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Possible Problem Selling New Cars

Discussion in 'In The News' started by docsabre, Dec 21, 2016.

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  1. docsabre

    docsabre Elio Fan

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    Zero Hedge has been discussing the "car recession" with American automakers and the current glut of new cars in dealers' showrooms. I'm wondering how this will factor into EM plans. Also it will be good news to see oil prices rise after OPEC's latest move to limit production. The US is poised to start up shale oil production when prices rise.
    http://wolfstreet.com/2016/12/19/ca...nventory-glut-forces-layoffs-plant-shutdowns/
     
  2. Jeff Miller

    Jeff Miller Elio Addict

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    It is an interesting thing to note but it isn't clear how it would apply to EM.

    For GM, they make most of their money (62% from the article) off very expensive SUVs and Trucks. I didn't see in the article any reference to what vehicles are filling dealer lots but I'd guess it is the expensive ones.

    The plant cited in your article produces "Chevrolet Cruze, Camaro, Corvette, Malibu, Volt, and Impala; the Cadillac CT6, CTS and ATS; and the Buick LaCrosse", most of which are high $ vehicles. The lower cost Cruze and Malibu are still more than 2x what a Elio would cost.

    So the Elio is a significantly different vehicle than the SUVs and Trucks as well as significantly cheaper than the low cost Chevys. Ultimately I don't think the vehicles GM is having trouble with overlap the same market that an Elio would so from that perspective I believe that it is interesting to take note of GMs plight but difficult to understand the impact on EM.

    My personal opinion is that if GM, and other car companies, continue to struggle with high end vehicles it just shows that the high end vehicle market is saturated. Will this impact Elio sales? My guess is that it probably won't, and in fact, may even help Elio sales. The reason being that people that can afford >$60000 vehicles wouldn't be looking at an Elio as their first choice of vehicle while those that have trouble paying their bills would still be very interested in a low cost vehicle like the Elio. For those that have the expensive car, they probably would appreciate the opportunity to by a low cost vehicle like the Elio as a second, commute, "and", or kid car simply because they already blew their $s on the expensive vehicle and with the market softening they can't possibly unload it.
     
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  3. Jeff H

    Jeff H Elio Addict

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    It was either here or another article I read in the past week, but they had the average car + light truck price at $33K

    I believe that Elio will have a welcoming market if they can just get to production and not have any major defects in the product.
     
  4. Ty

    Ty Elio Addict

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    Here's a thought on why manufacturers don't try to sell cheap cars.

    If you had a population of 100 people, wouldn't it make sense to sell 100 cars that have a 20% markup vs. 100 cars that have 6% markup... That much is obvious. But, that doesn't take cost of vehicle into account.

    If your cars cost $10,000 and you can only sell 100, you end up bringing in $1,000,000 in Gross sales and if we say (for the sake of explaining) there is 10% profit, your company earned $100,000. Go team!

    If your cars cost $5,000 and you can only sell 100 (remember, there are just 100 people in this place), you'd bring in $500,000 in Gross sales and at 10% profit, you'd net $50,000. Now, in a market where you never completely saturate, this is absolutely not an issue. You can just undercut everyone around and build a gazillion cars every year.

    Ford is producing the GT and selling them at $450,000 a year but are only producing 250 per year. Now, if they built 100,000 of them every year, they wouldn't be able to sell them for $450,000 because if they aren't special, it would be hard to command that kind of money.

    Elio is going to have to fit into that little space where they sell volume out of necessity in order to keep the costs down while at the same time, they can't raise the price much because there isn't much room between the 2 seater, limited storage Elio and the much more conventional $12,825 4 door, Nissan Versa.
     
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  5. wizard of ahs

    wizard of ahs Elio Addict

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    common-sense.jpg
     
  6. slinches

    slinches Elio Addict

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    Yup, that's the standard thinking in the automotive market, Ty. And it's correct for the most part. If you were to come into that market with a vehicle that competes on features, you'll either have to accept a lower margin than the other guys or sell in lower volumes.

    The reason I think that the Elio can pull it off is that it isn't competing directly in the same market. At least not in the sense that large numbers would buy one instead of a traditional 4-wheel family vehicle. Instead, they're creating a new segment of super-efficient, low cost, commuter transportation that will be sold alongside traditional vehicles. The Elio's price point and efficiency makes it possible for one car households to own two vehicles and two car households to add a third and even allows many of those who could never afford to drive before access to the freedom of personal transportation. If they can get to production, I don't see any reason that Elio Motors wouldn't sell as many as they can produce until viable competitors come to market (either existing EV three-wheelers once battery costs drop enough or new ICE powered autocycles from established auto manufacturers).
     
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