Think Global, Act Local (Motors)

If we start seeing automotive executives wearing flak jackets and crouching behind sandbags it wouldn’t surprise me at all. This industry is under attack on multiple fronts, especially from Silicon Valley. But now there’s a new threat on the horizon. Even the tech startups from the Valley will be shouting “Incoming!”

The new threat comes from a company called Local Motors (LM), which has been in business since 2007 but is about to move from the proof-of-concept phase to low-volume production. They have an intriguing business model, one that is completely alien to the traditional industry, and one that has the potential of pulling off the quintessential paradigm shift: Where all your knowledge and experience suddenly counts for nothing as everything gets reset to zero.

LM is combining three very powerful concepts: Crowd-sourced designs, 3-D printing and micro-manufacturing. In one fell swoop it is clearing away the barriers to entry that always have bedeviled anyone trying to break into the automotive industry: The need for massive upfront capital spending, armies of engineers and a nationwide network of dealers.

I first learned about Local Motors in 2009 when it launched its efforts in crowd sourcing by throwing out a challenge to anyone who wanted to design its Rally Fighter, a hard-core, high-performance, off-road machine. With crowdsourcing, if they use your design, you get paid a royalty for every car sold.

LM achieved its objectives, but the product was a $100,000 car. I don’t get too excited by expensive, low-volume, high-performance cars. There’s no shortage of wannabe’s who try to go that route.

But in 2011 DARPA (the Defense Advanced Research Projects Agency which is part of the U.S. Department of Defense) awarded LM a contract to crowd source the design of a prototype that could potentially replace the HUMVEE.

The typical military procurement process would have delivered a prototype in two to three years. Local Motors delivered one in four weeks. In fact, with much fanfare, they delivered it to President Obama at the White House. That’s when I started to pay closer attention to this company.

My first encounter with LM was at the 2015 North American International Auto Show, when it 3D printed a car on the floor of the show during the media days. That was my first exposure to fullsize printing, and that’s when I realized 3D-printed cars could meet the FMVSS crash standards. I was stunned to see that they print a latticework between the outer and inner layers of the body. That lattice work forms a crush zone, and for additional strength it can be filled with structural foam.

Earlier this year LM unveiled the product of yet another design challenge, this one sponsored by the city of Berlin, Germany. The result is Olli, an electric 12-passenger autonomous bus, designed by a 22-year-old Colombian student studying in Italy. LM now is getting orders for this bus from all over the world.

Companies such as GE, Siemens PLM, Sabic, NXP and IBM have started partnering with Local Motors. That’s a pretty impressive list of partners. In fact IBM is putting Watson, its artificial-intelligence computer, into Olli so passengers can ask it anything they want as they go along for the ride. No doubt you’ve heard of Watson.  That’s the computer that speaks in natural language and beat the top champions on the television quiz show “Jeopardy!” I believe this is the first application of Watson that is available to the public.

Potentially Upsetting Status Quo

Local Motors’ next goal is to become a full-fledged car company. But instead of building a quarter of a million cars a year in a massive assembly plant like traditional automakers do, its vision is to have hundreds of mini-factories scattered across the country, each printing about 3,000 cars a year. In fact, this local approach to manufacturing is how the company got its name.

Traditional automakers make massive investments and then build huge numbers of cars to achieve economies of scale. Their costs only come down as they make more vehicles. But LM doesn’t need economies of scale because its upfront investment is measured in millions, not billions. The first car costs about the same as the last one. The tradeoff is that while each mini- plant can’t make a lot of cars, it can make a much greater variety of them, up to five completely different body styles. 

Another key difference is that they’ll only build to order. The idea is to have customers come to a factory and choose the body style they like along with the type of powertrain they prefer and the kind of options they want. Then they pay for the car, LM prints it overnight and the customer picks it up the next day.

So, no more dealerships. No more acres of new cars sitting on dealer lots waiting for customers to show up. No more summer blowout sales to clear the cars that didn’t sell. And no more used- car lots. When your old Local Motors car wears out, you take it back, they’ll grind it up, recycle it and print you a new one.

Or at least that’s the plan. LM will open its first mini-factory in Knoxville, TN, to start delivering cars in 2018. So we’ll have to wait and see how this plays out.

But I sure like their odds. History shows the only way to successfully break into the auto industry is to bring something completely new to the party. And, man, is Local Motors bringing something new: in design, in manufacturing and in distribution.

While everyone else is focused on connectivity, electrification, mobility services and autonomous technology, I think Local Motors represents the biggest disruptive force facing the automotive industry. It has the potential to undo a 120-year-old business model and send everyone back to zero.