I recently blogged about how the recession will benefit automotive start-up companies. The basic jist is that the large companies are hit harder than small ones allowing the little guys to gain precious ground.
This doesn’t mean, however, that Tesla, Aptera, and the others will have it easy throughout the recession. They like everyone else will be scraping and clawing to survive. I’m no business expert (yet), but I want to point out a few key points that I think will determine whether or not these automotive companies sink or swim (or should I say stall or rev).
1. Be Niche (NOT Mainstream).
These companies are not in a position to compete with Camrys and Accords. They shouldn’t even attempt to reach those masses. Take for example some other successful vehicles that were limited to niche groups:
- Hummer: Rolling-billboard Niche
- Escalade: Bling Niche
- Harley Davidson: Need-to-feel-more-manly Niche
Tesla, Aptera, and Fisker seem to have pretty clear niches:
- Tesla: Green-alternative-to-a-Ferrari Niche
- Aptera: Greenest-person-in-the-city Niche
- Fisker: Green-alternative-to-a-Mercedes E Class Niche
Pheonix Motorcars and Miles Electric, on the other hand, seem to have products aimed more mainstream (as far as I can tell).
Pheonix Motorcars: Competing with Chevy Equinox?
2. Be Luxury.
Luxury items like Rolex are affected very little by a slumping economy. Further, every tecnological advancement has to start out in expensive luxury products:
- Computers
- Cell-Phones
- GPS
- etc.
Luxury items allow for a good profit margin even at low volumes. Tesla, with their $109K Roadster, seems to grasp this concept well. Miles, on the other hand has a $40,000 highway sedan that looks like a 10-year-old Accord. I’m not sure how they are going to attract high-end buyers.
Miles Electric
3. Pre-Orders, Pre-Orders, Pre-Orders.
These companies have to shell out a lot of money to build their cars before they can sell them. Creditors and investors are very hesitant right now. Many young companies are crushed by such cash flow problems. There is no better way to gain the confidence of creditors and investors than to have a pile of customers shelling out cash before the final product even exists.
Let the customers pay a hefty fee to reserve their car. Send them home with a fancy plaque to hang on their wall: “John Doe: Owner of the 63rd Aptera.” Keep them posted on the status of their car. Let them bring their friends by company headquarters to go for a spin in one of the company cars.
Aptera charges only $500 for their reservation fee. It seems like anyone green enough to buy and drive an oversized sperm on wheels would be willing to shell out more to be an early adopter.
Prediction.
I honestly know very little about any of the companies I’ve mentioned, and there are certainly more critical factors than the three I mentioned. But if I had to guess which companies are heading for trouble I would say Pheonix and Miles. They are too main stream and not luxury. I don’t see how that could be a recipe for success in the early stages of a new product.
Tesla, Aptera, and Fisker; on the other hand; appear to be positioning themselves well. That’s why I listed them as the 3 American Car Companies to be Excited About. It will be fun to see how it plays out.
Thoughts?
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