GM offers buyouts to ‘majority’ of U.S. salaried workers

To judge by the venting of a car-buff coworker, who needs to buy a slightly-affordable car for his son, the days of lower volumes & margins on cars may be a bit further out.

1. High interest rates make cars a lot more expensive, suppressing demand.

2. The inventories on dealership lots have been rebuilt over the last 6 months, hiding a drop in consumer demand.

3. EV's take much less labor to manufacture than combustion engines. Take a look at the regularity of an EV compared to a combustion vehicle. That regularity makes robotic assembly more feasible.

4. We're hitting the first knee on the "S" curve for EV adoption. We're moving from the slow "early adopter" phase to the "mass market acceptance" phase.

5. The transition is creating a large group of hesitant buyers. Many people are unsure what their next vehicle purchase should be, so they delay the decision. They keep maintaining their current vehicle, purchase a used car as a stop gap, or keep relying on their current alternative -- bus, Uber, mooching rides off friends, whatever.

In other words, demand for combustion engines will drop faster than demand for EV's will rise.

6. The other points mean that manufacturing capacity is higher than demand, which means lower prices. Which means shrinking of already low profit margins, perhaps even into the negative.

7. And EV's won't be a panacea. Their price is dropping too. Tesla will be blamed for leading the price drops, but it's really the Chinese leading that charge. BYD has an €8200 vehicle coming soon. It's not a golf cart, it meets full Euro safety specs. BYD has a stable of European brands (Volvo, Polestar, MG and Lotus) that it can and will use to sell Chinese cars at Chinese prices without the Chinese stigma. (cf MG4).

8. Look up the "Altman Z score", and then take a look at this: https://cleantechnica.com/files/2023/03/Graph-Tony.png A score below 3 predicts upcoming bankruptcy. People complain that Tesla is over-priced, but IMO it's that the others are underpriced -- their price includes a significant bankruptcy risk. Not all of them will go bankrupt: once the survivors lose the bankruptcy risk discount, their value should go up.

9. The usual risks of large companies riding a significant technology change, coupled with significant supply chain challenges.

10. HN is highly skeptical about autonomous driving, but if it does happen it will have a significant unpredictable change on the market.

11. The uncertainty of the Inflation Reduction Act. Manufacturers are betting heavily on the subsidies in the IRA, but the chances of a rug pull in 2024 are high. OTOH, those not betting on the subsidies will lose heavily if the rug isn't pulled.

12. 80% of Lithium refining is done in China, and the odds of a trade war with China seem high.

13. Many legacy manufacturers make a surprising proportion of their volume and profit selling into China. That seems highly vulnerable.

I'm sure I'm wrong about some of those points, but even just a few could be devastating.

If you have hundreds of people creating $50K/yr of value and you’re paying them $80K/yr, you’re losing money even though they’re all doing something useful.