Who willingly pays twice as much to get 50 percent less?
When Sergio Marchionne was running Fiat, he advised people to not buy the electric version of the 500, Fiat’s “Italian Job” micro-car. Why? Because each “sale” would cost Fiat a lot of money as the electric 500 could not be sold for what it cost to build, plus a profit margin sufficient to make it worth building. It was too expensive — and too limited. It was for these reasons what people in the car industry call a loss leader — usually also a compliance car. The latter refers to a car that’s built solely to satisfy government regulatory requirements and is inevitably sold at a loss — because very few buyers want to pay for it.
