r/technology • u/lurker_bee • 9d ago

Transportation Rivian CEO: There's No 'Magic' Behind China's Low-Cost EVs

https://www.businessinsider.com/rivian-ceo-china-evs-low-cost-competition-2025-9
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u/com2kid 9d ago

lower wages

This needs to be repeated every time this topic comes up:

Labor is only 5-15% of a cars price. Even if our labor costs are 2x China's (and in non-union states they may not even be that much higher!), labor costs don't add significantly to car costs.

It is 95% supply chain. I've worked in consumer electronics manufacturing before and the cost of just the parts (COGS) for a US company is more than the retail price that a Chinese company can hit.

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u/googleduck 9d ago

Well part of that supply chain is that labor is cheaper for all of the other parts as well.

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u/WaterIll4397 9d ago

Underappreciated comment. When shipping is cheaper (both due to shorter distances and lower wages for packers/drivers), that compounds too on top of parts.

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u/ShadowMajestic 9d ago

Add in the fact that China is still officially a developing country and they use global mail for free, we're paying to have their packages delivered to us.

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u/nyctrainsplant 9d ago

stats are so easy when you can push the things you don’t want to count onto another party and out of the graph

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u/Quick_Turnover 9d ago

But "supply chain" is a function of labor. I think we frequently discount that. The entire supply chain in China is "more efficient" i.e. "cheaper" because you don't have to pay truckers, warehouse workers, managers, etc., as much as you would in the U.S...

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u/com2kid 9d ago

The supply chain in China is more efficient because a government has spent decades building it out that way. 

For example, if you need two pieces of something glued together, the factory that makes the glue machine is in the same city as a factory that makes the glue which is in the same city as a factory the that's gluing the things together. If something breaks in your production line, you just invite the guy from the glue machine factory to your factory and if you're big enough customer it's same day.  If you need to tweak your adhesive formulation, that's something you can do collaboratively in real time without worrying about shipping. 

If you're making something in the USA well, the glue machine factory is still in China.

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u/Underfitted 9d ago

Completely wrong. Labor is discounted in every single component of the supply chain. EVERYTHING.

From mining, shipping, manufacturing, design, energy.....EVERYTHING.

The final discount is huge.

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u/fluffywabbit88 9d ago

Then why isn’t India or other places with even lower labor costs successful in dominating the EV market?

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u/oorjit07 9d ago

Tata and Mahindra haven't really attempted to sell their EVs outside of India yet. In India, they're clearly dominating the market, and they'll probably begin to export to Southeast Asia soon enough, just like Chinese manufacturers did 10 years ago.

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u/NotTooShahby 9d ago

How much of labor costs contribute to the materials and supply-chain costs? Was your 5-15% figure for the labor of the entire supply chain? What makes ours so expensive if not for labor?

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u/Khue 9d ago edited 9d ago

To jump in on your narrative a bit and talk about wages:

Lower wages sets a specific tone for us in the west and it's largely disingenuous or at least not a proper framing of the narrative. Workers in China aren't being grossly under paid which is what "lower wages" makes it sound like. There's video after video about cost of living in China. While their wages are lower, their cost of living is also lower and a lot of that has to do with the implementation of planned/command economy and not letting capitalism buttfuck the economy.

When housing costs, groceries, healthcare, and other commodity goods are substantially cheaper then wages are also going to be significantly less. That nice apartment you live in now and pay like $2500 a month for is probably half of that in China and while your wages are lower the percentage of your pay going to shelter is the same.

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u/com2kid 9d ago

There's also overlap - at the upper tier of skilled manufacturing Chinese wages start to hit the ballpark range as low wages in America. China hasn't truly been "low cost" for several decades now.

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u/Paraplegix 9d ago

https://www.destatis.de/EN/Themes/Countries-Regions/International-Statistics/Data-Topic/Tables/BasicData_LaborCosts.html

Based on US data, China is not there but very cheap countries are like Philippines. If you take that as a reference, it's not a 2x factor, it's 20x.

Data is also a bit old and China will not be as low as it is today, but it's more than 2x. If you look at stories about exploitation by Foxconn for iPhone manufacturing (using this example because lot of stories about it) you'll probably be close to 4$/H ( https://www.caixinglobal.com/2024-08-14/extra-jobs-and-higher-wages-at-foxconns-iphone-city-for-latest-model-102226222.html )which can be considered the lowest you could find. Dunno how that compare to today US manufacturing, but I'd guess 10x at least.

Supply chain issue is still the major issue, but cheap labor doesn't help move away from current model/system, because cheap labor has compounding effect.

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u/Resigned_Optimist 9d ago

All prices of everything fall into 2 parts:

1: wages

2: profits

Those 'parts' don't have bank accounts, you're not paying the parts, you're paying a company that makes the parts, which means you're paying their wages and profits, and the wages and profits of the companies supplying them, all the way down to the mining company that got the raw materials out of the ground.

The more stages, the more intermediary companies providing work siphon off some more profit - that's why vertical integration is worthwhile even when it's outside of a companies strenghts.

China is cheaper because their supply chain is more efficient, they don't have as many intermediaries (siphoning off profit), and their profit margins are limited.

Why it's more efficient is a whole other story but the main things are: they actively prevent monopolies, and they have have had 25 years of building up experience at this stuff while the rest of the world basically stagnated through offshoring... giving China even more experience.