Weakonomi¢s » cars

The Downside To Great Gas Mileage

The Weakonomist — Fri, 18 May 2012 14:10:02 +0000

Between gas prices and government regulation, fuel economy on vehicles has started to climb significantly. Manufacturers fought the regulation, but now they aren’t fighting consumer demand. When the recession hit people stopped buying new cars. There’s now pent up demand as consumers are tired of paying for repairs and dealing with crappy mileage. Millions either now have jobs or at least feel better about the ones they have. As a result, the automotive industry is now doing so well both Obama and Romney are taking credit.

Fuel consumption is falling not only thanks to vehicle efficiency, but also thanks to consumers driving less too. Below is a chart showing the average amount of miles we travel each year per person. Not only has this been falling per capita, but it’s also been falling on a gross scale too.

This is all great news for our wallets, technology, and the environment. But there’s no such thing is a perfect outcome, and better fuel economy is no different.

Think about what you do when you’re in your car. You drive, mess with your phone, flip bad drivers off ignoring your own bad driving, curse the radio for too many commercials, and sit at lights. But you’re also wearing down the roads, and clogging them up. Even with a reduction in driving, we still need new roads and existing ones have to be repaired. A lot of the funding from those roads comes from taxes on gasoline sales. And if we’re buying less gas for a number of reasons, we’re paying less into the fund that pays for the roads.

So we’re left with a couple of options. The easiest one is to just increase the tax on gasoline. But unless the cost of making roads has dropped considerably, consumers are going to lose the savings from better fuel economy to higher taxes.

There may be better ways. We could charge taxes based on your miles driven. Gas taxes attempt to do this at the pump, but that’s really a tax on how long your motor is running. And that’s different than how many miles you drive.

Whatever way we raise money is up for debate. But that is a debate that needs to occur soon before our roads start to become a problem.

Read: New CAFE rules and a stagnant gas tax mean big deficits for infrastructure

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Nudging Our Way To Better Gas Mileage

The Weakonomist — Thu, 03 May 2012 14:44:50 +0000

One of the best books on behavioral economics is Nudge. I’m not just saying that because their blog (which needs to get started again) lists me in their blogroll. I was a fan of the book long before that. Nudge makes the argument that people should be free to make their own choices, but they can be encouraged to make the right decisions. One of the best examples is automatically enrolling employees in 401k plans and giving them the choice to opt out. This has proved to dramatically increase retirement savings rates as many people would normally choose not to enroll.

A car blog I regularly read called Inside Line Road Tests tests new vehicles over a period of 20,000 miles and the authors write about what they learn from the car over the extended period. One driver noticed the tachometer on their Jeep Wrangler has a green line in the lower rev range much like all cars have a red on at the high end. The green is there to encourage more responsible driving. By keeping the car’s engine at a lower speed it burns less fuel, leading to better fuel economy. Most of us know this intuitively, but may not acknowledge it in our day to day driving patterns. The blogger noted that the green line seems useless and asked “do we really need a green zone to tell us that we’ll get better mileage by running the engine at just over idle? I would hope not.”

But that’s precisely what we need. It’s likely that most people don’t think about their driving habits affecting the mileage of their cars. And even those that do probably don’t think about it every time they get in the car.

Jeep has done a very basic thing here that is very low cost and likely does result in an increase in the fuel efficiency of the Wrangler, which isn’t exactly frugal. If customers perceive better fuel economy than they thought, it’s likely to increase delight with the vehicle. Jeep has gone with the most subtle of nudges to get people driving a little bit smarter, but they are hardly innovators in the space.

Ford takes the nudge one step further. As you drive the Fusion Hybrid efficiently, green leaves start growing on a screen in the dashboard. If you accelerate quickly or otherwise use too much fuel the leaves go away. This takes a simple nudge to drive more intelligently and turns it into a game.

Government regulation is requiring more fuel efficiency out of vehicles these days. Manufacturers are coming out with all kinds of new technologies to meet the regulations. These are designed to make the car itself more fuel efficient. And that is all the government regulates. They do not regulate making the driver more efficient. Consider it a good move that companies are doing what they can to make the driver use less gas. It’s not very costly and everyone benefits. Like most nudges.

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How An Economist Views My Parking Situation

The Weakonomist — Wed, 02 May 2012 14:19:46 +0000

On many days I am forced to drive to a location that is a number of miles in order to do work. It’s called commuting. Since I live near a large city and must drive into town I am forced to pay for parking when I arrive. Most people that drive in daily pay a monthly fee, but I do not drive frequently enough to this location to make it worth the cost to pay monthly.

