Elio Motors: The Other Breakthrough Car Company
James Anderton posted on August 25, 2016 |

The mass media and technical press alike have understandably given Elon Musk and Tesla Motors widespread coverage, but there’s another automotive startup that looks poised to launch a revolutionary new vehicle: Elio Motors.

The Tesla model has become traditional for new vehicle startups: make a dramatic, expensive, relatively exclusive vehicle for high-end consumers and then migrate toward the middle market once the brand is well-established.

Anyone in manufacturing knows that building small quantities of high-margin, high-value products is relatively simple. The hard part is making large quantities of low margin products and make money doing it. Elon Musk is discovering this with his upcoming Model Three.

Paul Elio in contrast, is going straight to a low-cost, high-volume commuter vehicle that’s innovative while using conventional internal combustion engine technology.

Elio Motors’ vehicle is unusual in several ways. It’s a three wheeler that accommodates two seated in tandem and unusually, the gasoline engine drives the front wheels through half shafts and constant velocity joints in conventional automotive fashion.

Other than the very limited-production, nostalgic three wheeler produced by Morgan Cars in the UK, currently available three wheeled vehicles are Bombardier Recreational Products Can-Am, three wheeled motorcycle and the new Polaris roadster, both of which are open topped sports vehicles.

The Can-Am product is essentially a motorcycle and is ridden, while the Polaris machine has conventional automotive controls and seats two side-by-side. In both cases, the power goes to the single rear wheel, which from an engineering and production standpoint makes sense: no differential needed, a greatly simplified powertrain assembly and efficient packaging.

The Elio, however is not built for speed, but uses a clean sheet piston gasoline engine design for high volumetric efficiency. The firm claims 85mpg fuel efficiency. All that’s cool, but the commuter market is substantially different from the high-performance sports car or motorcycle markets.

Price is everything and for the Elio it’s good to generate considerable “sticker shock,” but this sticker shock goes the other way: a base price of USD$7300 for non-refundable reservation holders for the first 65,000 vehicles. This price is beyond aggressive and it’s remarkable for a mass production vehicle with an AM/FM stereo, electric locks, power windows, cruise control, airbags and air conditioning.

The company has generated some interesting numbers for comparison. In 1968, another low-cost commuter vehicle, the VW Beetle carried a $1699 sticker price. In 2016 dollars, that Beetle would cost $11,700.

How the Elio Might Come Out on Top

How will Elio do it? They’ll need extremely efficient, highly automated production and it will need to work right out of the gate.

To make sure it works the first time, Elio Motors will operate out of a former GM assembly facility, just like Tesla, except this plant is in Shreveport, Louisiana, where GM previously built pickups and Hummer SUVs.

Unlike Tesla, Paul Elio has made no claim that he’ll reinvent automotive manufacturing. Elio has hired Doug Frick, a former GM engineer who is intimately familiar with the facility, as plant manager.

In my opinion, Elio motors is moving forward with a strategy that minimizes risk and maximizes the probability of success. Elio taps into a local workforce that has prior automotive assembly experience, is building in a cost competitive jurisdiction and is staffing the operation with leadership that understands the automotive industry.

Elio also relies on a conventional Tier 1 and Tier 2 supplier base to source components which individually have no radical or novel technology. Elio Motors relies on old-fashioned clever engineering to pull cost out of the product through lightweighting and reducing the overall part count.

So why the aggressive pricing for the first 65,000 customers? It’s because Elio Motors has applied for a $185 million Advanced Technology Vehicles Manufacturing loan from the Department of Energy.

The loan criteria require 65,000 reservations and right now Elio claims just over 56,000. At a $7300 base price, the risk is minimal for purchasers as well and if real-world consumption figures truly top 80mpg, Paul Elio may have enough early adopters to ramp up production into true economies of scale.

Five out of six members of the Elio Motors Board of Directors come from the automotive industry, including a former CEO of DaimlerChrysler. With that kind of oversight, it’s reasonable to expect that Elio’s projections are reasonable and attainable.

Automotive history is filled with valiant attempts to mass produce high-volume low-cost simple vehicles, and in the United States, no startup since World War II has succeeded.

No one remembers the Crossley, Kaiser Henry J, Studebaker Scotsman or the Nash Metropolitan, but those failures didn’t have the advantage of CAD/CAM, computer simulation, CNC machining, robotics or DOE low-cost loans.

Right now it looks like Paul Elio can make this thing work.

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