Innovation and Profits in the Automobile Industry
Even though right wing pundits continue to espouse Detroit as a City in ruins and housing prices remain low in the Motor City, both of those bellwethers are known to sound the tail end of a trend, not the beginning. The financial fortunes of Detroit still remain tied to the success and failure of American owned car companies.
The United States automobile industry is going through a renaissance the likes of which we have not seen since the late 1940s when a similar situation was taking place. The U.S. was coming out of World War II rationing and war production which had shut down the consumer car market. After the war, the well known story is the big three geared up to feed pent-up consumer demand and returning GIs. The ignored story is the dozens of entrepreneurial independent car companies that sprang up to address market needs being ignored by the big three.
New car companies outside of Detroit sprang up and drove innovation that dragged GM, Ford, and Chrysler kicking and screaming into innovative cars. The Tucker Torpedo in 1948 sported seat belts decades before they became required by federal law, and also had a head light that followed the steering wheel. Many of these independent car producers, such as Crosby, Kaiser, Nash and Midget Motors produced cars that were small in size, small in price, and pinched a penny when it came to gas.
The designs from these independent companies in the late 40s and early 50s forced recalcitrant Motor City mammoths to invest in new designs and new technologies. Motor fanatics may debate this until the cows come home, but the fact remains the post-war cars produced by the big three were big yawn boring in comparison to the hive of activity they were forced to produce by the mid 1950s. The point is the big three were predominantly reactionary followers during this period.
I would also argue there was a marked change in the cultures inside and surrounding the big three by 1959 when innovation and the rocket age demanded companies embrace innovation or accept rusting in the dust. The American public and the nation claimed advancing through science as an American province, much in the same way they claimed so many German scientists, such as Einstein and Von Braun, as naturalized sons.
Fast forward to 2008. The U.S. has been fighting two wars many have said was about oil, the economy is crumbling under deregulated banking practices and unregulated stock investments. In a sea of international major auto manufacturer morose, the lone exception arguably being Honda, a bevy of new automobile companies are arising to meet changing market needs that address the new realities of pollution killing the planet and declining incomes encompassing more American consumers.
New companies, such as Organic Transit and Elio Motors, are fueling an independent car manufacturer revolution that in 2013 is dragging Detroit kicking and screaming into a new age of American automobile prosperity. These companies are addressing new needs with technologies Detroit did not think were possible.
The Tesla S car has won numerous awards in advancing not only electric cars, but the entire industry into completely new territory where a sedan out performs dedicated sports cars while outclassing the competition in styling and safety. In the more than 60 year history of Motor Trend’s best car of the year award, the Tesla S car is the first to win in a unanimous decision. The S car performance, styling, safety, and environmental carbon foot print leave everything else in its wake. It is built in quake rattling California, and it has sent shock waves beyond Detroit to every vehicle producer on the planet. The valid criticism of Tesla Motors is the S car is too expensive for the average American, but so is the line-up of every major car manufacturer.
With the great recession of recent years, the average American income has declined and driving habits have changed while ecological awareness has grown. Major manufacturers have ignored these changes and have left a void American entrepreneurs have leaped to fill.
These small, independent companies have the right products for the right reasons at the right time and their products are storming the market as we speak.
Organic Transit in Durham, North Carolina, is manufacturing and selling a new type of hybrid vehicle that is literally selling like hot-cakes with the waiting list currently at two months. Their vehicle is called “The Elf” and it sells for $4999, and it uses no gas, for it is a hybrid of human and electrical power. It comes standard with photovoltaic cells and is so efficient it can recharge itself in sunlight while you work. The Elf addresses the needs of people who are ecologically conscious, want to stay fit, don’t want to spend a lot of money on a car, and travel about town at 20 mph. It fits the new reality of spend less, use less, stay active, and go slower.
Lit Motors in San Francisco, California, is on the verge of using innovation to go where no Tesla has gone before, square into the garage of the working class. Lit Motors has its $20,000 C-1 electric vehicle slated for production in 2014, and it is going to rock the motor world. Many are calling it the iPhone of the car world because of its ingenious innovation, simplicity, and styling. The C-1 has only two wheels like a motorcycle, but drives like a car. The C-1 is actually safer than a car because two gyroscopes in the floor of the vehicle keep it in a constant upright position.
How can the C-1 vehicle be safer than a car? Since it only has gyroscopes and two wheels, instead of four, the C-1 slides when it is hit instead of rolling over..
Auto critics point out Lit Motors is a start-up and most start-ups never live to see the day when their product hits the market. However, Lit Motors is not your average start-up and the C-1 is a revolutionary product in ways critical to averting start-up problems associated with capitalization. The first advantage of the C-1 as an entry level product for a start-up is that it has only two wheels, and the second advantage is that it is entirely electric. Both of these advantages add up to the C-1 having significantly less parts than a four wheel internal combustion vehicle. Less parts mean the amount of capital and length of time required to bring the C-1 to market are also significantly less, both of which are the primary enemies start-ups have to overcome. The C-1’s styling, simplicity, functionality and low price add up to a product that is going to have major sales.
Another new company, Elio Motors, sending tremors through the motor world comes from Detroit itself. Founded by veteran engineer Paul Elio, Elio Motors has a rag tag band of Detroit executive mercenaries who have designed and are ramping up to produce a three wheel vehicle in an vacated GM factory in Louisiana in early 2014. The Elio car seats two, gets 84 mpg on the highway, and has 5 star safety. All for a cost of $6,800. That’s right, $6,800. High safety, high mileage, and low price. The design is sleek and attention getting. The Elio is going to sell, sell, sell. Count on Ford or GM making an offer to buy out Elio soon.
Tesla, Organic Transit, Lit Motors, and Elio Motors are just the tip of the innovative independent automotive iceberg in the United States. Myers Motors in Ohio is set to launch their all electric Duo for under $20,000 after rebates. Blue Sky Designs in Oregon already has the $5,500 BugE and the HPV Canopy. Persu’s $25,000 V3 is targeted to hit the streets in 2014, and has auto aficionados, such as Jay Leno and Top Gear’s Jeremy Clarkson, absolutely raving about it being like driving a jet fighter on the ground.
All of these vehicles are ground breaking, their design is sleek, and all grab onto the intangible of being fun to drive. The American automotive industry is going through a renaissance of innovation led by start-ups addressing market needs and new ecological realities. Older car companies, like GM and Ford, are getting on the ride because they have no choice, and they are heading into innovation and vehicles American consumers are clamoring for. The Ford Focus hybrid and new Chevy Impala are examples of what is yet to come. The U.S. auto industry is once again leading the world. Detroit is going from bust to boom.