For my parking needs, I have two choices. There is a surface lot available for $4 and a parking deck for $5. Each comes with it’s own advantages:

Surface lot: It is easy to get in and out of and I don’t have to get in by a certain time to get the $4 price point. But the lot is exposed to the elements both sun and rain. When it’s storming or really hot out, either I’m getting wet or my car is getting hot.

Parking deck: It takes longer to get in and out of, but the walk is shorter to my office. There is protection from the elements, not just for my car, but me as well. I can get to my building by walking through other ones. But I have to get in by a certain time to get the low price.

The parking deck is 25% more expensive, which can add up over time. Overall the utility of each choice is about equal for me so my choice depends on what I think the weather might be like that day and what time I get in. But the parking deck has another hidden feature, and this is where economists come in.

Event day
My office in town is near a number of buildings that host events, especially in the evenings. Events can be lucrative for parking facilities and they often switch to a flat rate for the events. This particular deck switches from automated payment upon exit to human power collection upon entrance when these events occur. Event attendees aren’t given tickets for exiting so the manager must leave the gate open for everyone trying to leave.

What this means for me is on these event days every once in a while I can drive out of the parking deck without having to pay, saving $5.

So when I know there is an event and choose the parking deck over the surface lot, I’m taking a risk and if I lose I’m out $1. That’s because my choices are to either pay $4, or maybe pay $5 with a chance of paying $0.

Options
Economists and financiers see this as an option contract. The contract is between myself and the parking deck operator. In finance, an option is usually a contract that gives the buyer the choice on whether to buy an asset from the seller at a set price in the future (some readers may note this is but one kind of option). The option buyer pays a small fee to the seller for the pleasure to decide in the future.

In the parking world the parking deck operator is buying a contract from me. They pay for the contract in the form of parking services, and they have the right, but are not required, to charge me $5 in the future.

Options are used all the time in the business world to give managers and investors a choice in the future they don’t want to make now. The deck operator wants to decide at the end of the day whether or not to charge me. Their ultimate decision will be based on whether or not they can get enough vehicles to come to the event to offset the loss on me.

As for me, I am taking a risk every day I park in this deck. The $4 surface lot is the more conservative choice. I know how much I will pay at any given time, and it will always be less than if I get charged in the parking deck. But if I tracked my visits into the city I could model the likelihood of the parking deck to charge me or not and allow an algorithm to decide for me. That isn’t going to happen, so instead I will be taking a risk. Wish me luck!

Image: o palsson

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What Anthony Davis And Hybrid Buyers Have in Common

The Weakonomist — Tue, 10 Apr 2012 14:33:02 +0000

Once is enough.

Anthony Davis played basketball for one year at Kentucky before declaring his intent to go pro. He won a championship, tasted sweet victory, and then passed on a chance to become a NCAA legend. Most hybrid buyers, it seems, also pass on the opportunity to have another go. In 2011, only 35% of hybrid owners in the market for a new car bought a hybrid.

Only 35%? That sounds really low. You’d think hybrid owners love their cars so much they’d of course be back to by more hybrids. But, according to this study, they aren’t.

And what’s the implication? The message surely can be spun to say that hybrids are a failure. Even their own customers aren’t coming back to buy more. As the Autoblog post linked above says:
“How much do hybrid drivers really, truly like their cars? According to R.L. Polk, not all that much – at least not in 2011.”

But the question wasn’t whether they like their cars. It’s whether or not they bought new hybrids. This is example of the media extrapolating data into an assumption that make for a better story than the press release actually said. For the record, RL Polk, the company behind the hybrid study, did a good job of just reporting numbers and not making such assumptions.

So if the customers aren’t unhappy with their hybrids, why aren’t they buying more? I’ve got at least three explanations:

Household shopping: Say your parents own a Prius and a minivan. The minivan is old and it’s time to be replaced. They want another minivan. There are no hybrid minivans in the mainstream marketplace so they just buy some normal minivan from the local annoying dealer on your TV. This purchase would register as a hybrid owner not coming back to buy a hybrid.

Fuel economy: In short, the fuel economy of non-hybrids has improved considerably over the last few years. The 2007 Camry hybrid got 38mpg highway. They 2012 normal Camry gets 35mpg highway. The city economy numbers are a lot different, but many people often ignore that number. The hybrid premium is $3400 on a new Camry and the mileage hasn’t improved much over the 2007. Even if they like their 2007 Camry Hybrid, it might not be worth the cost to get a 2012 hybrid over the normal version.

