Bad Deal Math: I have a Product, But Please Don’t Buy It

August 3, 2015

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Courtesy of Mish.

How often do you hear a car manufacturer (or any other manufacturer) tell people to "not" buy their product because they lose money if you do?

I highly suspect this is nothing more than a purposely calculated publicity stunt, but please consider California Has a Plan to End the Auto Industry as We Know It.

Sergio Marchionne had a funny thing to say about the $32,500 battery-powered Fiat 500e that his company markets in California as “eco-chic.” “I hope you don’t buy it,” he told his audience at a think tank in Washington in May 2014. He said he loses $14,000 on every 500e he sells and only produces the cars because state rules require it.

So who’s forcing Marchionne and all the other major automakers to sell mostly money-losing electric vehicles? More than any other person, it’s Mary Nichols. She’s run the California Air Resources Board since 2007, championing the state’s zero-emission-vehicle quotas and backing President Barack Obama’s national mandate to double average fuel economy to 55 miles per gallon by 2025. She was chairman of the state air regulator once before, a generation ago, and cleaning up the famously smoggy Los Angeles skies is just one accomplishment in a four-decade career.

Spare Me the Sap

Automakers could just as easily price this crap at a point where they make a profit. They don't, because they want the publicity.

Here's the bottom line: Companies don't beg consumers to "not buy" a line of their products, unless they think favorable publicity will make up losses elsewhere.

Moreover, I highly doubt companies (counting tax breaks) are losing what they claim they are. Can we see full cost accounting, please?

Bad Deal Math

Even if this is a bad deal for the automakers, please don't assume it's a good deal for consumers.

Government adds inefficiencies in everything it does. It's quite likely that energy mandates are a lose-lose proposition for everyone involved.