Mar 4, 2012
“Thou shall not enter the automotive industry” is the eleventh commandment for any entrepreneur. The only attractive segment of the automotive market is getaway vehicles for VCs who hear the word ‘automotive’ and need to flee the scene as hysterically as possible. Automotive is one of the most heavily regulated, capital-intensive industries, with a frustrating product cycle and a long time to market. The epitome of Japanese efficiency, Toyota, spends three to five years and billions of dollars to produce a new automobile model. This industry is not for everyone.
But Jay Rogers thinks it is. Four years ago, he founded Local Motors to make open-source cars. The company developed an online platform for crowd sourced car design and developed a unique micro-factory for rapid local manufacturing. This may be what the automotive industry needs right now: someone to take the big guys head-on. “Automotive is a really hard industry, but we are not taking on the car industry as a whole. Rather, we are taking on the problems with car manufacturing. There are so many technologies for cars, but they are not making their way to production and testing quickly enough to be integrated in actual cars. It’s that pace of technology development that seemed to be out of step with the rest of the technological world, specifically in regards to internet technology or various forms of electronics – they seem to move a lot faster. From a point of view of making a difference in the world, cars have a huge impact, together with pharmaceuticals and energy solutions.”
Rogers believes that this model of open innovation is not appropriate for every field, but it can be applied to any field that scores high on two scales: number of users and number of creators. This simple paradigm makes sense, and when you think about it, it suddenly poses opportunities in other apparently obese industries. According to the Rogers doctrine, if you add the impact criterion to the equation, as an indicator of collective desire to co-create, you will find that cars are a prime target for open-innovation because they are high on all three scales. Drugs score low on the number of creators. Clothes are somewhere in the middle, because of a medium score on the impact scale. “It is possible to crowd-source a cereal or a donut for example, but they are much further down the list because those are areas where people are looking to be surprised by the new flavors. So it’s not enough just to have many people able to do this and many people interested in the product – it has to have a large, real impact on the user’s life, in order to be eligible for crowd sourcing. I think architecture, furniture and drug development are other good candidates.”
The hitch with crowd-sourcing is that nobody wants to do the uninteresting dirty work. That’s where Local Motors comes in. They fight, on behalf of their open-source community, regulations which add bureaucracy to the design process and write standards which open up design further. Mr. Rogers says, “There is no such thing as un-moderated open sourcing. Standard-writing is a critical part of the process and regulation is a very real part of the car industry. It is not fun and our company has taken on some of these tasks on behalf of our community.” For example, Local Motors took a big piece of regulation from the Air Resources Board to court and won unanimously. The regulation required separate certifications per car model for the same engine design, making innovation more costly. Local Motors argued that certifying a power-train only once, would significantly promote faster and cheaper innovation that would loosen the strangle on developers of new vehicles for different purposes. This case illustrates the importance of a centralized moderator for open-sourcing, and Local Motors became a defender of its open community. In a sense, Local Motors are the parents of a genius and like a good parent, they remove obstacles for the community’s talent to break through.
From design to market
Hold your horsepower. Open-sourcing a car is not the same as open-sourcing a web browser. Can an open-sourced jalopy survive against the lean mean driving machines of Detroit, Germany and Japan? Local Motors’ showstopper, the Rally Fighter, argues that it can. It is a sleek all-terrain vehicle with (arguably) stunning design and extreme durability. It looks like it could eat a Jeep Grand Cherokee for breakfast and belch up a Hummer H3. The Rally Fighter originated from a web design tournament and was chosen as the first design for production. It is now available for purchase for $74,900. There are 25 of these already on the roads and 140 deposits have been put down for future orders. This design made it through not only because of its popularity within the open community, but because it was identified as buildable yet unique. “We wanted something different that could also come to market. We actually wanted something that would be polarizing. Something that would be really liked by one group of people and maybe not so liked by another group,” says Mr. Rogers.
The Rally Fighter is a large vehicle, the size of a SUV, but has the weight of a small sedan. Its base measures 116 inches by 83 inches of track width and it weighs 3200 lbs. Specs for the Rally Fighter are: 6.2 liter, V8 engine and 430 horsepower (at 5900 rpm), 424 lbft (at 4600 rpm). The final version of the Rally Fighter uses composite panels for the doors, body and inner shells. There is no paint on the Rally Fighter, though you may customize it with your own design of vinyl skins. “We wanted desert drivers to absolutely love it, whereas North-Easterners will probably find it inappropriate, but we will get to them soon, with our next models. We want to get this first model to be seen throughout the Southwest and make people realize that a true difference has been made,” says Mr. Rogers. Though a few Rally Fighters have been sold in Boston and Russia, the marketing direction is clear for the Rally Fighter: Crocodile Dundie’s vehicle of choice. All designs and CAD drawings are available online at: http://www.rallyfighter.com/open.php
It took the Rally Fighter 18 months to go from initial concept to production. Traditional manufacturers need three to five years, for a standard car to make it through this full cycle. Local Motors plans to further reduce this time to 12 months for its next models, but needs the cooperation and feedback of consumers to achieve this. Mr. Rogers argues that in order to get through the whole battery of tests within the impossible timeframe of 12 months, their customers are going to be involved in development.,Local Motors is asking future customers for their opinion during every stage of the development through a wiki. Customers continue to develop the vehicle after they take it away. Of course, all the basic safety tests are done before the model is released, making the Rally Fighter officially street legal. But the open-source model allows for rapid development to a stage that is “good enough to get to customers.” Great customer ideas are incorporated in the next production vehicles. It’s all about communication between the different parts of the community.
