I was the 309th employee at Tesla back in 2009, I was sub 200 at Lucid Motors. It takes an absolute mountain of cash to start a car company… As a field engineering technician, I assisted at crash test for a many weeks, and the money it takes to do this is insane…That combined with actual production factory setup, stamping tools, dies, etc… Imagine a bonfire of cash fed by a dump truck.
Are we talking hundreds of millions, or hundreds of billions? And either way, how much would that scale down for a smaller operation, something like what Factory Five does?
Genuinely asking and curious, to be clear. The number of "moving parts" in big businesses boggles my brain to the point that I wouldn't even know where to begin.
I’d say 100s of millions would be the bare minimum.
Sometimes small scale is actually harder in many ways, we ran into this issue with Tesla Roadster and early Model-S… Most tier-1 auto suppliers will ONLY sell you a minimum quantity of parts, take for instance a window switch, they’ll demand 50,000/yr minimum order. So you’ll be forced into either…
1- working with a fly-by-night small supplier company that may not have good quality control and you’ll pay 10X more per part. Plus they severely lacked ability to scale. This can lead to recalls and upset customers along with much higher costs per vehicle.
2- Use an already existing part from another company, for instance Tesla used Mercedes window switches in the beginning, that allowed us to start small and ramp production as the host supplier had capacity to supply us once we hit 30,000+ units/yr, but we could order small batches of 3,000 per month to keep costs down in the beginning.
The Tesla roadster and Lotus were allowed to skirt a few safety laws because they were deemed a low-production vehicle. Not sure if that still exists but I believe it was under 1,000 units per/yr was the limit. These laws may have changed since 10 years ago…
In the end building a production vehicle, whether it’s 25 cars per year, or 5,000 per year is DIFFICULT… You’ll run into paint defects, software mis-matches, NVH issues, part supplier quality issues, cost changes, supplier bankruptcies, after sales service, deadbeat employees, and probably the worst… the media that will focus on every tiny problem of a brand new car… it’s a tough business. Estimate what it takes to start, and triple it… even that may not be enough.
>NVH issues
Ford is one of the longest companies in the business and even they have NVH issues on their 3 cylinder & hybrid Escapes. The engine on mine is the loudest & crappiest sounding of like 10 cars I test drove, and you can feel the vibration through the gas pedal.
Can't imagine trying to nail down NVH as an entirely new company.
Even audis 3-cyl have NVH issues. Friend got a newish a3 with the 1.0 and vibrations on idle and especially with start stop function felt scary upfront. Hes had it for couple years now and if it was a rough running issue I feel like it wouldve exploded by now so I guess it was indeed deemed normal and acceptable.
Yeah thats pretty much what I learned while driving that car. After that Im pretty curious on what the longevity if such engines is but idk, maybe I just unnecessarily associate vibrations with rough running and issues.
I guess it was just such a surprise that a brand like Audi would make such a car. Dont get me wrong 90% the time the engine is very adequate and perfectly fine, its mainly the idle I cant get over (Id also get the start/stop disabled asap)
it takes the same amount of work to make/test production tooling to make 200k parts or 5k parts. unless some one senior is involved, little guys like tesla just werent worth it.. i remember the smart car and everyone had an opinion if it was just a waste of time and resources.
they went bankrupt when oil was very high and the canadian dollar to high. the way this happened is they bought longer term contracts for usd exchange where they used to make bags and bags of money - then, ooops... if it goes the wrong way you lose your shirt. and oil is in everything to some degree (plastic) and if your contracts agree to price for a long time but your costs balloon for raw mats you are fuked there to.
You can check financial statements for these recent EV startups to get an idea but Lucid lost $631M in Q3 this year. Their cars cost $470M to make, R&D cost $231M, and business costs were another $190M. They only had $138M in revenue. I think Lucid’s costs are wildly out of scale and probably something fishy is happening behind the scenes but that’s a data point
Before Tesla launched the OG Roadster they were already well over a hundred million in investments. And that’s with licensing the Elise body which likely saved them a ton of money on R&D and crash testing.
That is some very, very cool experience!
FWIW, I think the literal mountains of cash burned by Lucid and Tesla aren't necessarily required. Those companies are seeking mass production and huge sales numbers ASAP, which drives costs up very quickly. A boutique shop like Pagani or TVR could run on a much smaller budget.
You might not see it because you have zero fucking clue what you’re talking about lmao.
