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Massachusetts car entrepreneur John Rogers Jr. is getting ready to roll over the naysayers on a set of 32-inch tires.
With the Big Three automakers in the breakdown lane, the CEO of Wareham-based Local Motors Inc. believes there’s no time like the present to disrupt the auto industry with a manufacturing model based on the principles of open source.
“They are the Linux of car companies,” said investor David Smith. As CEO of kit-car maker Factory Five Racing, also based in Wareham, Smith is betting Local Motors can succeed in the same niche his company serves: auto enthusiasts. Funded with a summer 2008 second round from 30 private investors, Local Motors’ first vehicle, the Rally Fighter, was developed by an online community of auto designers and desert-racing enthusiasts, hosted on Local Motors’ website. It’s a high-performance off-road vehicle designed for the desert.
“Henry Ford built the first assembly line,” Rogers said. “Since then there’s been no innovation in the car industry.”
This November, the first Rally Fighter is set to roll off a production line in the Southwest. Other than its distinctive body and the underlying frame and chassis, 99 percent of the car will be built with parts purchased from major auto manufacturers. With a BMW engine, Chrysler side-view mirrors and Honda taillights, it looks like nothing else seen on the road. Imagine a muscle car designed by Jaguar, built on the suspension of a monster truck.
Manufacturing innovations at Toyota Motor Corp. (NYSE: TM) improved efficiency in the 1960s and 1970s, but no one has questioned what Rogers calls the “economy of scale mandate.” That is, the assumption that car manufacturing must be front-loaded with heavy design and factory tooling costs, and therefore cars must be designed and built for a mass market.
The Rally Fighter is designed to appeal to desert-racing enthusiasts in the Southwest. Rogers hopes to sell 2,000 total. He wouldn’t disclose the company’s break-even point, but said with Rally Fighters priced at $50,000 each, Local Motors can make a profit if it sells less than 1,000.
Local Motors will save millions on the tool-up for its factory by using carbon fiber-reinforced composite materials for the Rally Fighter frame, instead of steel, Rogers said. Its online community of designers has found ways to incorporate other manufacturers’ parts, avoiding colossal design and development costs.
Designer Philicia Hsu was working full-time at a company that designs car engines when she discovered www.local-motors.com last September. Every day, she would return from an 11-hour shift to her home in Ventura, Calif., and work on her own designs for four hours and then submit them for other community members’ criticism. “It gave me the passion back,” Hsu said.
Designer Sangho Kim won the competition for the Rally Fighter’s overall design and will be paid $10,000. Local Motors has held 11 design competitions, for cars ranging from a green car for Manhattan to a roadster built for zooming around tight corners on Boston’s bumpy streets. Each winner took home at least $1,500 and bragging rights to a design that Local Motors may build next.
The market for a street-legal desert racer is not only in the Southwest, but worldwide, said Ivan Stewart, an icon in desert racing who makes his own line of off-road trucks and parts for racers and enthusiasts.
He predicted customer satisfaction will be a challenge for Local Motors. Without speed limits or boundaries, off-road enthusiasts tend to push the envelope and then blame the manufacturer when their vehicles break down, he explained.
“It’s very hard to build something that they can’t break,” Stewart said. “If they jump three feet high and it doesn’t break, then they’ll jump it four feet.”
Rogers respectfully disagrees. He believes customer buy-in can boost satisfaction. In addition to opening the online design process to customers, Local Motors will offer future buyers the chance to come into the factory and help build their own car.
It’s a model Factory Five CEO Smith believes the big automakers can learn from. “This is what GM needs. This is what Chrysler needs,” he said — “to be able to listen to customers and have customer-driven design.”
Rogers hopes he can scale that model massively, micro-brewing cars for niche markets across the country. As for going toe to toe with Toyota, Ford and the rest? “There will be a time when I’m sure we are competitors,” Rogers said. “But right now, we’re their customers.”
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