It’s not that it’s impossible to start a new car company. But you’ve got to have a relatively large amount of money (I don’t think it has to be billions, but, you know, still a lot), and you’ve got to find a niche.
Is your dream to produce a four door sedan for $22,000? Congrats! You’re doing what a dozen other multi-billion dollar companies are already doing. But they have a 70 year head start and a lock on the supply and distribution network. So good luck with that.
Maybe, though you have a background in hydrogen and want to get that type of car off the ground.
Maybe you see a need in Latvia for cars that run on potatoes.
Maybe you can create a $500 car for use in Sub-Saharan Africa.
Maybe you have an idea for the ultimate hand-assembled (non-sport) luxury car to go after a market that will pay $250,000 for one of 147 of this year’s line.
There are still niches to be filled that don’t compete against the big and the cost need not be billions to start up. But even so, your success rate is still going to be abysmal.
Remember, you don’t just need to design the car, arrange agreements with suppliers, manufacture a chassis and powertrain, and assemble it all together; it has to have good reliability, high build quality, and most importantly, pass the government safety regulations (in multiple countries if you want to sell outside of the US) which means a lot of complex analysis and simulatioj plus safety performance and crash testing. This analysis and testing alone is many tens of millions (perhaps as much as a couple hundred millions) of dollars, plus redesign if you can’t meet the required standards.
The modern passenger automobile is one of the most highly engineered products the average person will ever encounter. Every major subsystem is the cummulation of hundreds of thousands of person-hours of engineering development, testing, and refinemenrt. A new entrant into the industry can certainly leverage off of the work done before and commercial components that can be adapted to their particular application, but making it all work together reliability, with good fit and finish, and meet the substantial safety requirements before it can even be approved for use on public roads is a massive undertaking.
Most large scale industries are similar; there are usually high barriers to entry that center around needing large amounts of capital, and once you overcome those, you’re thrown into a market with small margins and cutthroat competition. Most people with that level of cash are better off overall just investing it, instead of trying to build a new company.
The main reason that I think Musk isn’t trying to license his Tesla technology to a major auto manufacturer is because he’s interested in developing the technology, not just making money, which he already does in stupendous quantities with PayPal. And while he could probably sell the designs and tech to say… GM for a boatload of cash, he’d quit being able to develop it, and GM would likely just sit on it until they saw a way to make a profit out of it.
That said, there’s nothing magical about Tesla’s technology; once gas prices rise high enough that electric cars start looking really attractive for most people, you’d better bet that GM and the rest of the auto industry will reverse-engineer it or develop their own in a big hurry.
Chrysler is so unprogressive they probably should just kill everything except Jeep, Ram and their minivans. They’re so short on R&D they simply can’t move forward. I was at Chrysler in 2012 and was told they are not even thinking about hybrid cars. They lag pretty far behind other OEMs in technology and safety advancements.
My understanding is the Nissan Leaf isn’t exactly bankrolling yacht purchases either.
There’s really only 3 good product lines in FCA: Jeep, Ram, and Ferrarri. Ferrarri is being spun off as its own company, because FCA’s CEO will wind up at the bottom of a remote alpine lake if he doesn’t. (Only half-joking here. The Agnelli family really wants control of Ferrari back.) So, let’s forget about Ferrarri.
I’m sure GM would love to get their hands on Jeep & Ram, and would probably go as far as discontinuing GMC to make room for them, but the rest of FCA would be baggage that GM would need to unwind. This includes Chrysler & Dodge (which compete with Buick & Chevrolet), Alfa Romeo (one of those high-priced lines that still somehow manages to go broke every few years) and most definitely Fiat (which needs to be taken out behind the barn & euthanized). GM would spend billions of dollars culling the wheat from the chaff, plus they would be seen as the bad guys when the workers were laid off, so the deal isn’t worth it for them.
*Everyone *has owned Jag and Rover in the past few decades. The UK brands have been repackaged and resold countless times since they were last independent makes.
China bought the MG marque decades ago and AFAIK has never done anything but slap it on cheap “sporty” cars for the home market.
