Local Motors Tackles Carbon Crisis with Lightweight, Crowdsourced Cars

12/18/08Follow @wroush

While capitalist systems are, in theory, open to any entrepreneur with an idea for a better mousetrap, most investors are pragmatists. They aren’t likely to pony up for a garage tinkerer with a way to build passenger jets better than Boeing’s or supercomputers better than Cray’s. The reality, in other words, is that certain high-tech industries are essentially closed to small businesses—and that includes the American automobile industry, as the litany of failed rebel carmakers, from Tucker to Delorean, attests.

So how were Jay Rogers and his nine employees at Local Motors, a tiny startup in Wareham, MA, able to raise $4 million to test the idea that car design can be crowdsourced to Web-based communities and that consumers will want $50,000 “mass-customized” vehicles built in small batches at a network of micro-factories?

It wasn’t because of Detroit’s recent travails—Local Motors collected its two investment rounds well before the Big Three started passing the hat in Washington. More likely, it was because of Rogers’ impressive resume—Princeton undergrad, investment analyst, startup entrepreneur in China, Marine company commander in Iraq, Harvard MBA—and his passionate intensity when it comes to talking about cars. And not just about car design (though he loves his classic 1971 Mercedes 280SL) but about the auto industry’s carbon footprint, and what you might call its geopolitical footprint.

“Being on the ground in Iraq showed me that the war is really about our reliance on Middle East oil,” Rogers told me after a whirlwind tour of the startup’s headquarters yesterday. (I had scheduled the visit immediately after learning about Local Motors from the company’s unusual presentation at the December 9 Web Innovators Group meeting.) “The problem of oil end-use is absolutely being missed here,” he says. “We were helping the Iraqis to rebuild their oil ministry, but thinking deeper, thinking to myself as a businessman and an entrepreneur, I would have liked to just shut this whole apparatus down. Friends of mine had been killed. Global warming was weighing heavily on my mind. I really had a moment of ‘What should I be doing with the rest of my life? What can I do to make a difference?’”

Local Motors CEO and co-founder Jay RogersHis musings took him back to his love of cars—which could well be genetic, considering that he’s the grandson of Ralph Rogers, who helped develop the United States’ first diesel passenger car and took over the famous Indian Motorycle Manufacturing Company in Springfield, MA, in 1945. (The elder Rogers went on to chair PBS and co-found the Children’s Television Workshop.) After the Marines, Jay Rogers, who’s now 35, briefly considered starting a company to build cars powered by hydrogen fuel cells. “But making a bet on the science was not going to be a sure-fire way to change things,” he says. He wanted to make cars that people could actually buy, and soon.

“I looked at the supply chain and I saw that there are people who make great engines, great batteries, great lightweight materials—but the people who make cars can’t use them, because they’ve gotten stuck in their enormous apparatus.” For Ford, Chrysler, and GM (and, to be fair, for Toyota, Honda, and BMW too), bringing out a new car model is a five-to-seven-year process that can cost a billion dollars or more. Which means as much as the Big Three might want to respond to consumers’ changing tastes—their newfound disdain for trucks and SUVs, for example—they simply can’t, in any reasonable amount of time. It also means that bailout or no, any serious contribution Detroit can make to scaling back the nation’s petroleum consumption is likely half a decade away.

“I want to change how the system itself works,” Rogers says. “So I thought, maybe we’ll just make a system.”

The system Rogers and his colleagues have built so far is 50 percent Web 2.0 social community and 50 percent rapid-prototyping workshop. The first half of Rogers’ big idea is to speed up the design process—and, in theory at least, tap directly into consumers’ own ideas about what they want from their next car—by staging online design competitions. Hobbyists and professionals alike are invited to join Local Motors’ online studio and submit their 2-D sketches and renderings for periodic contests focused on cars for different geographic areas. Community members vote on the designs, and the winners get not only cash prizes ($2,000 for first place, $550 for second, $300 for third) but a shot at having their design turned into a production vehicle. The company pays the final selectees $10,000 for the right to the production-bound designs.

The other half of the Local Motors formula is to turn the selected designs into full-scale, 3-D engineering plans, designed to use as many off-the-shelf parts as possible. (Until the engineers get to the last few pieces, anyway. “When you’ve got one space left in the Tetris game and the part you’ve got doesn’t fit,” as Rogers puts it, then the company will build its own parts—hence the $50,000 Z Corporation rapid prototyping printer in one corner of its garage.)

