Argument is a little more complex than what you are suggesting. There is a concept called économies of scale'. But we probably need to get some facts down:
1. The gigafactories in production at this stage (and many are been built by the same companies) are not at full capacity. So as you produce at capacity your unit capex costs as embedded in each vehicle fall markedly. In other words you have a large fixed cost that only 'scale' can reduce.
2. Your opex costs will increase with more EVs been produced, agree but the biggest cost in a car is actually the capital cost of the plant. Opex costs, per unit however can decrease, if there are efficiencies attained, such as operating your plant at capacity btw.
3. If you think about it, as scale increases the cost of the goods sold can fall - just check your computer costs, and i am sure the cost of the inputs haven't drastically reduced. It is scale - manufacturing is reliantly capital driven and expansions in production actually cost less than start up operations and hitting scale is the key.
4. The main concern right now is the gigafactories are still not at capacity so significant increases in opex cost will further be a problem, but if the EV forecasts achieve then you would be expecting per unit production costs to fall (why - the capital element is worth far more than the opex element).
5. A simple illustration - how many workers currently on a LNG project in production? What is the capital cost of an LNG project. What is worse - a project at full capacity but wages double? Or one where the project is at half capacity and wages halve? The point been gigafacyories IMO currently are not at full capacity.
6. The point is with capex spends they are not unitised, you actually install massive upfront capex instead of increment of capex - your expansions is where the real benefits are to unit costs because they cost a lot less than your initial installed capex. An out there example, what is the cost of say a railway build of 300 km servicing an iron ore mine of 50 million tonnes per annum - you have to install the foundation, formation works, ballyst, track etc etc upfront? Answer a hell of a lo. t What is railway expansion cost - a lot less and you can double capacity initially on railways by low cost passing loops (1km long) so trains can pass each other whilst the other one is parked.
7. You need to look at the whole picture and not part of the puzzle - increase in EV uptake is the key is the point to reducing unit costs, because your unit costs entail a return on capex (why - well your bank demands you show feasibility and an ability to pay back before giving you money). It is why technology takeup increases (and that can also correlate with increased mineral prices and falls - it is a market), whilst costs of computers and technology is falling.
On markets -
Post #:50226863All IMO
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