Re: long-lasting cars
[Charset iso-8859-15 unsupported, skipping...] First Law of Work: If you can't get your work done in the first 24 hours, work nights.
Re: long-lasting cars
(Sorry about that blank message!) "Gustavo Lacerda" <[EMAIL PROTECTED]> wrote: > > Claim: "auto manufacturers won't make cars that last long (say, 20 years of > > reliable operation) because they would make less money that way". > > > > Your opinion? > > Krist van Besien <[EMAIL PROTECTED]> wrote: > I have to disagree with you on this one. When I was a kid Volvo used to > advertise with the fact that on average their cars lasted well over 20 years. > Since then cars have only become more reliable, even though not all cars are > built to last 20 years, there are brands like Volvo, Mercedes and even Peugot > that have a reputation for longevity. I cannot remember anyone I know buying > a new car because their old one broke down beyond repair, which gives me the > impression that car manufacturers do build cars that last as long, if not > longer, as consumers want them to last. > The fact that people (in Europe) replace their car long before it is worn > out says enough... I have to disagree also. Properly maintained, many cars *do* last 20 years. I learned to drive (at age 16) on a car (a Pontiac Catalina) that was five years older than I was; it ended up lasting 23 years and going 230,000+ miles. (Granted in the 23rd year it wasn't 100% "reliable" and most of those miles were put on in the first 15 years...) I now have a 1991 Pontiac Sunbird with almost 110,000 miles that is still reliable, and I have no plans to replace it. I know my two data points don't prove anything, but I know of enough other cases that I'm confident that 20-year cars are not that unusual, at least in the U.S. Based on my highly informal data (i.e., from personal/family experience, plus I like to look at other cars as I drive, and note which ones appear old), I have the impression that GMs and BMWs last longer than, say, Fords and Nissans. (Moral: If you start a car company, name it with initials! ;-) I think it would be interesting to get data on whether cars with one owner last longer than cars with multiple owners. People like me who keep cars until they wear out tend to have 20-year cars; people who lease, trade in, or re-sell obviously don't. The market value of a 15-year-old car is nearly zero even though if I have owned a car for 15 years I think it still has 5 years left -- but a new car one plans to keep for five years has a very high market value. I think there must be some sort of information story, along the lines of Akerlof's "Market for Lemons." In Akerlof's model, there are two types of used cars, "high-quality: and "low-quality." Since quality is unobservable to the buyer but known to the seller, only low-quality used cars are actually sold. Now imagine that there are two types of car CONSUMERS, "long-term" and "short-term" (based on preferences, e.g., for the latest gadgets or for fashion). Everyone knows (from Akerlof) that you can't sell a used car for a high price since you can't prove to the buyer it's high quality; all used cars fetch the "low-quality" price. Now, quality of a used car depends to a large degree on how well it's maintained. So, "short-term" owners (i.e. those who plan to sell their cars eventually) don't put as much effort/expense into taking care of them, so when it's time to sell, the car really is a low-quality used car, and it's rational to sell it. On the other hand, "long-term" owners plan in advance to keep their cars for a long time, so they take good care of them. By the time the car is (say) 5+ years old, it's of higher quality than cars of the same age being sold by short-term owners, but the long-term owner can't prove it and get the high-quality price, so it's rational to keep the car. Maybe we should call this "planned rationality." ;-) --Robert Book University of Chicago First Law of Work: If you can't get your work done in the first 24 hours, work nights.