The economy: Of course, this is my favorite explanation. If you look at Polk’s number of customer loyalty to hybrids quarter over quarter you can see the buyer looks to be sensitive to the economy. 2008 was a rough year for hybrid loyalty, and the economy. When the tsunami hit last year and the European Union seemed on the brink of breaking up everyone was worried about the impacts on the US. For a while last fall some started to think we’d enter another recession. Hybrid loyalty tanked during this time.

The economy part two: Polk is kind enough to break down the hybrid loyalty by market so we can see that LA has average loyalty and Florida has high loyalty. In fact, the top 4 markets for hybrid loyalty are also markets that have taken huge hits to their economies due to housing: West Palm Beach, Phoenix, Orlando, and Tampa. So if the most loyal customers are in these areas, and the economy has affected everyone’s purchasing habits, what would the hybrid loyalty score look like if those cities hadn’t cratered in the housing bust?

All in all, customer loyalty for hybrids from 2008 until today is largely identical. But since then the economy has changed dramatically. To say that loyalty for, what is still a premium product, hasn’t faltered during this period sounds like a good thing to me. If our economy were fully recovered we could expect hybrid loyalty to be much higher than it is today.

As for Anthony Davis, he never would have gone to Kentucky if it weren’t for a rule that requires him to wait a year from high school to go pro. Just like many hybrid buyers before 2011 might not have bought if it weren’t for a tax credit that’s no longer available. Once again, we should applaud the hybrid’s resiliency in the face of adversity.

Coincidentally, the rules that put Davis in Kentucky and incented hybrid purchases, passed in 2005.

Image: efusco (really wanted a picture of Davis in a blue Prius but don’t think I’ll ever see that)

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State Lines Redrawn, and Perhaps Blurring

The Weakonomist — Wed, 28 Mar 2012 14:07:07 +0000

There’s something very interesting going on at the border between North and South Carolina. Like most states, they have clearly defined borders. However, unlike many states, they don’t have straight lines or rivers marking that territory in every place. There are also a lot of people living near the border especially in populated areas like Charlotte. One would think that in the 21st century we would have verified all our borders down to the millimeter by now. You would think wrong. In some stretches, the last time the borders were surveyed predates the formation of this country. And even back then they didn’t do it right.

So now surveyors are remarking the state lines. And some people are learning their homes or properties are not in the state they thought they were. People that live near the border may be learning they don’t actually live in the state they thought they did, and the implications are huge for them (minor for everyone else). But anyone who has crossed the border between these states or driven through the south knows one crucially important business that could be seriously affected by being the in the wrong state. If you want to have fun in your backyard on the 4th of July anywhere in the southeast, you need to go to South Carolina to get the goodies. SC has a very liberal policy with fireworks. But that isn’t the business that could suffer the most. Many of those places pop up in tents and can move a few hundred feet if needed.

It’s actually gas stations that would suffer the most. And there’s at least one gas station own who will find himself on the wrong side of state lines when everything is made official. There are gas stations all over the highways connecting South Carolina to Georgia and North Carolina. Because the gas taxes in GA are 29.2 cents per gallon and NC packs a whopping 35.3 cents. South Carolina has just 16.8 cents, 4th lowest in the country and the lowest of any state for people traveling between the north and south until you get to New Jersey.

A gas station that was once in SC and is now in NC would go out of business virtually overnight, especially since it’s rare to have just one station near the border. Some residents are finding they’re in new states too. This can change their property taxes by thousands of dollars. What’s going to happen to these people? No one knows yet.

One thought is to grandfather these properties into their new tax system using their old rates. Another way is to just give property owners on the border the option to pick which state their deed lives. Another issue is the matter of utilities, school, and law enforcement, which don’t operate across state lines. The US takes their state boundaries very seriously and there’s still a high level of autonomy among each state. But those lines have started to blur. It used to be that states couldn’t operate banks across state lines (a change championed by a bank near the NC/SC border coincidentally).