For the bill of materials, Local Motors’ engineers will always choose the parts that will keep the finished vehicle as light, and therefore as fuel-efficient, as possible. “At highway speeds, the most important thing for fuel economy is aerodynamics,” says Rogers. “But your average speed over time is under 30 miles per hour, so you are actually more interested in the weight of the car. We use a 3.0-liter Mercedes Bluetec engine that we took out of an E320. That is a 4,200-pound car. We are shooting for a 3,200-pound car.” Which means that a lot less gas will be wasted on moving around a bunch of steel, plastic, and rubber.

Rogers says that when he went to potential investors (all angels—venture investors didn’t have much knowledge to add about bringing cars to market, he says) he told them “First we would build the website, then we would build the first car.” The company has finished the first task—the online design studio, opened in March, has already attracted 1,600 users, and just today, Local Motors announced the winners of its sixth contest, which happened to have a Boston theme. And it’s got a big start on the second task, using a design called the “Rally Fighter” submitted by Sangho Kim, a student at Art Center College of Design in Pasadena, CA.

Local Motors Rally Fighter ModelLocal Motors engineers Mike Pisani and David Riha, design intern Aurel François, and colleagues have transformed Kim’s illustrations of the Rally Fighter into complete CAD diagrams and design specifications and have built both a full-scale foam-core model and a scaled-down clay model of the vehicle, which will look like a rather menacing sports car but will actually be specialized for off-road desert racing. Within a year, Rogers says, the whole process will culminate in a drivable car.

Which all sounds doable—plenty of people build cars from kits in less time. (In fact, Wareham, MA-based Factory Five Racing, which sells kits that hobbyists can use to build fully-functioning replicas of Mk3 Roadsters, Type 65 Coupes, and other famous racing cars, is an investor in Local Motors). My big question, though, was how Local Motors plans to scale up projects like the Rally Fighter and sell enough units to start making money.

Rogers explains that Local Motors wants to build a network of 50 small assembly plants around the country where engineers would essentially hand-craft vehicles, with help from the buyers themselves, at least in the beginning. The company will limit production to what, by Detroit standards, would be considered tiny runs of between 1,000 and 2,000 cars per year per factory. (For comparison’s sake, Volvo sold 3,500 cars in Chicago alone in 2007.)

Rogers thinks Local Motors’ cars will appeal to the same kinds of auto aficionados who sketch car designs on weekends, build cars from kits, or spend their weekends at Mini Cooper rallies. “If you’re driving your green V6 Honda Accord and you drive up next to another green Accord, you don’t roll down the window and wave,” he said wryly, having noted that I’d arrived for the interview in my dowdy 2000 Accord. “But if I’m on an Indian Chief motorcycle and pulled up next to someone else on an Indian, we’d instantly be going for coffee together. We want that to happen for our company.”

But if people don’t happen to fall for Local Motors’ first batch of cars, it won’t be nearly as big a disaster as it is when consumers turn away from Detroit’s models. “The whole point is to learn early whether people like our product or not,” Rogers says. If they don’t, the drawing board is only a click away.

And assuming the question of style can be successfully answered, what about safety? Local Motors doesn’t plan to spend tens of millions of dollars on crash testing and safety certification, the way the big car companies do. Though most consumers don’t realize it, Rogers explains, the government does not impose crash safety standards; carmakers are largely free to self-certify their vehicles. So in the end, he says, safety is about trust. “The American public has effectively said that if you know how to build your own car, we will let you put it on the road. When people buy Factory Five kit cars they know full well that these are not federally tested cars, but they have seen people crash in them at 200 miles per hour and survive, and that’s good enough.” Of course, that doesn’t mean Local Motors won’t ask customers to sign comprehensive liability waivers.

Rally Fighter DesignsRogers says Local Motors has enough cash to get the Rally Fighter into production—at which point it will have a case for raising the money needed to start building the next car and establishing a network of factories. “We would like to put the first production car into the hands of a couple of customers by November of next year, and we already have people who would like to be first,” he says. “When we do deliver our first car—which we will do—it will be huge for us.”

I had lots more to ask Rogers about, but he had pressing paperwork to attend to: Local Motors is applying for part of the $25 billion in loan funding that the Department of Energy has set aside for green automotive projects. Not surprisingly, Rogers says he was glad to see the Senate kill the Detroit bailout plan negotiated by House Democrats last week, since it would have depleted the DOE’s green fund simply to help the Big Three meet their payroll. “It’s great, because we were about to pour that money into auto companies that really should be going into bankruptcy and then working their way out of it in an orderly fashion. Thankfully the $25 billion is now waiting for companies that can actually do something with it.”

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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