Re: long-lasting cars
On Saturday 30 March 2002 08:11, you wrote: >Is there a point in the life span of a car good for 20 > years that the owner would rather trade in now than lose what value they > have left? It all depends. The moment a car is worth less to the owner then it is on the (used car) market he trades in. THis can be subjective. A friend of mine is an absolute fan of the Renault 19, which hasn't been produced in about 15 years. She'll drive it till it falls apart (which it fortunately won't do for a long time...). For her the particular make and type has a high subjective value. I myself drive a car that isn't two years old and I am already looking for a replacement. But then I place value in owning the latest gadgets :-) > To pose another question: What effect would long lasting cars have on the > used car market? The last couple of years we've seen the quality of cars improve considerably here in Europe. No car manufacturer would think of offering 12 years of waranty against rust in 1970. So longer lasting cars are being build. OTOH the average age of cars on the roads here in Northwest Europe has dropped. We have become wealthier and trade in our cars sooner. Where do all these used cars go? Eastern Europe mostly. Just spend an afternoon at a used car market in Germany and you'll hear more Polish then German... The Polish gouvernement has recenlty imposed taxes on imported second hand cars. The average Pole seems to prefer an 15 yo Mercedes over a brand new FSO. I can understand why. Krist
Re: long-lasting cars
It has been said that people don't always use their cars until they fall apart, but sell them first. This means depreciation should be a large factor in deciding when to sell. How much is a 10 year old trade-in worth? After 20 years? Is there a point in the life span of a car good for 20 years that the owner would rather trade in now than lose what value they have left? To pose another question: What effect would long lasting cars have on the used car market? Brian Keith
Re: long-lasting cars
mine is twenty two years old and still run smothly!!! - Original Message - From: "Gustavo Lacerda (from work)" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Thursday, March 28, 2002 3:06 PM Subject: long-lasting cars > Claim: "auto manufacturers won't make cars that last long (say, 20 years of > reliable operation) because they would make less money that way". > > Your opinion? > > Is the technology for reliable vehicles feasible for mass production? Would > there be enough demand for such vehicles (i.e. the profit margin per vehicle > is big enough to offset the loss due to fewer sales)? > > Gustavo > >
Re: long-lasting cars
It seems that people is not buying car any more, they prefer to lease them, and this demanda behaviour has changed supply patterns. Alexander Guerrero - Original Message - From: "Gustavo Lacerda (from work)" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Thursday, March 28, 2002 6:26 PM Subject: Re: long-lasting cars > Having functional junk is no worse than having worn-out junk. > > > > This is the problem with communications and other satellites that have > > long lives. The owners often choose to replace them long before they > > wear out because such better models have become avialable in the > > interim. > > > > Yours, > > Asa Janney > > > > > > "Gustavo Lacerda (from work)" wrote: > > > > > > Claim: "auto manufacturers won't make cars that last long (say, 20 years > of > > > reliable operation) because they would make less money that way". > > > > > > Your opinion? > > > > > > Is the technology for reliable vehicles feasible for mass production? > Would > > > there be enough demand for such vehicles (i.e. the profit margin per > vehicle > > > is big enough to offset the loss due to fewer sales)? > > > > > > Gustavo > > > > -- > > If a man does not keep pace with his companions, perhaps it is because > > he hears a different drummer. Let him step to the music which he hears, > > however measured or far away. > > -- Henry David Thoreau, Walden > > >
Re: long-lasting cars
I suspect the problem is a market externality taken advantage of by advertisers. Fashionable identification increasing status. When cars are sold as sexy an old one just says dirty old man. This was most clearly seen in cigarettes. I have frequently overheard people judging others by the brand they smoked. People have been killed for their Nikes. Marketing thrives on repackaging. A lot of what is bought is not the car but brand identity. Its hard work proving you are a go getter, why bother when all you have to do is drive the right brand of car. Fred Foldvary <[EMAIL PROTECTED]> wrote: --- "Gustavo Lacerda (from work)" <[EMAIL PROTECTED]>wrote:> By (P1), producing long-lived cars could result in smalller profits (this> would happen in the form of fewer sales).> > Thus the interests of the manufacturer could be in opposition to the> interests of the consumer (this reluctance to change production would be> held up by collusion with the other manufacturers). Does this make sense?No. There would be a profit opportunity for a company to make long-durationcars, and eventually only those would be produced.It is technically possible to make cars that deteriorate in one year, but wedon't see these in the market today.Fred Foldvary =[EMAIL PROTECTED]__Do You Yahoo!?Yahoo! Movies - coverage of the 74th Academy Awards®http://movies.yahoo.com/ SOLD.com.au - 1,000s of Bargains!
Re: long-lasting cars
Is there any link between aircraft manufacturing and car manufacturing concerning the life of the product.? Cars and aircraft can be made to last 20 or more years, but they require constant repairs. Any car can last 20 or more years, you just have to repair those parts that break. A car that has hassle free parts for 20 years is going to cost quite a bit more. Should this car that lasts 20 years be hassle free. If so, then what kind of technology is going to create a repair free car for 20 years? Seon.