But the experts who approved its safety rating sure do! Sounds like you should lose some more money shorting Tesla
A few billion minimum. It's exponentially less money to brand engineer like Toyota did with BMW for the new Supra and like Fiat did years ago with Mazda for the 124.
Less expensive, but still very expensive. In the case of the Supra and Z4 twins, the whole point was that BMW no longer wanted to risk spending so much on such a low-volume car. So Toyota shouldered much of the development cost of both the Supra *and* Z4, and even participated in some of the development of the components.
So it wasn’t just, “Hey, can we, like, pay you a small fee to build a rebadged variant of that car just for us? (a la Volkswagen Routan)”
I would guess all in from drawing board to rolling off the line is well over 1 billion dollars if you wanted to produce a car that would be worth buying over the competition that would certainly crush whatever you could produce.
I understand that for major, mass-produced automobiles. But what about a company like Ginetta/Farbio, TVR, etc. I don't think they had $1b to spend. Maybe thats why they went belly up.
I think the best option is to go the route of vanderhall. a super tiny, super cool, relatively affordable car if people want it. if you're manufacturing glorified go-carts it much cheaper plus you get experience in the entire industry.
you can outsource almost everything. there are existing shops that will do all the manufacturing for you.
but you still need a design, cash for tooling (10s of millions might get you started there), and then distribution network.
Easiest would be something like what tesla did originally, modifying a lotus. Similar to what hennessey and Shelby do a lot of. Basically just a tuner shop.
Theres dozens of those, and only a few are recognizable because the demand for a tuned up production car isnt that big.
\^ this. I've seriously wondered about automotive industry too (nothing crazy, maybe glorified exo cars or something) but i think \^this is a perfect starting point. (relatively) low cost and you get your feet wet in the industry. Rimac started from a random joe modifying his e30 BMW.
Honestly? I don’t think a billion would be enough. If you want to compete with the top 30-50 worldwide manufacturers, you’re going to need so many lawyers, accountants and paper pushers, your head would spin.
Some rough math: Koenigsegg is planning to produce 300 Gemera's for around $2 million each. They're not a high volume manufacturer and this is their main production focus for the next while.
That means they are expecting all their expenses and some profit margin to be covered by the $600 million they'll receive for those cars. They already have a lot of their facilities and staff but since their models are pretty bespoke I can't imagine they've invested too much into specialized machinery for any specific model.
Anyways. $600 million is probably around the ballpark to design and produce 300 cards.
I disagree that $600 million could build you 300 bespoke cars of Koenigsgeg caliber and still make a profit. There's tens of thousands of parts in a car. A lot of them are nuts and bolts, but thousands of them remain highly complex items. Whenever you choose to make one of those parts unique, you're investing in big dollar engineering, equipment, and tooling that would usually get amortized over hundreds of thousands or even millions of vehicles. Likewise running a car company costs money. Koengisegg may be appropriately scaled down compared to a large company, but they still have to pass the same crash test and emissions tests that a normal car does. They still need the same test equipment and capabilities that a normal car manufacturer does. Those tests and capabilities cost millions. In Koneigsegg's case, all these costs that normally get shared across hundreds of thousands of cars are now shared across just a few hundred.
If you're casting a bespoke aluminum control arm you're going to end up buying a $40,000 custom die after you pay engineers just as much money to design it and inspect it. When you only build 500 cars, that's $160 per car compared to something like a Corolla where it would be pennies. That's just sunk cost before you've even built a single part, and you'd better believe that suppliers charge more per piece for low volumes.
Koenigseeg has been slow burning for three decades to get to this point and most of their starting capital was backed by Christian's already successful importing/exporting business. Especially in the early days, they earned revenue by being a technology company. They hold some flexfuel technology patents among others that they license out to major OEM's. That's still a major source of their revenue today, in addition to licensing out their brand name. Ferrari earns $2billion per year licensing out their logo for t-shirts, keychains, hats, etc. It makes up 40% of their total revenue. Koenigseg is doing the same thing.
So what am I getting at? The cars are loss leaders. They're there to generate brand appeal and get everyone saying "Wow, look at what these guys can do!" That gets the OEM's over there licensing technology and the brand hours picking up a t-shirt, because they sure as shit can't afford the car.
