# Is It Impossible To Start a New Car Manufacturing Company Today? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [September 4, 2015, 2:51pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906 "2015-09-04T14:51:27Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [September 5, 2015, 10:10pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/61 "2015-09-05T22:10:21Z")
> [@jz78817](#): > > SAAB fans seem to have far too generous memories of what it was pre-GM. They had two models, both of which were riding a creaky old Fiat/Alfa Romeo platform. Well, that’s not quite true. The 9000 platform was [jointly developed](https://en.wikipedia.org/wiki/Type_Four_platform) by SAAB and Fiat, not borrowed. The 900 didn’t use a Fiat platform at all; it was a development of the 99. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [September 5, 2015, 10:31pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/62 "2015-09-05T22:31:43Z")
> [@Amateur\_Barbarian](#): > > Cars are a specialty product with a nearly unique market/application combination. I agree with your conclusion but not your reason. Cars aren’t a specialty product; they’re a commodity product. If you try to compete with GM or Toyota, but your vehicle offers the same thing but at 5% higher price (because you’re a new player and don’t have the same economies of scale, experience, etc.), then you’ve already failed. Make it 5% less and you might have a product, but good luck with that. So the only way to survive is to have a fundamentally different product from the big players. The traditional way in the auto industry is to offer hyper-performance or hyper-luxury. Tesla has found a new niche of people dissatisfied with the limitations of ICE vehicles. We’ll see if they can expand that niche with the Model 3. ---
**Author:** ![Amateur\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/a/59ef9b/32.png) [@Amateur\_Barbarian](https://boards.straightdope.com/u/Amateur_Barbarian)\ **Post date:** [September 5, 2015, 11:31pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/63 "2015-09-05T23:31:26Z")
> [@Dr.Strangelove](#): > > I agree with your conclusion but not your reason. Cars aren’t a specialty product; they’re a commodity product. Yes and no. Commodity product, but in a very specialized and complex niche unlike many other consumer products. You can’t just start stamping them out and shipping them like most products; they need a ton of end-user support, handholding, interface, etc. > [@](#): > > So the only way to survive is to have a fundamentally different product from the big players. The traditional way in the auto industry is to offer hyper-performance or hyper-luxury. Tesla has found a new niche of people dissatisfied with the limitations of ICE vehicles. We’ll see if they can expand that niche with the Model 3. Again, you’re assuming it’s some kind of level playing field, and it’s not. A niche product can always compete in its niche. It’s competing on the bigger scale, against the entrenched players, in the same categories where the curve is almost vertical and the bar almost impassable. The likelihood is that Tesla will never be more than a niche player in the auto field, and they may be happy with that. The odds of them succeeding as a serious competitor to Ford, GM, Toyota etc. are very small. Their best odds are to have their product and tech absorbed by someone who already has that vast street-level marketing and support presence. ---
**Author:** ![jz78817](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jz78817/32/1028_2.png) [@jz78817](https://boards.straightdope.com/u/jz78817)\ **Post date:** [September 5, 2015, 11:44pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/64 "2015-09-05T23:44:37Z")
The one way I’ve always thought Tesla is like a lot of tech companies is that their end goal is to be bought by someone bigger. Musk is already spending a lot of his time on SpaceX. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [September 5, 2015, 11:49pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/65 "2015-09-05T23:49:02Z")
> [@Amateur\_Barbarian](#): > > Yes and no. Commodity product, but in a very specialized and complex niche unlike many other consumer products. You can’t just start stamping them out and shipping them like most products; they need a ton of end-user support, handholding, interface, etc. All true, and yet in the end the major players are almost indistinguishable from each other. You can own a Toyota for years, switch to Ford, and know exactly how things operate, from basic stuff like filling it with gas to more abstract things like how the dealer system works. A new player that wishes to compete has to either get all of these things right, or move the playing field (like by bypassing dealers). > [@Amateur\_Barbarian](#): > > The likelihood is that Tesla will never be more than a niche player in the auto field, and they may be happy with that. The odds of them succeeding as a serious competitor to Ford, GM, Toyota etc. are very small. Their best odds are to have their product and tech absorbed by someone who already has that vast street-level marketing and support presence. Well, I don’t know exactly how you define niche. I think they’ll succeed in selling a half-million units a year. I don’t think they’ll be another GM, nor do I think they’ll want to. I suppose a close analogy might be Subaru. They’re relatively small and semi-independent. They sell under a million cars a year. They’re bought by people looking for specific features: all wheel drive; rallycar-like performance/handling; etc. Is Subaru a niche player? I dunno; they aren’t Toyota and they aren’t Bugatti. They’re somewhere in the middle. As I imagine Tesla will be several years from now. ---
