Feature Analysis - How to start a car company


Britain is a hot-bed of sports car companies operating out of stables and small industrial units. By riding on the resources of larger firms and producing in tiny numbers they have shown how it is possible to create a car company on a limited budget. However, if they are to last, they must also dilute some of that independent spirit and learn to work together.


At one time it was a popular hobby to start a car company. The industry came to Britain in 1895 and by 1900 there were 80 of these little enterprises beavering away. Harry J Lawson owned four, and they managed to crank out nearly 200 fragile machines to a waiting world. In some ways, things haven’t changed much. It still seems to be a national obsession in the UK to set up car companies, and output doesn’t seem to have risen much either.


There are about twenty or so of these bijou car manufacturers sprinkled around Britain. Some, like Lotus, have fallen from a great height, although they continue to do sterling work with engineering consultancy. Others, like Marcos and TVR, seem to dodge between financial roadblocks more regularly than their cars whip round hairpin bends. It is even rumoured that AC, Britain’s oldest car manufacturer and which now has its assembly operation in Malta, may not actually be producing any cars at all. It is also said that Bristol is busier restoring customers’ old vehicles than making new ones for them, not that you could ever get Bristol to comment on such scurrilous stories.


The one common feature of this cottage industry is that in comparison to the global behemoths they are but tiny bugs. Indeed, most mass market car manufacturers produce prototypes in greater numbers than these pigmy firms. The difference between them is simply the production technology: steel monocoque bodies are both light and strong, but the machinery to stamp out and weld the panels is so gigantic that it is only economic if the production output is high. Furthermore, once the machinery is up and running the cost of pushing another few panels through to form just one more car is almost negligible, so the temptation is always there to turn up the pace of production. Running at full tilt the unit costs of production can be drastically reduced, but of course with set-up costs of around a billion pounds high levels of production are an absolute necessity. Even if the additional output can only be shifted at a discount it is still better than having the machinery lying idle.


Our bijou car companies, however, operate an entirely unrelated production system. This is the old craft style of artisan production, each vehicle put together by a collection of skilled workers. The set-up costs are much lower, perhaps less than £20m, although the unit costs of these labour intensive products are relatively high. The craftsmen are not mere assembly line operatives, they are closely involved in the fabrication and fitting of parts, often forming body panels by hammering them into shape over wooden bucks. There is no possibility here of simply running another car down the production line in the hope that it will sell, certainly not as long as the lads have homes to go to. Flexibility in production at this level comes from adjusting the size of the workforce, so it is important to have a decent waiting list of orders so that production can be properly planned.


What we have, then, is a product that is relatively expensive to make and only available in small numbers. To justify the price it must be highly distinctive and it hardly matters that there will be few customers for it. It might be an exclusive variant of a mainstream model, such as a stretch limo or even a hearse, but generally speaking what we end up with is a sports car.


The biggest obstacle for small car firms is the fact that, thanks to ever-tightening regulations, all cars cost about the same to develop and this runs to hundreds of millions of pounds. Fortunately, the great thing about sports cars is that the basic engineering can be completed by an unsung genius working on his laptop at home, while the usual creature comforts expected of more orthodox cars can be omitted for reasons of ‘driving purity’. It is well known that the Lotus Elise offers fewer creature comforts than the average bicycle, yet this is seen as a positive attribute in what is considered to be the ultimate driving tool.


Costs can be further reduced by piggy-backing on a larger firm’s development. Bentley use VW Phaeton platforms, Bristol are thought to base their 200mph Fighter on a Dodge Viper and Healey are pinning their strategy on an abandoned Scandinavian sports car project. Project Kimber are similarly helping out poor old Mercedes-Benz by taking the Smart Roadster off their hands and turning it into a small AC. Morgan have sidestepped the issue of new vehicle development by only attempting it once a century. If you look very carefully under the front of the current Plus Four you can still see the eyelets that the horses were hitched to.


Engines, usually considered the heart of the sports car, are also ruinously expensive. Some used to make their own engines but gave up, like Lotus, or update designs they have been stuck with since the 1960s, such as Bentley. TVR is unusual in having its own engines, even if they are a little, shall we say, bombastic. Connaught is the most courageous, confirming plans for its own sophisticated V10 hybrid power plant. Generally, though, power units are obtained from a myriad of sources, from motorcycles to Corvettes and Mustangs.


Production costs are a little trickier to deal with since traditional craftsmen have the temerity to demand modern wages. Life would be so much easier if they accepted a couple of shillings and a tied cottage for their efforts. Although workers can be discarded in a way that machinery cannot, nevertheless it is costly to hire-fire-rehire in response to fluctuations in demand. Morgan is famous for the length of its waiting lists, there even being suggestions that grandfathers were putting their infant grandsons’ names down in preparation for when they were ready to start driving, but it is this contrived consistency of demand that has kept the company going so long. Other companies suffer terribly from the vicissitudes of the market place, TVR and Lotus being regular victims. Rather brilliantly, the company behind Caparo smooths out the production flow by manufacturing high-tech furniture along with the vehicles. Of course, it is also possible to get the nearest government to cough up subsidies, and for this reason Wales is suddenly looking like an attractive location for a microscopic car industry.


So, taking all these factors into consideration and boiling them down to their lowest common denominator, we find that the best way to start a car company is to resurrect a Swedish design, install a motorcycle engine and have it made in tiny numbers in a sofa factory in South Wales. Raising our ambitions only slightly, there is no reason why two companies should not share a flexible platform but fit widely different bodies, as is done within Aston Martin now, installing the engines of their choice and producing in the same factory using the same workers. The problem is that the spirit of innovation that gives birth to these charming little companies is the same one that keeps them from working together.


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