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When the economy is running on all cylinders, new and more efficient ways of doing business accrue benefit mostly to shareholders simply because the consumers are willing to pay up, especially when encouraged by easy money. It is during the down turns when lower prices become available to consumers. For example, for a couple decades now it is a given that SUV's/crossovers cost more than cars based on the same/comparable platform; Americans did that (in order to have more profitable products) and Japanese carmakers followed suit. Now however we are witness the European carmakers selling crossover/SUV's at lower prices than cars on the same platform. Why? because the fat was there to begin with, and only the latest price pressure has forced the carmakers to trim the price a little . . . using new crossover models to do that is a way of avoiding upsetting existing owners of their cars that paid high premium.
Thanks to the wonders of division of labor and free market exchanges enabling it, material cost has already become quite "immaterial" compared to labor cost nowadays. If we go to a furniture store, the price premium of a leather couch over a well made cloth one is almost non-existent. It is the labor for upholstery, transportation, store display and selling that makes up most of the cost of a couch nowadays. Likewise, for cars the "leather seat" vs. "cloth seat" difference has been more about market discrimination than about actual cost of production for well over a decade now (global market price for leather by the square feet/meter collapsed more than a decade ago). It is conceivable that when we come out the other end of the recession in a few years, depreciating a new car made off the production line will be cheaper than paying anyone to turn the wrench. It was already headed that way more than a decade ago until internet made parts more accessible to end users and more importantly repair information becoming more accessible to end users. The real question is how long this bad dream of a recession is going to last and whether we have to have some kind of catastrophy like a major war before we resume real economic growth in the form of further division of labor through free market exchanges.
posted by 76.118.39...
, Wed, 13 Apr 2011 13:49:16
, Fri, 15 Apr 2011 14:16:59, Thu, 14 Apr 2011 06:19:19
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