24
votes
When EV startups shut down, will their cars still work?
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- Authors
- Tianyu Fang, Alicia Fàbregas, Faisal Mahmud, Nayem Shaan, Rest of World
- Published
- Aug 28 2024
- Word count
- 1096 words
I don't have any insight into the Chinese EV market, but this is part of why I think it'd be smart for NA-based EV startups to target the "just a car" EV niche with designs that try to be as simple as possible. No overwrought tablet-like infotainment, as few ECUs throughout the car as is practical, FWD/RWD, motors just powerful enough to do their job, and battery chemistries that require less management.
In theory, this approach brings several benefits:
This could be improved further by hiring a small team of talented full-time software engineers instead of contracting the software out.
The downside is that your margins will be minimal, but that's better than shooting for large margins with high-end vehicles that are much more difficult to produce (see Fisker).
The actual difference between a high end and a low end EV is almost entirely down to materials and finish. Companies start with the high margin models because it's easier to start small than to start with a need to sell half a million cars just to break even.
Sure, some car parts are actually better and more expensive, like the suspension, but the major expenses like R&D, the batteries, and the motor(s) are all basically the same whether you're building a high end or a basic car.
There’s still some wins that can be eked out of a simpler models, though, like not having ECUs for things like door handles and seat adjustment. Reduction of number of ECUs was actually identified as one of the things that allowed Rivian to manufacture the next-gen R1S/R1T, R2, and presumably in the future, R3 more cheaply than it had the original R1S/R1T.
As far as volume goes, it’s also possible to do low volume at the low end. Cap the number of pre-orders, make it invite-only, etc. Simple and low-volume sounds like the perfect way to get started so long as you’ve got the funds to support yourself or have investors that value long term stability over short term profit.
There are fixed costs (R&D, tooling), which won't be covered by the combination of low volume and low margin.
I don't know where you're going to find these investors who care more about the next decade than the next quarter, but I do hope they exist. Rivian and Lucid might be the closest to this model, given their respective investments from Amazon and Saudi Arabia, but the shares trading on the open market are still definitely focused on the short term without a care for what might come later. Even then, it seems like Amazon's support has waned recently, and no one's sure when the Saudis might pull out or what their end goal is.
My inclination is to think that such investors exist, otherwise several companies that took many years to achieve profitability wouldn't exist today. Finding them might be the actual challenge.
It might come down to how the idea is pitched. You're not likely to catch any VC's attention by saying your goal is to forever make basic cars, but it might be a different story if that's made out to be part of a larger strategy, e.g. "We plan to start small and achievable to enable rapid, inexpensive iteration, creating an engine that pulls us forward and allows us to build a solid foundation that can comfortably support many years of growth into a variety of markets."
My guess is that economy-minded buyers are going to be more skeptical about an unproven startup and more concerned about resale value, compared to rich people where they have other cars.
The strategy of “start by catering to rich buyers and then move downmarket” is what Tesla used and it seemed to work for them. They actually started with a roadster which was a rich guy’s plaything. People like that could take the risk that it ends up in the shop sometimes.
So I think that’s why other companies do it and investors are comfortable with that strategy. It’s proven.
I think there might be demand for a lower-priced vehicle, but that’s something like the Nissan Leaf. It seems like something an established car company has a better chance of doing?
I think there's a sect of buyers who can technically afford more expensive cars, but would take the leap for a practical economical EV should such a thing exist. It's probably not huge, but sufficient for building a fervent fanbase.
Tesla did make starting at the top work, but many others have since failed trying the same thing, so clearly that strategy isn't a ticket to success. I think it's time for an EV company to instead take the SpaceX approach, starting by developing a cheap solid workhorse and expanding from there.
In theory, yes, but traditional automakers clearly don't have interest. It'd also require a greater degree of vertical integration than is typical to maximize chances of success, which established auto companies seem averse to – they'd rather farm out as much as possible.
I think it worked for Tesla because they were first and had little competition (among electric cars). But even so, they nearly went bankrupt. Starting a new car company is hard! Many people were skeptical that it could be done in the US.
Electric cars aren't new anymore. The amount of competition now makes a car startup much riskier. Any new electric car company has to compete with Tesla, and in China they also have to compete with BYD.
So another possible scenario is that we just don't see any new car companies in the US for a while. Apple was working on a car, but they backed out, perhaps because they didn't like how the market looked?
Another possibility: Tesla was supposedly going to make cheaper cars someday. Maybe someday they'll get there.
That'd be fine with me. Honestly, the best "tablet" for a person like is an indent where I can insert my phone, maybe along with a USB-C port somewhere. Update it periodically, 99.99% better hardware than the car screens, Google/Apple auto can fill in the UI aspects.
But yeah, as another reponse said, they don't want to target the economic sector. High end cars with all those bells and whistles need less to break even, and theres apparently still enough willing people to make that a worthwhile target.
I appreciate a larger screen built into the dash to project CarPlay/Android Auto to so maps are more legible at a glance (which you're going to need to meet backup camera requirements anyway), but otherwise I agree. It wouldn't bother me in the least if my car had practically no UI of its own to interact with… just let my phone handle it.
Yeah, that can work. I forget USB-C these days can also act as an HDMI, so as long as the screen is decent I'd appreciate what's basically a small monitor in the car. Ideally a dumb one purely for display.
This is why I would never buy a car from a company that is younger than me, unless I had "fuck you money" and could afford to just replace it if it failed.
From the article:
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Fisker is another example of this. The real issue with most EV cars is that you're reliant on software to do a lot of the work in making the car run. If the software has issues with core systems, and no one is updating it, your car is either bricked or dangerous to drive. And any custom components for your car that need replacing probably can't get replaced, although to other commentators points you could probably at least focus on as many "common" parts as possible, but you'll always have some parts that just won't be produced anymore.
It's a shame because I was considering buying a Fisker post-bankruptcy at dirt cheap prices but without software updates it is not necessarily safe to drive, and without key parts being produced I could be screwed if it breaks in just the right way.
I don't see why it has be that way. If the core systems aren't connected to anything else, the software shouldn't become more dangerous than it already was when it was new.
A lot of the complaints seem to be about entertainment systems.
That’s a load-bearing if statement you’ve got there. The things that run the control systems in the car are typically pretty well designed and are built to be reliable. Cars have been run with ECUs for decades and while recalls aren’t exactly unheard of, they are relatively uncommon when compared to the multitude of other things that can go wrong.
You are right that if there were a problem with one of those control computers you’d have either no recourse or at best something extremely expensive with questionable reliability. But Fisker was around for a while and they made good product. The chances of there being such a major undiscovered issue with the software is very very low.
Even if there are software problems it doesn’t necessarily mean that it’s not fixable. Take a look at the YouTube channel Aging Wheels, where the host owns cars from Wheego and Coda - dramatically worse cars from tiny manufacturers that fizzled out pretty quickly after coming to market. Even those cars are more-or-less fixable to an extent. And while those may not exactly be the worst case scenarios, they’re pretty close to it.
Edit: this is, of course, discounting any “smart” or “connected” features.