To manufacture cars locally and save on expensive shipping fees, Local Motors designed a micro-manufacturing plant, implementable globally. The first micro manufacturing site is in Arizona. Customers come for a few days to build their own car with the assistance of Local Motors trained staff. No mechanical or engineering skills are required. The customer list includes regular people: city slickers, rugged countrymen, families, men and women of all professions. The customer is fully involved in the assembly of the car – from frame alignments and engine calibration to break system and dashboard placement. A panel at the TechCrunch Disrupt 2011 conference dubbed this kind of process “The Rise of Profitable Open Source Hardware,” but this concept of having the customer emotionally involved in the creation of the car is not only economical for Local Motors. It is part of a recent trend of shifting the power balance from traditional manufacturers, who used to exist in a secret mystical world of knowledge, to the end customer, who is recently figuring out the benefits and accessibility of hands-on production. “Our vision is for everyone to be able to build these models everywhere, but in the short run, the best solution is this micro factory we developed, which is operated like a local agency in different areas by people who are interested in being a nexus of local manufacturing.” The micro-factory requires relatively low capital investment (~$200,000) and is light on tools: mostly assembly tools, no production tools. They have some rapid prototyping tools, such as laser cutters and 3D printers, but only the kind that can be used for a wide spectrum of vehicle building options. Such a factory can never reach the production volumes of a billion-dollar plant, but will serve a small area. Currently, the plant in Arizona serves about 200 vehicles a year and more plants are being planned. The idea is that no government backed funding or large scale financing will be needed to set up a production micro-factory. “We have had 35 requests from community members and industrialists for setting up local micro-factories, from places like Singapore and South-Africa, Nigeria, Dubai, Poland, Germany, Russia, Austin, New-York, and we are now evaluating them. They can just take what we’ve done and do it again, but it does help to be in touch with the community that we have created online because you might need our support in the design and initial development before the actual production stage.”
Mr. Rogers is an ex-marine, who could not compete with the likes of Elon Musk of Tesla in terms of private capital investment. “It’s really hard to raise money from VCs. They hear the words ‘car manufacturing’ and run in the other direction so you either have your own money, like Elon Musk did with Tesla, or you could go to people who are truly interested in the definition and change of manufacturing. You could call them angels, I call them individuals who are interested in seeing this change happen. I did a combination of the two, since my personal investment was large but not enough.”
These visionary change agents are key to any entrepreneurial venture, and this would not be the MIT Entrepreneurship Review if we did not let Mr. Rogers vent about the big players, those he chose not give his project management skills to:
“The challenge of making a change happen within a big car manufacturer—if you are the kind of change agent that I wanted to be—is probably ten times harder than being outside of such a company. So I wasn’t satisfied with just going to work in an environment that would make the change I wanted impossible. If you think about it, who are the people who can make that kind of change in a car company? It’s probably someone in the upper-upper level of management and the chances of you actually making it to that position, no matter how smart or how connected you are, are pretty small. In a sense – these companies are likely to weed out any person who might muddy the waters or ruffle the feathers, because it’s just too dangerous for their publicly traded stock. I learned about this in the military. The military was a fantastic training ground for me, but I’ve also learned that the people who make it to be four-star generals are not necessarily the change agents that are the folks who may invent something totally different on the outside. And that’s not a bad thing, it’s just the reality, and that’s why I didn’t go work for a big car company – it just didn’t suit what I was trying to get done.”
Hear, hear. Local Motors is a great example of the recent process of democratization of technology. What once was considered hardcore, untouchable science, is now opening up to the masses, and not only in computer science and other hardware-light industries but in physical manufacturing as well. With tools like Arduino or the RepRap project, this could have a great impact on accessibility of technology to all of us as well as to communities who were cut off from mainstream innovations. Looking into the future, I asked Mr. Rogers what were the processes he was most excited about for Local Motors. The community supplies him with many answers to that question. “A rocket powered antique car with an ejector seat. A monocycle with a wheel that runs over your head and you ride inside the wheel. A pedal-powered hybrid car. An amphibious car that flies. A magnesium bodied car’. We are open to any creative project under the sun.” But is it possible that open hardware is at a critical make it or break it stage, in which a more conservative approach is needed to get not only the early adopters involved? Should Local Motors aim at less crazy ideas? It is their responsibility to nurture a concept that is bigger than one company. Local Motors’ choice for this strategic move is a new open-source electric vehicle, which they are very excited about. Mr. Rogers says that “the people in our community are everyday Henry Fords,” and indeed the biggest challenge now is for this community to mass produce itself.