As history has proven, anyone can start building cars at any scale from one-offs in a basement to turning steel mills into factories. But the hurdle of selling them to the public is almost insurmountable in the face of what it takes to build and roll out a dealer and support network.
Tesla has gotten away with a thin-market model because, well, they have a thin market. It will be interesting to see if they can ever cross into mainstream acceptance and sales without becoming a GM or Ford division.
I give even less chance to the tech-car crowd. Selling cars is absolutely chalk and cheese with respect to selling consumer desktop/pocket tech. But as with any number of failed expansion ideas, you can’t tell them that. They already know better cuz, Apple. Jeez.
this is also why I bristle when people try to claim Tesla is a “tech” company and not a “car” company. It wasn’t a bunch of Silicon Valley frat-boy “whiz kids” designing the Model S, it was experienced automotive engineers.
I don’t think Google really wants to make and sell cars. I think they want their tech in everyone’s cars. It makes more sense for them to put Android Auto in Ford, GM, Toyota, Honda, etc. than to try to compete against all of them.
I’ve been following the Sob, er… Saab story for a while now.
When GM sold Saab, it was bought by a Dutch boutique carmaker called Spyker. Unfortunately, it turned out that Spyker was kinda having delusions of grandeur, and when it came to running a mass-market car company they were in way over their heads. Saab want bankrupt, and eventually Spyker did too.
Saab was next sold to a Chinese-Swedish consortium called NEVS. Not to dance around the point, NEVS was just flat-out incompetant, and after producing a handful of cars Saab was bankrupt again. At this point, you need to understand that the name “Saab” is actually leased from Saab AB, a Swedish aerospace company. Nobody anywhere in this chain has actually owned the rights to the name.
Now, when NEVS went bankrupt, Saab AB revoked the license that granted NEVS the right to use the Saab name, basically because they were tired of having to explain to people that, no, the doofuses who keep going broke are a different Saab.
As things currently stand, NEVS has new owners (still Chinese) and is building a car plant in China, for the Chinese market. They’re trying to develop an electric car, and are supposedly working on a new brand name for it, since they’ll get sued if they call it a Saab.
I’m curious as hell to know if the Chinese stock market crash is going to finally put them under for good.
My view, which may be slightly faulty, is that GM bought Saab, promptly threw away everything that made it Saab except the nameplate and a vague styling sense, and tried to sell Saabites and new customers GM platform-gineering. Once they were done, there was essentially nothing to Saab but the name - the old tech was gone, and the “new” tech was unloved and unsalable.
The GM-era Saabs weren’t that bad. They lost some of their fundamental quirkiness that was their appeal in a lot of export markets, but they still sold reasonably well in their traditional home markets.
I think the major blunder with the NEVS debacle is that they just sat around twiddling their thumbs waiting for the electric car technology to be available from China, which never materialized. Near the end they started building 9-3’s with the same old GM drivetrains, but by then it was too late. If they’d actually started with chugging out normal gas-powered Saabs mainly for the Scandinavian market, they might have had a chance of making something sustainable.
Another barrier is the world car market is notorious for over-capacity. Most car companies of any nation are too big to fail. When they approach bankruptcy they inevitably receive governmental subsidies, even from conservative governments. The transport industry is simply astonishingly big: the simultaneous closure of multiple factories and parts suppliers and dealer network would be devastating. Not to mention the drop in consumption by the newly fired workers. Fiat won’t go out of business even if it should. Ditto for Chrysler, which thankfully was taken over by Daimler then passed on to -er- FiatChrysler.
I think you should move your goalposts. If Musk sells his car division at a profit to a top 10 world motor company and sales of their electric vehicles grow over the subsequent 10 years, I’d say his play was a success by any reasonable metric.
I don’t think that SAAB was ever a big seller, even in the home market. GM did introduce new engines and systems, the the bodies were designed in Sweden. It was a very expensive car to buy and maintain, and now that FWD cars are common, it wasn’t all that different from what GM was putting out.