Is it conceivable that the lines will blur further in the future? This is a young country that has clearly reached a peak in terms of land growth, but that doesn’t mean change is over. What if a fiscal crisis collapsed a state or two and the federal government didn’t bail them out. The feds had banks merge, could states merge too? Carolina, Dakota, New Mexizona, Virginia, Connectichusetts & Providence Plantations, Oklatexas, and Jerslyvania all sound like viable mergers. It can’t be ruled out even if it’s difficult to imagine. Either way, you might want to write your local representatives and make sure your boundaries are solid if you live near state lines.

Read: NC-SC State Line Redrawn

Photo: wjarrettc

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Weak Links: Less Roads, Less Traffic?

weakonom — Fri, 23 Mar 2012 14:21:09 +0000

Why I gave up my six-figure salary and quit Bay Street: Bay Street is in Toronto and is Canada’s version of Wall Street. You can’t expect much a difference between the two countries, but this author provides a well written explanation of his time in finance and why he, and others, left.

Remove the highways, fix the traffic problem: One of the most interesting reads in 2012 so far. John Norquist championed the destruction of some highways in Milwaukee while the mayor and actually saw an improvement in traffic. New Urbanism is the name of the idea and it calls for better city planning that reduces congestion. The best way to sum it up is that by proper planning of roads, people won’t have an incentive to live far out of town and commute in for things they need. If you work in the city, live in the city. We are likely to see this in some form or another in increasingly greater amounts all over the country as the cost of commuting continues to rise. Most traffic issues are “solved” by adding supply to support the increased demand. What would happy to demand if supply was taken away? I’d like to see how they would do DC though.

Castro might have known Kennedy was going to get shot: Conspiracy theorists rejoice. A great conspiracy about Fidel Castro knowing JFK was going to get shot. The only downside is if this story is true, most of the cover-up conspiracies likely wouldn’t be.

Generally speaking, everything makes you fat: Extensive article showing that calories alone can’t account for the reason everyone is so fat. It’s the quality of what is put into our body. The whole article reads like an endorsement for organic food, and it will give the overweight among us an excuse for not jogging tomorrow. Mommy’s eating when she was pregnant made me fat.

Men, just thinking about talking to women makes you dumber: This would explain while I fumble through my words every time I need to talk to my wife about something. Points scored for The Weakonomist (if The Sheconomist is reading)!

Number cruncher’s life in charts: I didn’t build this, but I feel a good connection to the charts. Especially aligning the supposed same data from different sources.

Are you a ginger? You can take the pain: Red heads feel less pain than everyone else. Are they more genetically advanced? Will they rule the world? Thank a ginger today.

Divorce: the downside to living longer: Til death do us part used to mean 60 years. Now 90 isn’t crazy. The rate of divorce of people over 50 has doubled over the last 20 years. When the kids are gone, it usually meant you were about to die. Now it means you have to decide if you want to spend another 50 years with the other parent. Many are thinking, not. Via @pkedrosky

More People Interested in Part-Time Retirement: Count me as one of them. Weakonomics started because at the time I was bored working just 40 hours a week. I work more now, but I can’t imagine full blown retirement. Not yet at least.

Tricks retailers use to carve out extra profits: Candy bars have been shrinking, but the prices for them haven’t. That’s good for bellies, and retailers. This is just one of a number of ways retailers are playing games with price tags these days.

Once again, I entered a post into the Carnival of Personal Finance. Once again, I was editor’s choice. Click through to see what it was.

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Our Cars Tell The Story Of Our Consumption

The Weakonomist — Thu, 02 Feb 2012 15:13:49 +0000

Joanne Muller over at Forbes did some interesting digging on the car buying habits of Americans. Less than 40% of rich people (defined in this case as those making $250k+) actually buy luxury cars. And about 8% of people earning less than six-figures do. Now that doesn’t sound all that crazy but Thomas Stanley extrapolated a little bit more from those numbers:

I estimate that there are 2.5 million households or nearly 2.2% of the total that have annual realized incomes of $250,000 or more. Using Ms. Muller’s estimates that 39% of “the rich” buy luxury brands, one can estimate the number who do so, approximately 975,000. Ah, but this population is much smaller than those households who drive prestige makes but have annual incomes under $100,000. About 30 million households have annual incomes in the $50,000 to under $100,000 bracket alone. Translated: 8% of 30 million = 2.4 million who are buying luxury cars but are not in the so-called “rich” category. This population is nearly 2.5 times the size of the high income/luxury vehicle buyer.

In other words, most of the people buying luxury cars make less than $100,000 a year. That alone is interesting but we can go back into the numbers and learn more.