Re: long-lasting cars
--- "Gustavo Lacerda (from work)" <[EMAIL PROTECTED]> wrote: > By (P1), producing long-lived cars could result in smaller profits (this > would happen in the form of fewer sales). > > Thus the interests of the manufacturer could be in opposition to the > interests of the consumer (this reluctance to change production would be > held up by collusion with the other manufacturers). Does this make sense? No. There would be a profit opportunity for a company to make long-duration cars, and eventually only those would be produced. It is technically possible to make cars that deteriorate in one year, but we don't see these in the market today. Fred Foldvary = [EMAIL PROTECTED] __ Do You Yahoo!? Yahoo! Movies - coverage of the 74th Academy Awards® http://movies.yahoo.com/
Re: long-lasting cars
On Thursday 28 March 2002 16:06, you wrote: > Claim: "auto manufacturers won't make cars that last long (say, 20 years of > reliable operation) because they would make less money that way". > > Your opinion? > > Is the technology for reliable vehicles feasible for mass production? Would > there be enough demand for such vehicles (i.e. the profit margin per > vehicle is big enough to offset the loss due to fewer sales)? I have to disagree with you on this one. When I was a kid Volvo used to advertise with the fact that on average their cars lasted well over 20 years. Since then cars have only become more reliable, even though not all cars are built to last 20 years, there are brands like Volvo, Mercedes and even Peugot that have a reputation for longevity. I cannot remember anyone I know buying a new car because their old one broke down beyond repair, which gives me the impression that car manufacturers do build cars that last as long, if not longer, as consumers want them to last. The fact that people (in Europe) replace their car long before it is worn out says enough... Krist
Re: long-lasting cars
Gustavo wrote "Let's assume for a minute that: (A1) It costs the manufacturer the same $8 000 to produce 1 long-lived car as it costs them to produce 1 short-lived car. (A2)...Since the manufacturers' profit per unit is more or less proportional to the cost of production (call this assumption A3), (P1) when production becomes very cheap, the manufacturers' profits can get smaller, even if the number of sales is increasedDoes this make sense?" --- No, it doesn't. Consider first the easier case of competition. In a competitive situation, as the auto market surely is, an auto maker with access to such technology would certainly use it to get a jump on the competition and grab market share. The fact that the long run implications of this would be to reduce total auto maker revenues is irrelevant in a competitive situation (and a common occurence). Now consider the monopoly situation. At first this seems like a better candidate but it isn't for the reasons given by Landsburg in John Hull's post. Think about it this way. Suppose that all sales are up-front so you can either buy 1 long lived car today which will last 20 years or you can buy 2 short lived cars today each of which will last 10 years (the second car will be in storage for the first 10 years). Even assume that consumers are indifferent between these two purchases - say they are willing to pay $20,000 either way. It's still the case that profits are much higher selling the long lived car = 20,000-8,000=12,000 rather than the two short lived cars =20,000-16,000=4,000. Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
long-lasting cars
Let's assume for a minute that: (A1) It costs the manufacturer the same $8 000 to produce 1 long-lived car as it costs them to produce 1 short-lived car. (A2) Technological and style changes are insignificant. (this means I'm no longer talking about cars in today's world, but never mind) The point is: Since the manufacturers' profit per unit is more or less proportional to the cost of production (call this assumption A3), (P1) when production becomes very cheap, the manufacturers' profits can get smaller, even if the number of sales is increased. The Salt industry comes to mind, although this may be a fake example. If producing 1 long-lived car costs as much as producing 1 regular car, then the cost of producing cars-for-their-use is effectively smaller. By (P1), producing long-lived cars could result in smaller profits (this would happen in the form of fewer sales). Thus the interests of the manufacturer could be in opposition to the interests of the consumer (this reluctance to change production would be held up by collusion with the other manufacturers). Does this make sense?
