Dyson Electric Car Plans Could Endanger The Company.
Needs To Find Partners To Spread The Risk.
“Dyson is taking on significant risks in entering the EV automotive sector”
Dyson, the British vacuum cleaner maker which plans to spend $2.7 billion making electric cars, might be risking the future of the company and would be wise to seek partners to make sure of success, according to analysts.
But some say Dyson is leaning on an open door.
Dyson unveiled plans in late September to produce an electric car for sale in 2020. It gave no details about its looks, size or price, only saying it would be a “premium” product. That could mean anything from a state of the art golf cart, to a competitor for Tesla’s top of the range Model S or Model X.
The company behind the Dyson vacuum cleaner, hand and hair dryers has been working on electric battery technology for almost two decades.
“We know this is a crowded market,” said Dyson founder Sir James Dyson as he announced the plan on car and battery technology, and predicted the automotive business would quickly outgrow the rest of the company. Half will be spent on the battery, and half on design and manufacturing.
Dyson said he expected to make a profit on the venture. Dyson has long been rumoured to be about to enter the electric car business.
Auto industry analyst BMI Research reckoned Dyson stood a chance of success, but it might be better to recruit some help.
“Although Dyson’s expertise in electric motors will give it a fighting chance, the challenges such as capital constraints will prove tough for it to overcome. Dyson will therefore struggle to go it alone and will require partnerships with more established automakers to penetrate the EV market,” Singapore-based BMI Research said in a report.
Dyson said at the time of the original announcement it has ruled out working with any existing auto companies.
BMI Research thinks this makes no sense.
“Dyson is taking on significant risks in entering the EV (electric vehicle) automotive sector and will face tough competition from larger automakers such as Tesla, General Motors and Daimler, who all have access to significantly more expertise in designing and building new vehicles as well as already larger established manufacturing capabilities. Dyson will also have to contend with Daimler, GM, VW and Toyota EV developments ramping up their investment into EV and EV component manufacturing, which is taking an ever growing portion of total automotive investments,” BMI Research said.
BMI Research recently published data showing that in the first half of 2017 EV investments reached 17 per cent of total global automotive spending. Currently, electric car sales are closer to 1 per cent of all sales.
Erich Joachimsthaler, CEO of branding consultancy Vivaldi, also sees Dyson’s plans as a possible threat to its future, and pointed to an old industry mantra. The Dyson brand might have the power to make the project a success though.
Brand stretch for Dyson
“As somebody once said, the fastest way to make a small fortune in the auto industry is to start with a large one. I think Dyson’s plan is perhaps a brand stretch. If he wants to go into the manufacturing of cars, he could lose his shirt in the process. The car industry is much more complicated than the business he’s now in. It’s much more of an ecosystem with component makers, suppliers, dealers and regulations. It’s not the same in vacuum cleaners. How much room is there for another electric car maker after Tesla?” New York City based- Joachimsthaler said in a telephone interview.
“Even with $2 or $3 billion it’s not easy to go from vacuums to autos.
Joachimsthaler said the Dyson brand will help as long as it beats Tesla on design.
“But we don’t know yet how it will look or how it is priced. We’re in a guessing game at the moment,” Joachimsthaler said.
China will lead the way with electric cars, and Dyson will be looking to sell there, he said.
“As for the Dyson brand, that might persuade those with enough money to buy a Tesla as a second car, that’s a market in which he can make a dent. The might want to buy something British, like Burberry,” Joachimsthaler said.
Burberry describes itself as a global luxury brand with a distinctive British identity.
Another differentiator for Dyson would be its use of solid state batteries, according to IHS Markit. Dyson has bought Satki3, which specializes in solid state batteries
“These have the potential to hold more charge than lithium-ion batteries but are more unstable. If the company has managed to find a solution to its issues, it would give it a leadership in this space over established companies like Toyota, which is hoping to have the technology in its vehicles by early 2020,” IHS Markit said in a report.
Morgan Stanley is excited by the prospect of a Dyson electric car foray.
“It makes total sense for Dyson to enter the electric car market. We see Dyson as having an even greater level of skills transferability to EVs than today’s ICE-based (internal combustion engine) car firms. Dyson claims its electric motor design is good to go. They have experience in efficient motor design and portable battery powered devices,” Morgan Stanley analyst Adam Jonas said.
“Electric cars apparently aren’t that difficult to make. Dyson is just the latest in a long and growing list of new entrants in the electric vehicle space, particularly form regions like China,” Jonas said.
“If Dyson really can fleet a long-range, fully electric car by 2020 that would be earlier than most of today’s car companies would accomplish the feat. If Dyson offered a slick EV transport experience that met all future safety standards would you be ashamed to be seem in one? Would it matter if they also make your vacuum cleaner,” Jonas said.
The doubters at BMI Research have an alternative, less risky plan.
“Another scenario to consider is that the premium EV that Dyson aims to produce in 2020 will be merely a technology showcase to be built in only very small production runs, rather than Dyson facing the trials of beginning a mass vehicle production initiative. This will allow Dyson to focus on component development to supply more established automakers rather than tackle the challenges of setting up its own large-scale automotive production and building up the necessary supply chain.”
This scenario also gives Dyson a possible exit route to sell off its automotive division if the challenges and capital requirements become too much for it to sustain without impacting Dyson’s core consumer business,” BMI Research said.