**Author:** ![Muffin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/muffin/32/4341_2.png) [@Muffin](https://boards.straightdope.com/u/Muffin)\ **Post date:** [September 6, 2015, 3:02am UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/66 "2015-09-06T03:02:48Z")
So who’s going to end up with Jeep and Ram? ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [September 6, 2015, 3:26am UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/67 "2015-09-06T03:26:19Z")
Tesla currently has a $31B market cap. The only companies big enough to acquire them would be Google or Apple. Anything else would be a merger. ---
**Author:** ![Habeed](https://avatars.discourse-cdn.com/v4/letter/h/a587f6/32.png) [@Habeed](https://boards.straightdope.com/u/Habeed)\ **Post date:** [September 6, 2015, 3:26am UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/68 "2015-09-06T03:26:26Z")
You know, the same arguments were made when Apple entered the Smartphone market, or Chipotle started competing with McDonald’s, or google started competing with Yahoo and Alta Vista. In david vs goliath, goliath usually wins. But once in a blue moon, somebody comes up with something so superior, so refined, so elegant and specialized, that the opposite happens. The Tesla main line is a series of fully autonomous robotic stations that create the car body from sheets of aluminum. The battery constructing gigafactory will presumably look the same way. Tesla doesn’t have to create a car for everyone, it has to do one car extremely well. Sort of how there was only 1 model of iphone until recently. Or how Chipotle only serves a limited menu but does it crazy well. From the videos I have seen of the Tesla plant, I am not sure that the giants are getting significantly more efficiency from their economies of scale. The main thing making Teslas so expensive is the cost of the batteries (I did a computation, it’s about 30 grand if you put a Tesla sized pack yourself) and the cost of the R&D split over so few vehicles. Even then, the Tesla R&D appears to be just as good as the big automakers, if not better. They have excellent controls, excellent software, excellent layouts, excellent frames and crash resistance, excellent everything. I know it will be an outlier if they succeed, but I’m willing to say it might happen. If they become a firm that specializes in making 1 car uber-well, and they do focused vertical integration of the high value stuff, and they don’t have reams of executive overhead and time wasting bloat like the big institutions - just a floor full of engineers right next to the factory - and they use the internet to just not have time wasting dealers and salesman, letting their product do the talking… I’m just saying, maybe they have to pay $95 instead of $90 for their tires because they don’t have the clout, but if they save money elsewhere, it could work out. Car salesmen are a dying breed. Car servicing may itself become much less of a thing if these electric cars are more modular and inherently reliable. And so on. ---
**Author:** ![Diceman](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Diceman](https://boards.straightdope.com/u/Diceman)\ **Post date:** [September 6, 2015, 12:42pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/69 "2015-09-06T12:42:35Z")
The thing is, Tesla hasn’t succeeded, at least not yet. They’re in debt by a couple of billion dollars, and they’re still not profitable. They lose money every quarter, recently at the rate of ~$100 million/month. They recently made an additional stock offering because they’d almost run out of funding. Their valuation as a company is based entirely on speculation, which means it could easily come crashing down if they have trouble raising money the next time. They could still end up like one of those Dot-com darlings that ended up flaming out in Hindenburg-esque fashion. (People tend to forget about those when talking about Google or Apple.) ---
**Author:** ![enipla](https://avatars.discourse-cdn.com/v4/letter/e/54ee81/32.png) [@enipla](https://boards.straightdope.com/u/enipla)\ **Post date:** [September 6, 2015, 2:15pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/70 "2015-09-06T14:15:27Z")
> [@Dr.Strangelove](#): > > And I’ll just say that a car is a hell of a lot more than a drivetrain with body panels. Software is a huge part of any car today, and not just the control systems. **Consumers want a car that works like their smartphone**. Bolding mine. I disagree. And we have had threads about this. Sure SOME touch screen is OK integrated with the GPS. But people want tactile controls that they can reach and touch without taking their eyes off the road. It would be cheaper for car companies to put everything on a touch screen, but it’s very, very unsafe. ---
**Author:** ![boffking](https://avatars.discourse-cdn.com/v4/letter/b/858c86/32.png) [@boffking](https://boards.straightdope.com/u/boffking)\ **Post date:** [September 6, 2015, 2:17pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/71 "2015-09-06T14:17:08Z")
> [@Dr.Strangelove](#): > > Is Subaru a niche player? I dunno; they aren’t Toyota and they aren’t Bugatti. They’re somewhere in the middle. As I imagine Tesla will be several years from now. Toyota actually owns a significant stake in Subaru. ---