Dr. Stanley discusses in his post that the average price paid for a car by a millionaire is just over $30 grand. For the decamillionaire: $40 grand. So when someones wealth increases by factors, their spending on vehicles increases by fractions. That means that at some point on the wealth stream we stop spending more on our cars. But with so many people buying luxury brands with lower incomes it’s clear that until we reach that point, we’re overspending on cars. It sounds like that many people are faking being rich, until they actually are. Then they scale back.

This implies two things about rich people:

After a certain point projecting status becomes less important and money is spent on things with more value (maybe a second home, private school for the grandkids, charity).
Once we cross a certain point we start saving a greater percentage of our incomes

These two things are not mutually exclusive.

But what does it all mean? These numbers tell me a story about people that live beyond their means, and it’s not just with cars. It’s with purses, vacations, clothes, jewelry, food and even gifts. Most displays of economic status are not likely to be proportionate to the actual status. It is only and indicator of willingness to pay.

Personal Car Advice:

Should you be the type that struggles with figuring out exactly how much money to put towards a car, here’s my little formula. Take your total household income and subtract out any debt payments that aren’t for a mortgage. Take half of that and you’ll have the total maximum value one should ever have for their vehicles. An example is in order.

Say your household makes $90k and after student loan and credit card payments you clear $80k. Half of that is $40k so you should never have cars totaling in value beyond that. For a family with two adults that’s two cars worth $20k each. That is not to be confused always having cars worth that much. Each car should be owned for at least five years and new purchases should have at least 50% down and paid off within 2 years. Buy a car where you can do that. Get all that?

Now, spending more than $30k on any one car should be considered a luxury purchase and made in all cash. If you can’t swing those things then you can’t afford the car you want. If you can’t follow all that definitely just buy a car that costs 25% of your income, all cash.

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Product Matters Not, Marketing Only

The Weakonomist — Mon, 09 Jan 2012 15:00:16 +0000

What does it look like when you can no longer sell a product based on any actual qualities?

This is what happens when a company stops innovating. The Nissan Frontier was once a really cool truck. I remember during the Bush presidency everyone had the 4-door Nissan truck. They were awesome, even I wanted one. Now, Nissan’s smaller truck has no qualities to set it apart from the competition. It doesn’t have good pricing, gas mileage is average, and generally it’s not a great product. Nissan marketers know this and so the best they can do is literally make up stuff that the truck can’t do, and then show the truck doing it with a disclaimer saying it can’t actually do it.

Sadly, it’s selling trucks. This sad excuse for a marketing campaign actually works.

I don’t mean to make fun of Nissan. They generally make fine vehicles. But I do have to show you another commercial:

The narrator asks if it would be cool to take the top down on a crossover. The answer is no. Later in the commercial we see the Nissan Altima, and again we’re asked if it would be cool if the transmission never changed gears. The answer again is no. This vehicle uses a transmission that acts like an automatic, but you never feel the gear-change. For some time Nissan has acted as if this were an innovation when in fact such transmissions have been around as long as cars have. Other automakers don’t make them because there’s yet to be any real benefit over normal automatics. And when was the last time a gear change was an annoyance.

What annoys me is when marketers solve problems no one ever had. But that is kind of the job of a salesman. To create a problem you didn’t have and then solve it for you. “As seen on TV” products are the masters of this and it’s part of the reason why you never buy it. Many times the products can be genuinely decent, but as a Weakonomics reader you still feel skeptical.

Nissan was in my crosshairs because they’re a company I actually care about. Most of their products are good, and they make a number of them here in the US (including the top-selling Altima and soon the all-electric Leaf). It’s disappointing to see a company with good products not actually sell them on the virtues that make them good. But as a famous ad executive once said:

Nobody counts the number of ads you run; they just remember the impression you make.
-William Bernbach

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Weakend: DIY

The Weakonomist — Sat, 07 Jan 2012 16:52:51 +0000

I’ve always been the kind of person that prefers to pay someone to do something for me. In the strictest sense, I like to pretend every waking moment is worth the amount of money I make driven down to the hour. So rarely have I considered it worth my time to take care of some simple things myself.

In reality, I think I’m just too lazy to learn how to do some stuff. But that’s started to change recently. At some point hardware stores started to look like toy stores to me. Now I’m buying tools, drilling holes, and taking more of a Tim Taylor attitude to the things I own.

