The business model of Local Motors

An industry on the move

The automotive industry is changing. More and more companies are focused on how we use our car. Tesla is bringing an electric and more sustainable experience to the market. BMW wants to be a premium mobility provider, working together with Daimler to offer a broad range of services. Local Motors has a completely different business model.

Local Motors has a different approach and is disrupting the automotive industry by completely changing the industries business model. By reinventing mobility AND manufacturing at once, something no other car company has done over the last 100 years. By doing this, Local Motors is bringing tooling costs down by 50%, while at the same reducing the production time with 90%.

A different way

The automotive industry is a very hard market to enter. You need experienced engineers, a massive capital investment, and a network of retailers. Therefore, Jay Rogers wanted to do things differently from the very start. In 2007, he founded Local Motors, a company that designs, makes and sells vehicles.

Local Motors main competitive advantage is that they reduce the tooling costs and reduce production time by doing three things fundamentally different. First, they relied on co-creation by involving the crowd and ask designers, engineers and makers to contribute to the vehicle design and production in exchange for a royalty if the project succeeds. In this way, they were able to attract the brightest minds, who often were satisfied only with the reputation and contribution to participate, although they wouldn’t get a dime. Second, they used 3D printing to manufacture components and assemblies. The advantage is that they don’t need to wait weeks for the parts they need but can print it on the spot. And third, they used micro factories to produce at a small scale, avoiding the large upfront investments for building a factory.

Co-creating cars

Local Motors was able to bring the Rally Fighter to the market, just 18 months after starting the business. This car was an open sourced vehicle, meaning that the crowd had helped to design and manufacture it. They immediately set a record for bringing a car to market in 18 months, something that was unimaginable in the automotive industry. They didn’t stop here. In 2014, Local Motors was the first company to 3D-print a car. In 44 hours, Strati was printed. The car only consisted of 50 individual parts, whereas a normal car consists of roughly 30.000 individual parts. Again, the crowd was used for co-creation.

Refocus

In 2018, Local Motors found itself all over the place and decided to focus operations. They proved that they were able to engage their community with co-creation and use micro-manufacturing to build high-technology products at a speed that no one could imagine. They decided to commercialize Olli, the self-driving all-electric shuttle. They also launched their community-powered SaaS platform, Launch Forth.

Image source Local Motors

Olli is the world’s first co-created, self-driving, electric and cognitive shuttle. This shuttle can take up to 12 passengers, and is designed by a 22-year-old student, studying in Italy. Olli is the perfect vehicle for your neighbourhood. It moves people around in a safe and environmentally sustainable way. Olli is already active in the United States, Italy, and Saudi Arabia, and is receiving more and more orders. However, the most impressive part of Olli is how it is built. Olli is 80% 3D-printed, with 100% recycled materials, and it uses 90% fewer parts than a traditional vehicle.

Accelerate innovation

Launch Forth is a platform that is helping enterprises to accelerate innovation and product development, at the same speed and costs as Local Motors. Local Motors doesn’t just hand them the SaaS platform, but actively teaches their customers how to develop and produce the Local Motors way.

Local Motors was able to disrupt the automotive industry from their very start by starting from scratch. By asking themselves how they could do things significantly different, they found ways to design, make, and sell vehicles at a fraction of time and costs in comparison with industry standards. Local Motors is able to remain flexible by using co-creation, 3D printing, and micro factories, while at the same time reduce the tooling costs and production time. Local Motors goal is to create and deliver safe and accessible mobility solutions for local communities. They made a great start in doing so, while turning how things are done in the industry upside down.

This case is part of the research for our upcoming book Business Model Shifts. Please keep me informed about the new book

Originally published at https://www.businessmodelsinc.com on May 25, 2020.