Local Motors: 1st Disruptive Entrance In Auto Industry in Decades - Open Source Car Design

While the state of the automotive industry continues to crumble, a small startup out of Wareham, MA, flies under the radar quickly proving that the next generation of American cars can be produced cheaper, quicker, and sexier by crowdsourcing design processes and erecting micro factories around the US. Their process that I've outlined below, will make you want to petition the government to spend its proposed $25 billion dollar bailout plan on Local Motors, rather than dieing companies such as GM and Chrysler.

Recessions are difficult because of unemployment, but few people realize how necessary they are in catalyzing creative destruction that helps the future of innovation, mold new business models, and produce the next generation of companies. Some of today's most successful companies hatched during similarly turbulant economic times. FedEx, LexisNexis, MTV and Microsoft were founded shortly after the 1973 oil crisis that tugged the US into an economic slump. GE - the third largest company in the world - was established in 1876 by Thomas Edison shortly after the panic of 1873, a recession that plagued the US for 6 years. HP emerged from a garage in Palo Alto at the end of the Great Depression. CNN revolutionized how people consumed information with its 24 hour all-news channel in recession-plagued 1980.

There are countless others, but the point is that these companies were successful because their founders commercialized disruptive technologies and business models that provided useful solutions to real problems. According to Wikipedia (born during the post 9/11 recession), a disruptive technology can be defined as "a technological innovation that improves a product or service in ways that the market does not expect, typically by being lower priced or designed for a different set of consumers." Local Motors is exactly that.

Like most startups, Local Motors grew from humble beginnings and started by co-founders, Jeff Jones and John Jay Robert, President & CEO, with grand ideas, dreams, and ambitions. It's not surprising that their initial idea sprung while attending Harvard Business School. In the Spring of 2007, they won 1st place in Harvard's Social Enterprise Conference "Pitch for Change." Shortly after, they raised $4 Million with 3 goals:

1. Build a first-ever, open-source community for car body design.
2. Build a vehicle.
3. Build a channel to market.

The ultimate goal: To build "mass-customized" vehicles in small batches at micro factories for a $50,000 price point.

Granted this seems ludicrous, but they've already proven that they can integrate an open source approach with automotive manufacturering to arrive at a stage in development, that would usually cost companies like GM and Chrysler nearly $300 milliion, for the price of $10,000, a couple of plane tickets, and a relatively inexpensive website.

I originally saw them present at Web Innovators Group, where they demonstrated how their model works. This process might very well produce the next generation and future of the automotive industry and American cars:

1. The heart of the process begins with a simple competition. Designers from around the world compete remotely by submitting sketches and initial designs as a framework and launch pad to receive feedback from the public and potential consumers. A prize of $10,000 helps to generate incentive.

But, "why designers?"... and why are they willing to contribute their designs? A snip-it from their website explains:

Around the world, there are thousands of industrial designers, some self-employed as freelance workers and others engaged in various product design functions for corporations (The Supply). Though vehicle and transportation design occupies a large percentage of this groups' collective work, there are only a paltry number of dedicated transportation design positions available due to the relatively slow creation cycle of new automobiles by the existing automakers (The Demand). This Supply and Demand mismatch has created a pent-up well of talented folks for which Local Motors hopes to give palette on which to paint and a stage on which to be appreciated.

2. Iterations are crafted by cultivating comments from designers, future customers, and engineers. The goal is to receive as much information about customer preferences as possible to reduce risk and produce models that consumers really want. This feedback loop repeats several times orchestrating a "back to the drawing board" mentality. You can literally see how the design of a car gains flesh and form...creating a truly unique entertainment process.

3. Winner is chosen by the community. This further enables the company to gain valuable feedback to maximize a production model that piques the interest of a majority.

4. Winner is flown to location. So far, $10,000 has been awarded with an additional cost of a couple hundred dollar plane ticket.

5. Packaging Diagram begins to form bridge between 2D and 3D.

A "Packaging Diagram" is explained on their website as the following:

A Package Drawing is a dimensional guide that locates the passengers, seats, steering wheel and interior components. It can also take into account the engine and other components in the completion of the total vehicle. A package drawing is a crucial part of the design process because it allows the designer to see whether or not the engine, people, and cargo space will fit in the design. They also give a sense of scale to the overall design. The Packaging process often requires the designer to make crucial decisions to allow enough space for the occupants, engine, necessary cargo space and correct visibility. This process often alters the design due to the physical requirements of the vehicle.

The cost of GM or Crysler to get to this stage costs $100 million!

6. Designers and Local Motor team create 3D rendering. They use the same professional design software that car manufacturers use. (Below video is of a different model)

7. Foam is used to create life size model. Local Motors doesn't need to invest $100 million dollars that GM and Chrysler use, they just substitute with $40 worth of foam from Home Depot. The constraints of having far less money than a large corporate company has forced Local Motors to be creative and innovative.

8. Designs are place back on the web for further review and iterations. The continual process of engaging potential customers not only maintains hype and excitement for their new car, it continually "checks" and "reviews" their desires and preferences. More importantly, it establishes an entirely new buying experience that allows them to interact with the process from beginning to end.

9. Clay model is derived from foam version.

10. Core design community flies to headquarters for final stages. An additional few thousand is invested by Local Motors, but is still millions and millions of dollars away from the overhead costs of corporate automotive manufacturers.

At this point, Local Motors has developed another $75 million worth of progress at the cost of thousands.

11. Mechanical parts are chosen. Local Motors doesn't have to reinvent the engine, or drive train, or suspension...they can use existing parts that have already been designed fit together nicely. By using a Mercedes engine, customers can receive service at dealerships across the country. This example of hyper specialization demonstrates that many aspects of a business model can be outsourced. Afterall, Apple doesn't build their own computers...they specialize in designing them.

12. Chosen parts are outlined and displayed on the web.

13. All blueprints for the car are finished and ready for production.

Obviously, its difficult to convey all aspects of this process in one blog post. But, these are the primary steps that are involved.

Clearly, Local Motors has challenges ahead with many milestones yet to be met. But with a limited investment of $4 million, they've certainly begun to prove an incredibly disruptive model. I hope they are able to achieve their mission "to lead the next generation of automotive manufacturing, design, and technology in order to revolutionize the industry with game-changing efficient vehicles and an unprecedented standard of customer service" ... becuase i'm starting to save money for my Local Motor vehicle now.