But I’ve never done anything with my car. Happy to pay someone so long as it comes with a guarantee. But after working on other things and not wanting to spend hundreds of dollars this weekend I decided to look into some of the stuff a dealer wants to charge me to do. My car is telling me one of the things I need to replace is the filter in the cabin. This filters the air that comes in through the vents. I passed the last time my car told me to replace the filter because the dealer said they would need to rip out the entire dashboard to replace it. The cost was north of $150.

Not worth it so I took my chances. 20k miles later my car wants to replace it again. Not dead yet, but I asked the dealer for a quote on all the service. Aside from basic services which I expect to be less than $150 even at the dealer, they need to replace this filter. Total quote, over $300. This thing must be a pain in the ass to get to.

So I looked it up. The part (which I’m holding in my hand) is about $30. Cheaper online or at a auto parts store. The process to replace it, about as hard as filling up your gas tank. I had to remove one latch on my glove box and pull the thing down. The filter was right there. So I pulled it out, cleaned it with my finger, and put it back in. Later today I’ll go buy a new one.

I’m not about to start changing my own oil, but I could get used to this DIY stuff. Whether you can afford to pay a mechanic or dealer to do the work is almost irrelevant. Some of these things are so simple it’s not worth your time to take it somewhere to get this kind of thing worked on.

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Labor Costs Aren’t Everything Anymore

The Weakonomist — Thu, 29 Dec 2011 15:33:58 +0000

Germany builds 2 times as many cars as the United States does every year. Considering the relative size and populations of these countries that’s pretty impressive. But what makes it even more so is that the average German autoworker makes twice as much as the US worker. So that’s 2 times as many cars, and 2 times as much income. How can that happen?

Well a new report talks about the differences in labor between the two countries. Essentially, everyone in Germany building cars belongs to a single union. That union has a lot of power, but unlike in the US, they rarely have to use it to get what they want. The relationship between automakers and workers in Germany is a lot more friendly. There’s also the matter of the legal system in Germany being more friendly to the labor force than in the US. The results yield high wages, but the German automakers are still enormously profitable.

The wage disparity is one reason for the profitability. Labor costs are substantially lower in the US than Europe. And the German automakers choose to put their American facilities in states where unionizing is difficult. But there’s another reason for the company’s profits.

Look at two cars manufactured by BMW. One is made in South Carolina, the other in Germany. The first is the X5, it’s an SUV made here in the states and has a starting price around $47.5k. The other car is the BMW M3, a personal favorite of your enthusiast author. It’s made in Germany and costs about $60k here in the US. What do these cars sell for in Germany? Before European taxes are added, the cost of the X5 is $60k and the M3 is $75k*. In both cases the European premium is substantial.

That’s because things cost more in Europe. Wages are higher, so are goods.

But BMW isn’t necessarily always exploiting the cheapest labor they can find. They’re also making the cars where the customers are going to buy them. The BMW X5 is the largest vehicle the company makes. Who likes the big cars? Americans of course. Europeans do not. The M3 is the sports version of the 3 Series product line and is one of the smallest vehicles in their lineup. 3 Series sales in the US are about 25% of global sales and BMW has clearly stated their home country is the largest market. It stands to reason that they sell more of those vehicles in Germany than the US.

BMW prices these vehicles in each country to sell. It’s based on competition, and the appetite of the customer. They way the company calculates margins can be complicated, so it would be really difficult to determine what their most profitable vehicles are and in what country from a blogger’s perspective.

What is clear is that BMW is doing what people don’t expect manufacturers to do. They’re building cars where their customers will own them. And they aren’t the only ones. Samsung just opened a brand new facility in Texas to make the chips that Apple puts in their iPhones and iPads. Companies are slowly bring manufacturing back to the United States. No longer are wages the only determining factor of production. Shipping costs have increased substantially. The US has also continued to be a place where skilled labor is valued. It takes more training to make a chip or a car than it does a plastic toy in a Happy Meal. And there’s the advantage of the people making the product also being the ones that understand how it will be used. While the $15/hour laborer in South Carolina may not own a BMW X5, they’ll certainly understand the market better than someone making twice as much in Europe, with no room or use for such a vehicle.

Labor costs just aren’t everything anymore. This is likely the new reality of the 21st century. It’s becoming more and more clear that most the media do not understand this yet.

*There may be some differences in the base price due to regulations and features, however I doubt so much as to cover the premiums. In many cases these vehicles are offered with less options in Europe. For example: you can get BMWs in Europe with cloth seats. Much to my sadness, you cannot get that in the US.

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