Cashing in on electric
Auto startups, loaded with financing, offer stiff competition to established companies
DETROIT — Not since the early 20th century have there been so many startups in the U.S. auto industry
Add Phoenix-based AtlisMotor Vehicles to a growing list of electric-vehicle startups across theUnited States— Rivian Automotive, Nikola Corp., Lordstown Motors Corp. and Bollinger Motors among them — seeking to make their marks. The surge in 21stcentury startups is inspired by the meteoric success of Silicon Valley EV
maker Tesla Inc. as well as government regulations that for the first time mandate the powertrains automakers must use.
But where automakers a century ago were pioneers on the Industrial Revolution’s transportation frontier, today’s startups face formidable challenges from established Detroit-based and foreign automakers jockeying for the same space in a still-undefined consumer market. The competition is stiff and well-financed.
General Motors Co.’s Cadillac is going electric and its GMC unit has a new Hummer EV. Ford Motor Co. and Fiat Chrysler Automobiles’ Ram have electric pickups in the works. German rivals including Volkswagen and BMW intensify the competition.
Those legacy makers hold a big advantage in access to capital to build factories, manage distribution and establish dealer networks. But startups benefit from efficiencies, including online marketing and low-maintenance electric powertrains.
Founded by Mark Hanchett, the Atlis XT pickup is aimed at the commercial vehicle market instead of the luxury niche targeted by Rivian and Hummer. Atlis promises a pickup starting at $45,000 with a flexible electric platform that fleet customers can configure to their own specifications.
“Organizations like Atlis are really looking at a much bigger picture,” Hanchett said. “It’s perfect for fleet owners. Electric technology is superior to the diesel technology that’s out there today.”
Hanchett breaks through the noise with a bold claim: that his trucks can recharge up to 500 miles on the Atlis high-speed charging network in just 15 minutes — competitive with the diesel trucks that dominate today’s market.
The variety of planned EVs is broad, reminiscent of the early 1900s.
The first decade of the 20th century saw anywhere from500 to1,500 startup automakers (depending on the source) in the U.S. But when Ford Motor Co. broke through with mass manufacturing in 1913, boutique automakers found themselves in trouble.
“Capital became a huge factor,” said Matt Anderson, curator of automotive history for The Henry Ford museum in Dearborn.
New cost-model
The demands of mass production inspired relentless consolidation. By 1929 the number of U.S. automakers was fewer than 50 with some 80 percent of production coming from GM, Ford and Chrysler.
The challenge of competing against the auto behemoths remains as true today as itwas then. But the nature of EVs means that startup costs are much less than they have been for gas-powered vehicles in an industry whose barriers to entry historically have been high.
“Atraditional gas-car company required $3 billion before you even put a spade in the ground,” said auto consultant Joe Phillipi, a veteran auto investment analyst who worked on Wall Street for decades. “Developing the powertrain, transmission, electronics were cost-prohibitive. But these new electric automakers have simpler powertrains, don’t have to worry about regulatory validation for emissions, and in some cases can outsource their production.”
California-based startup Fisker Inc. is one of the latter. Led by ex-Aston Martin designer Henrik Fisker, the company announced this fall that its $37,499 compact SUV, the Ocean, will be produced by Austrian supplier Magna Steyr.
Further reducing costs, the Ocean will be made on Magna’s own EV architecture. Fisker’s design will be coupled with off-the-shelf items from suppliers with Magna overseeing the car’s assembly. Magna has previously showcased an EV prototype for Sony and has experience assembling gas vehicles like Mercedes’ G-wagon SUV.
Atlis is a more-vertical company in the mode of Tesla. It not only builds its own vehicles but also a proprietary charging infrastructure and battery cells.
Atlis’ priority is raising capital, which has been plentiful for upstart EV makers. The biggest sources of cash: U.S. equity markets, venturecapital investors and sovereign investment funds from countries like Saudi Arabia. Even such legacy automakers as Ford, an investor in Rivian, are active in the space.
“There are billions in capital out there from venture funds across the world,” said consultant Phillipi. “The Saudis are investing heavily in this technology because they want to diversify beyond oil for the next wave of transportation.”
He adds that truck makers Atlis, Lordstown and Rivian — while not ruling out retail orders — are directly dealing with fleet customers to cut inventory costs, a major expense for legacy automakers that traditionally sell through dealer networks.
Altis rival Lords town Motors recently secured financing with Diamond Peak Holdings Corp. to jump-start manufacturing on the site of GM’s closed Lordstown Assembly in northeast Ohio. The merger with Diamond Peak provided $675 million of gross proceeds that will be used to fund production of the $52,000 Endurance pickup. GM invested $75 million in the startup.
“We don’t see anybody in our lane,” Lordstown CEO Steve Burns said. “There is nobody with a full-size truck for workers priced in this range, and it is hard to get a lane to yourself in modernday automotive.”
Startups vs. legacy
Even as these EV startups seek to upend Detroit’s three automakers’ hold on the truck market, they have a symbiotic relationship with them.
Besides GM’s investment in Lordstown, GM is working on a deal to partner with Phoenix-based Nikola to make electric and fuel-cell trucks together, including Nikola’s Badger truck. When announced in September, the deal was to give GM an 11 percent stake in the company.
Ford has invested $500 million in Plymouth-based Rivian.
Phillipi said U.S. automakers initially downplayed the threat of EV startups: “Tesla caught them napping. Tesla now knows more than any other automaker about batteries and self-driving systems.”
Now the legacy makers are scrambling to catch up by purchasing stakes in EV makers, tracking their advances, and creating startup-like projects of their own including GMC’s Hummer EV and the Ford Mustang Mach-E.
“Ultimately,” Philippi said, “the Detroit companies may want to buy a startup EV-brand outright.”