**Author:** ![jz78817](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jz78817/32/1028_2.png) [@jz78817](https://boards.straightdope.com/u/jz78817)\ **Post date:** [September 6, 2015, 2:29pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/72 "2015-09-06T14:29:07Z")
> [@Habeed](#): > > The Tesla main line is a series of fully autonomous robotic stations that create the car body from sheets of aluminum. this is not particularly remarkable. I see the same things going on in their body shop that I do at Dearborn Truck Plant where the F-150 is assembled. > [@](#): > > Even then, the Tesla R&D appears to be just as good as the big automakers, if not better. They have excellent controls, excellent software, excellent layouts, excellent frames and crash resistance, excellent everything. Again, this is unremarkable. They _have_ to do that if they want to sell cars here. ---
**Author:** ![leftfield6](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/leftfield6/32/18780_2.png) [@leftfield6](https://boards.straightdope.com/u/leftfield6)\ **Post date:** [September 6, 2015, 2:46pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/73 "2015-09-06T14:46:45Z")
Has anyone mentioned [Elio Motors](http://www.eliomotors.com/) yet? Or are they too boutique for this discussion? They have been trying to get off the ground for a few years now, and have moved their own personal goalposts a number of times. Originally supposed to have consumer ready product in 2014, then it became '15, now '16. If it ever happens, it would still not disprove the difficulty of starting a new automobile manufacturing company. Arguments could be mad about whether they are an “automotive” company at all, since their product has a lot of motorcycle, and even a lot of kit-car in it’s DNA. I’ve read where they would need to sell 150,000 vehicles annually to make it work. Mazda sold 278,000 vehicles in NA last year, and they have a much more varied line up of vehicles. ---
**Author:** ![Amateur\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/a/59ef9b/32.png) [@Amateur\_Barbarian](https://boards.straightdope.com/u/Amateur_Barbarian)\ **Post date:** [September 6, 2015, 5:57pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/74 "2015-09-06T17:57:32Z")
> [@Habeed](#): > > You know, the same arguments were made when Apple entered the Smartphone market, or Chipotle started competing with McDonald’s, or google started competing with Yahoo and Alta Vista. > > In david vs goliath, goliath usually wins. But once in a blue moon, somebody comes up with something so superior, so refined, so elegant and specialized, that the opposite happens. You’re still saying ubertech wins. It doesn’t always, not even in techy-tech markets that consist of shipping boxes to as many points as possible for sale. It’s almost 100% irrelevant to success as a non-niche, non-boutique carmaker. Tesla (cars and company) are many wonderful things. But until they they can slug it out in every automall across the country - with sales, test drives, service, support and more or less instant acquisition - they will find their market very limited, to about the current wealthy technoid contrarian. With cars, it’s the “dealer network” that is both essential and enormously difficult to build. Whether the car the network sells is a Fiat 500, a Ford Fusion or a BMW 7-series is pretty much irrelevant. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [September 6, 2015, 6:36pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/75 "2015-09-06T18:36:55Z")
> [@enipla](#): > > I disagree. And we have had threads about this. Sure SOME touch screen is OK integrated with the GPS. But people want tactile controls that they can reach and touch without taking their eyes off the road. It would be cheaper for car companies to put everything on a touch screen, but it’s very, very unsafe. You are free to have a personal preference, but the evidence has not borne out claims that it is dangerous. The Model S has been on the road for years and there is zero evidence that the touchscreen controls cause problems above and beyond what other cars have. I find myself taking my eyes off the road for infrequently used controls like defrost or the trip counters. I just don’t use them enough to keep their positions in muscle memory. A large, intuitive, pictorial touchscreen would improve matters here. Kids today grew up with touchscreens and don’t mind the lack of tactile feedback, so it’ll be even more intuitive for them. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [September 6, 2015, 6:52pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/76 "2015-09-06T18:52:58Z")
> [@Amateur\_Barbarian](#): > > With cars, it’s the “dealer network” that is both essential and enormously difficult to build. Whether the car the network sells is a Fiat 500, a Ford Fusion or a BMW 7-series is pretty much irrelevant. That is, at best, only 2/3 true. Tesla doesn’t compete with the Fiat 500 or Fusion, but they _do_ compete with the 7-series. And they are eating BMW’s lunch in this price segment. People who can afford these don’t want the hassle of going to the dealer. They want to order one online and have it delivered to their door, perhaps visiting a showroom in an upscale shopping center first. Tesla provides this. I don’t know if the strategy will extend downsegment, but people _hate_ car dealerships. There is obviously opportunity here. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [September 6, 2015, 6:56pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/77 "2015-09-06T18:56:45Z")
> [@boffking](#): > > Toyota actually owns a significant stake in Subaru. That’s why I said “semi-independent” :). Up until recently, Mercedes had a stake in Tesla large enough to earn a seat on their board. No one’s _totally_ independent. ---
