than to continue > to fund a project with only a relatively small hope of long-term success. All past expenditures are irrelevant from a purely economic point of view. I'm not an expert on economics so I'd recomend a basic economic class at your local comunity college, however consider: Let's assume I spend $1 million on R&D. Bye-bye, the money is spent and gone. Now let's say that R&D has developed a product that will cost me $1 million per year to manufacture (total costs) and will return $1,000,010 per year. Do I go into production? Well yes, from a purely economic point of view that's $10 profit. Does the $1 million I spend on R&D have any effect on that profit? Nope. Do I not go into production because it's such a small profit? Perhaps, but that's a person call and not an economic one, after all I'd be throwing away $10 a year. Now let's say I only make $999,999 per year. Do I go into production? No, not from a purely economic point of view. That would cost me $1 a year. Now personally I'd do it for purely altruistic reasons, but that is also irrelevent. Again does the $1 million spent on research matter? NO! Any and all costs spent in the past have zero bearing on whether or not a project is economically viable from this point forward. >> Hand built it's questionable, build in proper production lines with >> economy of scale working for them they could almost certainly turn a >> proffit. > > > And on what, exactly, do you base this claim? Economies of scale > require sufficient demand to sustain them, and a significant up-front > investment. On the fact that they build the Corvett in similar numbers to what I suspect the EV1 would sell (if it was for sale). Mass produced the PbA EV1 would probably cost less than a Corvett (it has fewer parts). I suspect the reason that GM caused the EV1 to fail is because they were afraid of the consequences. If the EV1 was sucessful then California would require that 4% of there vehicles sold be EVs. If California were allowed to force them to sell 4% EVs then other states would follow. The net result could be a requirement that GM sell MORE than 100,000 EVs per year. While I believe that there is a nation wide market for 50,000 to 100,000 EV1s per year (at least initially) I don't believe that there is a sustained market for 100,000 per year. that means they would have to attract buyers that wouldn't be willing to spend $40,000 on an EV1 so they'd have to price it cheaper to get enough customers to meet the state mandates and that might cause the price to drop below viable levels. > Just why do you think you know better than a major auto manufacturer > what is and is not likely to be profitable in their market space? If > it were "almost certainly" profitable, don't you think someone with > money (whether or not they were already an auto maker) would jump at > this lucrative opportunity? Or do you just not believe that > capitalism really works? Because this is a free country. I'm intitled to my opinions. > > Why look for demons? Why not just admit that, much as we think the > world would be better off with more of them, EVs are currently very > difficult to produce and sell at a profit? The benefits of EVs are > manifest, and I hope some company can put together enough venture > capital to turn out a decent mass production run. But I don't think > it is reasonable to assume that this is a simple undertaking and a > dead sure way to make money.
