At the time of his interview, Lutz was working to revive the Cunningham sports car marque. In its asset-light approach, Cunningham designed an all-new vehicle but looked to someone else to assemble it. Pre-dating Lutz’s involvement, Cunningham was being developed as a “virtual car company” where it would own the product but outsource almost everything else.
Companies like Magna Steyr and Valmet provide a way to produce vehicles when a manufacturer doesn’t have the factory space or can’t find a way to make low-volume production profitable. Outsourcing vehicle assembly helped get the European Chrysler Voyager, Peugeot RCZ and Saab 900 Convertible into production. While major manufacturers use this method to make niche models, the same process is helping get models from startups on the road.
New players like Foxconn jumped into the market, providing assembly space for emerging electric vehicle companies. Leveraging Foxconn’s plant in Lordstown, Ohio, production of the Lordstown Endurance pickup, the INDIEV One and Fisker PEAR has been fast-tracked. Other startups will take the same path on their way to vehicle production.
While these new players may see such outsourcing as an asset-light approach to production, that path does not bypass the need for adequate funding. Legacy automakers with strong balance sheets and seasoned executives have experience with higher interest rates and should weather the situation well. Many EV startups, however, rely on easy access to capital. Even Rivian, among the best-funded startups, recently laid off workers, rationalised its product roadmap and delayed the launch of its R2 vehicle in an effort to preserve capital. When interest rates were hovering around zero, finding venture capital was relatively easy, but this becomes much tougher as the market rates rise and only the strongest will survive.
The reason for industry growth that Lutz missed was China. In the late 1990s, the idea of China rising as a global player was being discussed, but it was largely focused on supplying vehicles for its home market. GDP in China in 1998 was $3,356 per person, so few people could afford a car. Today, that figure has grown more than sixfold while inflation has not quite doubled the cost of goods.