In a recent interview with the London-based Sunday Times, vacuum-cleaner magnate Sir James Dyson admitted to spending £500 million of his personal fortune developing his electric SUV program before calling it quits last October.
His proposed Dyson EV was as audacious as Elon Musk’s original Model S sedan back in 2012. With a planned range of 600 miles and a seven-seat capacity, the unveiled Dyson SUV prototype conjures images of a Range Rover designed by Apple. At about $610 million at today’s exchange rates, that’s a lot of scratch for Dyson to have poured into his dream car. Or is it?
The mainstream headlines that gasped at Dyson’s stake—a half-billion quid!—belied most people’s understanding of the automotive industry.
To them, I reference a column I wrote back in 2017, predicting the doom of ventures such as Dyson’s. Outsiders to the automotive manufacturing scene have no sense of the massive scale involved in undertaking such an enterprise. Manufacturing artisanal crumb suckers may be a pricey gambit, but manufacturing cars is expensive.
A half-billion dollars gets a novice automaker his first-string team of engineers, designers, and executives. It gets him some pretty renderings, clay models, an R&D facility, a few operational hand-built prototypes, and the building blocks for a factory. It gets him in the door with regulatory agencies and patent offices. And that’s about it.
But to build cars in serial production in volumes required for long-term profitability and survivability? You need to add a zero onto the end of Dyson’s investment. And then some. Even to billionaires, the size and scope of auto manufacturing becomes daunting once they wade out of the shallows.
Such hubris is hardly a new phenomenon. In 1946, shipping tycoon Henry J. Kaiser announced to the Detroit swells that he was going to spend the then-monumental sum of $50 million to launch his own car company that would challenge the GMs and Fords of the world. From the back of the room, one curmudgeon muttered, “Give the man one white chip,” referring to the smallest bet in poker.
Kaiser’s enterprise floundered, undercapitalized and always scrambling for cash flow, for a few years before collapsing.
How much is $50 million today? About $650 million—spot-on to Sir James’ ante. Some people never learn.
Dyson says he isn’t finished, that the company’s R&D facility will continue developing advanced battery tech in hopes it can one day be a key supplier to other automakers. I seriously doubt Dyson’s original vision was to be a mere supplier.
Which is why I raise a glass to Elon Musk and his dogged determination to persist and stake his personal fortune despite fearsome odds. Get past his mercurial personality, his Joe Rogan doobie-fest, his Twitter rants, the relentless work schedule he demands of his team, his legal issues with the Securities and Exchange Commission, and his baiting of short-sellers of Tesla stock. That’s the sideshow. You simply have to admire someone who has grown an electric car company from scratch, developed four model lines with more to come, and started to show operating profit.
Sure, Elon has had his “one white chip” moments. His realization that “building cars is hard” must have prompted snickers in Munich, Detroit, and Nagoya. And some automaker newbies, upon confronting the “manufacturing hell” of not only assembling cars en masse but also assembling “the machines the make the machines” might walk away, having met their match. Not Elon. He doubled down.
Now Tesla has finally launched a vehicle—the Model Y SUV, that nicks the mainstream SUV-buying audience. And despite Elon’s years of hard work and Tesla’s billions of dollars spent, this is where things will actually get serious. Tesla’s long-term success as a large-scale automaker hinges on the Model Y breaking through to the mainstream buyer.
In a 2014 interview I had with Elon, in a rare moment of grounding, he waxed prophetic about Tesla’s chances of triumph: “We’ll do our best to make it happen,” Musk said. “I think we will, but this is not a bold assertion we unequivocally will. There is a possibility we may not.”
In 2014, few people would imagine what Tesla would become. Elon’s one white chip has grown into many.