Tldr; Running a car company is wildly expensive, I think Koenigsegg loses money on every car sold and makes it back through licensing their technology and brand name.
its not about being a boutique manufacture or not. it's about what level of car you want to make. if you want to produce something to the level of a kit car, you can do that with $500,000 - $1,000,000. if you want to produce something at the top of the line, then you need $10,000,000,000 minimum.
True, anyone really can produce one of million dollars plus cars. But there are several manufacturers out there already doing it. When you have a target audience of the 1%, you have to do alot to stand out from established OEMs If you want to sell boutique supercars, going racing seems to be the only way to distinguish yourself. Anyone who have ever done anything related to motorsports knows its a rich mans game
It absolutely can be done and has been done by those companies you named. You just dont really hear about the hundreds of companies that have failed at it.
I can't speak for Spyker but Koenigsegg does have to crash test. Check out this awesome video. [How To Crash Test A $2 Million Koenigsegg Hypercar](https://youtu.be/EC1P6LBeTEw)
I imagine if you wanted to start a brand like Pagani where you hand produce a few sports cars a year to a very small subset of exclusive customers, you would need a metric fuck ton of money
But if you wanted to start a full on brand that makes production cars for average consumers, you would need several metric fuck tons of money.
“Under 250m” is the highest number you said and I can’t imagine that would even come close.
I love that the first use of capital is filing the llc papers, like a $150 cost.
Yes yes yes there's establishing the articles of incorporation and legal costs, but its still funny in comparison to the other costs required.
This is a fun thread to think about
Well, running a company and ownership of a company are different things, but point taken. A company can have a single owner, but a whole fleet of leaders to run the thing.
Looks like a high schooler doing homework about a fancy car start up lmao. Like all the mold this mold that which exist and operate by themselves, just sitting there to be ordered ~ rolled eyes
[Elio Motors](https://en.wikipedia.org/wiki/Elio_Motors) is a good (failed) example.
(though, could legitimately be argued as a really elaborate grift)
He (if ever actually genuine) was shooting for ~$600m total, in '18 dollars to start production. (on that super simple 3 wheeled monstrosity)
I mean, you could start up a one-off tube frame track car company for a million bucks and a talented welder and mechanic.
that doesn't mean anyone would care or buy the cars, but you could
Doesn’t it make more sense to buy the rights to an existing older car; bring it back into production like Delorean DMC 12; maybe modify things here and there and then grow? So long as you stay under the 400 some odd cars you’re allowed to build per year.
There’s a new one being started now in Detroit. I got a request to apply about 3 years ago because of my industry experience. No one even knows their name yet, they are that far out still from even having a fully functioning prototype. It takes an insane amount of cash and time to actually get vehicles on the road. For reference, one tool to make a door panel costs minimum 200k for injection molding. Imagine how many cars need sold to then turn that door panel tool profitable. Now apply that to every component in the car.
Begin life as a race chassis or engine producer. Develop a cult following through reputation for elite performance. Then begin ultra low volume super car production.
Basically, be Koenigsegg.
Your thinking is cart before the horse and those things you listed are the cheaper bits. Think about the engineers you need to develop the car and their salaries. $150-$600K a year? Times how many? You’re burning through a few million a year for 4 years before anything really happens and you haven’t even produced a single thing.
Ice or ev? Because while they both cost a boatload to get started (in the range of hundreds of millions to billions of dollars), one is much more likely to get funding, and the other is ICE.
Any where from a few hundred million to billions of dollars. Really depends on how much you’re planning on doing in house. There are companies like Factory Five which design their kits around donor bodies or doing what Tesla initial did and upfit an already developed vehicle. Starting from scratch and doing everything in house would be on the order of billions.
I think that you'd want to start as a "kit car" company like Local Motors, Factory Five, Superformance, Rossion (Q1), etc.
Kit cars don't have the same regulations as production cars. The testing for these regulations (crash testing, etc) will cost many millions of dollars to complete.
Ineos could be a good example. They publish Annual Reports since the start of the company in 2018.
https://www.ineos.com/investor-relations/annual-reports/
You could do it much cheaper depending on you definition of "car". Custom designed and built monocoque? Very expensive. Glorified kit car? Much easier!
* Tube frame chassis are easy to build by hand with a few jigs.
* Use other OEMs suspension, engines, transmissions.
* Register each car separately as low volume rather than attempt type approval
These guys build road legal cars and sell them to the general public https://www.mksportscars.com/
They definitely did not start with hundreds of millions of seed capital.