**Author:** ![GreasyJack](https://avatars.discourse-cdn.com/v4/letter/g/df705f/32.png) [@GreasyJack](https://boards.straightdope.com/u/GreasyJack)\ **Post date:** [September 6, 2015, 7:15pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/78 "2015-09-06T19:15:07Z")
> [@boffking](#): > > Toyota actually owns a significant stake in Subaru. They own about 17% of it, which they mostly bought from GM. Subaru is definitely still independent, for now at least. Another example I’d point to is that BMW used to be the classic example of a relatively small but unarguably successful car company. Until the late 90’s when they made their swing towards the mainstream with the Mini’s and SUV’s and such, they were definitely a niche company that was doing just fine only competing in a very small segment of the market. It seems to me that the issue with huge amounts of capital in the industry isn’t so much that it’s impossible to run a small car company successfully, it’s that large car companies have a habit of buying them up. A reputable auto brand is worth an enormous amount of money to large automaker, and the differences in size between the companies are such that the big conglomerate can buy them for pocket change. If you’re running a small car company to make money, selling it out when it gets big enough for the large companies to take notice is almost certain to be more profitable than continuing to run it yourself. In the case of BMW, they only remained independent for decades and decades because the people who owned and ran it made that a priority and structured the company to ensure it. ---
**Author:** ![Amateur\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/a/59ef9b/32.png) [@Amateur\_Barbarian](https://boards.straightdope.com/u/Amateur_Barbarian)\ **Post date:** [September 6, 2015, 7:53pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/79 "2015-09-06T19:53:25Z")
> [@Dr.Strangelove](#): > > That is, at best, only 2/3 true. Tesla doesn’t compete with the Fiat 500 or Fusion, but they _do_ compete with the 7-series. And they are eating BMW’s lunch in this price segment. > > People who can afford these don’t want the hassle of going to the dealer. They want to order one online and have it delivered to their door, perhaps visiting a showroom in an upscale shopping center first. Tesla provides this. It applies to Tesla if they ever want to move past the niche they are in, regardless of which other make they might be competing with. Because only \*some \*“people who can afford these” are willing to put up with Tesla’s non-standard sales, delivery, support and service model. In this era of “we can write an app for that, y’know,” it’s really really really important to realize that something that works for a largely self-selecting market is not assured of unlimited scalability. There is a vast difference between early adopters who climbed the mountain to get a product, and reaching the kind of mass market that takes the product into non-niche territory - and the latter cannot be done with keen tech innovation alone, less so in the car industry than most others. No “Tesla app” will make up for a coast-to-coast, every-major-town dealer network. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [September 6, 2015, 8:28pm UTC](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906/80 "2015-09-06T20:28:48Z")
> [@Amateur\_Barbarian](#): > > It applies to Tesla if they ever want to move past the niche they are in, regardless of which other make they might be competing with. Because only \*some \*“people who can afford these” are willing to put up with Tesla’s non-standard sales, delivery, support and service model. Far more than “some”. Otherwise they wouldn’t be outselling most of their competitors. You say “put up with” as if the non-dealer model is some kind of downside. On the contrary; it’s a massive advantage. Again, most people _hate_ dealerships. They hate everything about them, from the opaque pricing, to never really getting the car you want, to the fact that it takes hours and hours (much of which is deliberate on the part of the dealer). [Polls indicate](http://time.com/money/3826562/buying-cars-online-hate-car-dealerships/) that about 3/4 of people would at least consider doing things online. And this is number is probably depressed by poor education about how the process works. As more people go this route (either through Tesla or others), the population as a whole will become more comfortable with it. Tesla still has a few fights left in some backwards, anti-capitalist states (like Texas), but overall they’ve made great progress in dismantling outdated, protectionist dealership laws. They may well pave the way for others. > [@Amateur\_Barbarian](#): > > In this era of “we can write an app for that, y’know,” it’s really really really important to realize that something that works for a largely self-selecting market is not assured of unlimited scalability. I don’t disagree, but on the flip side we can’t say it’s assured of failure, either. For all their faults, “limited scalability” doesn’t seem to be a problem for Uber, for instance. One might have once claimed that their market was also self-selecting and that they’ll never capture a large portion of the taxi market. Hasn’t happened. Will the same be true for Tesla’s no-dealer model? I dunno. Could go either way. [Previous page](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906.md?page=3) [Next page](https://boards.straightdope.com/t/is-it-impossible-to-start-a-new-car-manufacturing-company-today/729906.md?page=5)