Dyson to give up building electric car
Bloomberg reported that Dyson Ltd was planning to build its own electric car, but the project was doomed to fail. According to Goldman Sachs Group research, the project initially sparked an interest due to relative simplicity of manufacturing as conventional car needs about 30,000 components, will an electric car needs only 11,000 parts. Such difference reduces barriers to entry into the automobile market and causes a sharp increase in the number of new car manufacturers.
Over the past few years, the market has seen the emergence of many startups from Tesla and Lucid Motors in the US, Byton Ltd and NIO Inc in China. According to Bloomberg New Energy Finance, since 2011 startups of electric cars have mobilized USD 18 billion (S$ 24.8 million). It was announced the release of 43 new models and production capacity of 3.9 million cars per year. This is a great competition.
Dyson's revenues from the sale of the Ebitda model in 2018 amounted to £1.1 billion (earnings before interest, taxes, depreciation and amortization), which gave the company the opportunity to continue to develop in this direction.
However, if we compare the company to other giants, Dyson's revenues are extremely low. Only Volkswagen announced plans to invest $52 billion in electrification and plans to produce at least two million electric cars a year by 2025. The existing dealer network in 153 countries will make selling these cars much easier.
Dyson will need to recoup his investment as quickly as possible in order to promote his electric vehicles successfully, but the small size of the market can make this task much more difficult. Only 575,000 electric cars were sold worldwide in the three-month period ended June. This is 3.7% of the automotive market as a whole.
James Dyson is not the only one with ambitions on this market. However, many companies are struggling to survive. Prices of Shanghai's NIO shares, supported by Tencent Holdings and Baidu, fell 86% from last year's peak after the IPO as the company's losses increased. Faraday Future, a Chinese-backed rival based in the U.S., was on the verge of bankruptcy before breaking away from the edge.
Due to such harsh market conditions, Dyson's decision to abandon his plans to manufacture electric cars can be considered reasonable. There are many examples where such experiments by large companies have a negative impact on the core business. Many people remember Apple's bad experience in building their own car. The same can happen to Dyson.
James Dyson said in a letter to employees that he does not know how to make a car "commercially viable". Therefore, the best option would be to focus resources on the core competencies of the company.