As the most recent example of a new manufacturer building at scale, it would be interesting to see how much money Ineos used to capitalise and spin up their automotive division that builds the Grenadier.
[https://jalopnik.com/the-ineos-grenadier-has-already-cost-owner-jim-ratcliff-1850087840](https://jalopnik.com/the-ineos-grenadier-has-already-cost-owner-jim-ratcliff-1850087840)
Ineos is an interesting example. Though keep in mind also that they're manufactured by Magna Steyr and they're using quite a few "off the shelf" solutions from the BMW catalog.
Tesla, Lucid, and Rivian are all examples of companies who are doing more complete end-to-end.
But this does tell you that at minimum its probably around $2 billion to get a single model to real, though low, volume production. And 10s of billions of dollars to actually build out the full chain.
I’ve worked at multiple startups, and I’d say the average investment needed before a vehicle was on the road was $1.5b, and before a real sale occurred to a member of the public, closer to $2.5b
Billions. I remeber reading somewhere that bringing a completely new car to market for gm cost about 1 billion dollars. So it has to cost more for a new company with nothing to do it surely.
It can varry depending on how you want to scale it just like any business. not everything has to be crashed and tested to meet NHTSA standards, companies like SCG I recall do not or didn’t do crash tests, cars sold in limited quantities don’t have to be crashed long as they are sold under the 250 limit a year of which would mark them as a kit car manufacturer which I recall some former automotive company did years back to not get into trouble with the U.S goverment. As for companies like Pagani and Ghost Squadron vehicles, there’s been exemptions under show and display that let them bring the cars into the states without a crash test of said models. I know the egg did crash tests with the same reusable chassis which is actually really cool but most companies do not have that level of engineering and care because of our capitalistic approach.
TLDR: cost can be very low if you can start from scratch if you really wanted to out of your own garage post material marketing molding manufacturing like many other companies have done with tube frame kits such as DF Goblins and various other that just borrow other platforms: G35 vaydor as an example. however the higher you want to reach a level of standard the more it will cost an it gets expensive real quick to the point profitability becomes non existent as an actual car manufacturer unless you go mainstream and sell in mass which just means more and more money dumped into the company.
Assuming you formed a legitimate company that sold fully assembled vehicles, I'd guess a minimum of $1 Billion USD in starting capital is necessary.
For starters, you will need a proper place to manufacture the cars. That's going to cost at least 3 or 4 million before you buy equipment, which is probably around $1 million. Most of the money will go to wages for the employees. You'll need enough to cover the first 3 or 4 years of expenses while you develop the first car. Then you'll also need enough leftover for materials and production costs of the first car.
The startup cost is one of the big hurdles and most companies have a line of investors who help cover it.
>It would probably be low volume production due the cost effective nature,
This is determined by a lot of variables, but the main one being how many cars you can sell. GMA and Pagani are smart and try to secure buyers before the car even enters production. But they can do that because they are lead by legendary car designers who are trusted and have fans.
The easiest way to start a car company is to work up to it. Start by manufacturing and engineering specific parts and then eventually grow the network and talent pool until building a whole car from scratch is feasible. You also wouldn't jump to stand-alone models, but do conversion kits and kit cars first. Those don't require as many resources and are less of a financial risk.
You are right. Horacio Pagani started by producing his own race cars in Argentina. Then working on certain Lamborghini models. Then his own carbon fiber company. He followed the same steps you mentioned, makes sense.
Can we define start? Like do you mean just open the doors and introduce a concept/prototype, actually making it into production, or how much you’ll spend before turning a profit?
For the sake of argument, we can explore one and/or the other. I suppose profitability is more nuanced because it has more to do with "playing your cards right" (designing the right product, marketing it well, etc.). Whereas the manufacturing is more of a base cost, regardless if the product takes off or not.
Economic barriers to entry are typically listed as the key hurdle in new entrants to the car industry. This may come down in the future as skateboard electric power trains become more widespread.
But it’s not just stuff you think you can make yourself, a lot of it is finding and ordering parts from those parts that already exist. Sourcing parts and establishing contracts for delivery and quality and having the cash to pay for those is insanely large.
That said, of course you can become a coach builder for very little money relatively speaking. This means churning out one offs at huge sale prices because you can replace expensive equipment (see: capital investment)with inexpensive equipment and labor.
Scaling is damn near impossible and almost killed Tesla numerous times - it will probably kill some of the newer competitors like Lucid over time once VC firms are no longer subsidizing loses
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