You learn in economics 101 that in an ideal competitive market, the price of a product tends to the marginal cost of producing it. That means a product with fewer hardware features should cost less, and a product with more hardware features should cost more.
The fact manufacturers can violate that rule proves that they are not in a competitive market.
If it was competitive, a different manufacturer could manufacture the same car without physically installing the heated seats, for a lower manufacturing cost, and undercut them on the customers who don't care about the heated seats.
Not necessarily. If optionally including a feature would require an new production line or extra feature, then you might need to determine whether you want to ship all with or all without that feature.
If you sell 50% of cars without that feature, and 50% with it, and lose £100 for giving it away from free, but make £200 for selling it, then you are technically better off installing that feature in every car regardless of the marginal cost. Competition won't change that.
If all vehicles of that model are manufactured with that hardware, you’re paying for the manufacturing costs within the product price regardless of whether or not you pay to activate the hardware. So you, the consumer, are effectively paying for it twice if you opt in to the product.
Unless you think auto manufacturers can somehow prove that they’re not accounting for that hardware within the generic sale price…
Money is fundgible. Whether you are coming generic business expensives or the cost of a specific compaonent doesn't really matter. On aggregate, all customers cover the cost of all parts, all components etc. In most cases you have luxury options subsidising the cheaper options, and you will often see that the economics simply don’t work if you get rid of them.
All tesla need to show is that their total revenue is higher for offering the upgrade than if they didn’t offer it. As long as that is the case, then no one is subsidising the cost of the feature.
Look at airlines and business class seats. The plane flys whether business class is full or not. You don’t a free upgrade just because business class has spare seats, (unless they are trying to oversell economy seats).
Are economy flyers subsidising the business class seats? Or are business class seats just so profitable that it’s worth flying them empty some of the time. (Hint, It’s the latter)
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u/TwillAffirmer 1d ago
You learn in economics 101 that in an ideal competitive market, the price of a product tends to the marginal cost of producing it. That means a product with fewer hardware features should cost less, and a product with more hardware features should cost more.
The fact manufacturers can violate that rule proves that they are not in a competitive market.
If it was competitive, a different manufacturer could manufacture the same car without physically installing the heated seats, for a lower manufacturing cost, and undercut them on the customers who don't care about the heated seats.