Re: long-lasting cars
Having functional junk is no worse than having worn-out junk. > This is the problem with communications and other satellites that have > long lives. The owners often choose to replace them long before they > wear out because such better models have become avialable in the > interim. > > Yours, > Asa Janney > > > "Gustavo Lacerda (from work)" wrote: > > > > Claim: "auto manufacturers won't make cars that last long (say, 20 years of > > reliable operation) because they would make less money that way". > > > > Your opinion? > > > > Is the technology for reliable vehicles feasible for mass production? Would > > there be enough demand for such vehicles (i.e. the profit margin per vehicle > > is big enough to offset the loss due to fewer sales)? > > > > Gustavo > > -- > If a man does not keep pace with his companions, perhaps it is because > he hears a different drummer. Let him step to the music which he hears, > however measured or far away. > -- Henry David Thoreau, Walden
Re: long-lasting cars
"Pinczewski-Lee, Joe (LRC)" wrote: > . . . look at the car styles of the 1980's, do you want to be > driving a Yugo or a Cabriolet now? Think of the styles of the > 1950's would you have wanted to drive one in the 1970's? . . . That strikes me as a bit circular. The more ephemeral a product is, the more it will be designed for novelty; a car designed to last twenty years will, I imagine, be styled more conservatively than one designed to last four years. -- Anton Sherwood, http://www.ogre.nu/
RE: long-lasting cars
Sure, the technology exists... HOWEVER, would YOU buy one? It would cost a great deal, after all, this is only one of two-three cars that you'll ever HAVE TO buy, so the car will cost more, because of materials and design, and because the manufacturer will lose many repeat customers. Further, look at the car styles of the 1980's, do you want to be driving a Yugo or a Cabriolet now? Think of the styles of the 1950's would you have wanted to drive one in the 1970's? So, would consumers really want to buy one? In short, you invest in a house, do you want to invest in a car? -Original Message- From: Gustavo Lacerda (from work) [mailto:[EMAIL PROTECTED]] Sent: Thursday, March 28, 2002 10:06 AM To: [EMAIL PROTECTED] Subject: long-lasting cars Claim: "auto manufacturers won't make cars that last long (say, 20 years of reliable operation) because they would make less money that way". Your opinion? Is the technology for reliable vehicles feasible for mass production? Would there be enough demand for such vehicles (i.e. the profit margin per vehicle is big enough to offset the loss due to fewer sales)? Gustavo
Re: long-lasting cars
Gustavo: I think the technology is available to make cars last longer and that manufacturers do not make them last longer because they would make lower profits. Who would want a car that would last 20 years? Long before it wore out, various components in it would be obsolete or out of date with regulations. (It would also go out of fashion, too.) This is the problem with communications and other satellites that have long lives. The owners often choose to replace them long before they wear out because such better models have become avialable in the interim. Yours, Asa Janney "Gustavo Lacerda (from work)" wrote: > > Claim: "auto manufacturers won't make cars that last long (say, 20 years of > reliable operation) because they would make less money that way". > > Your opinion? > > Is the technology for reliable vehicles feasible for mass production? Would > there be enough demand for such vehicles (i.e. the profit margin per vehicle > is big enough to offset the loss due to fewer sales)? > > Gustavo -- If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away. -- Henry David Thoreau, Walden
Re: long-lasting cars
> Your opinion? While I can't offer a brilliant and insightful opinion of my own, I can offer this possibly analogous quote from the Armchair Economist (pg. 123): "I have an Ann Landers column about pantyhose manufacturers who deliberately create products that self-destruct after a week instead of a year because 'the no-run nylons, which they know how to make, would put a serious crimp in their sales.' Ann concludes that she and her readers are 'at the mercy of a conspiracy of self-interest.' It's not clear whose self-interest Ann has in mind. It can't be the manufacturer's. With the facts as she describes them, a self-interested manufacturer would switch from selling one-week nylons for $1 to selling one-year nylons for $52, pleasing the customers (who spend $52 a year in either case but appreciate making fewer trips to the store), maintaining his revenue, and--because he produces about 98% fewer nylons--cutting his costs considerably." Is this analogous? It looks that way. In my mind I can see how long-life autos and long-life nylons are not analogous; however, I seem to be unable to articulate the difference. I guess that for me 52-tupling the price of nylons may be less of a financial issue than, let's say, doubling the price of a car. But I'll have longer to pay off the car so it might not matter. But the long lasting car may be more risky inasmuch as my tastes or lifestyle might change before my car needs to be replaced. Or I'll have a greater risk of missing out on new car technology; if I bought a 20-year car 10 years ago then I'd probably have missed out on airbags, anti-lock brakes, and so on. Maybe pricing in those risks changes the calculus of the question to such a degree that long-life cars aren't worth it. At this point I'm just rambling. -jsh __ Do You Yahoo!? Yahoo! Movies - coverage of the 74th Academy Awards® http://movies.yahoo.com/
long-lasting cars
Claim: "auto manufacturers won't make cars that last long (say, 20 years of reliable operation) because they would make less money that way". Your opinion? Is the technology for reliable vehicles feasible for mass production? Would there be enough demand for such vehicles (i.e. the profit margin per vehicle is big enough to offset the loss due to fewer sales)? Gustavo
