Thursday, February 9, 2017
The Dale versus the Elio - History Repeating?
The idea of the three-wheeled car has been around a long time.
I saw this video on YouTube the other day and was startled by it. The story seems to parallel today's development of the Elio three-wheeler. And to be quite frank, I don't remember much about the "Dale" three-wheeler, although I was only 15 at the time. Human economic memory is short as it is, few people alive today remember the cautionary tale of the Dale.
The parallels are frightening. During a gas crises, an Engineer designs a three-wheeled car that will sell for under $10,000 (adjusted to today's dollars) and get over 70 miles per gallon. Crude prototypes are built. Press releases are made. The principals start accepting investments - in the millions - as well as deposits from customers. But no realistic plans are made to build a factory and sell product. And introduction is delayed for years while excuses are made. And eventually it all falls apart and people end up being arrested.
Could this be the fate of the Elio? We'll have to wait and see - in the next few months, I think we will find out one way or another.
The parallels to the Dale are eerie, but illustrate how people can get caught up in wild ideas so easily. People actually put down deposits on cars that didn't exist. People invested money in a company that had no factory, no expertise, and no realistic plans to make a car. Grandiose production numbers - 85,000 the first year, 250,000 the second, were bandied about - the same or similar production numbers touted by both companies. Both companies tout the same price target and gas mileage as well.
It is almost like Elio took a page from the Dale playbook - but without the pre-op trans-sexual aspect (that we know of).
But there is a pattern here. Every few years, it seems, someone comes along and promises to revolutionize the auto industry. And every few years, they get a lot of press, because they prepare press releases with eye-candy photos and today, CGI videos. It could be a flying car, an air-powered car, an electric car, a three-wheeled car, or the "safety car" or whatever. And they all have names like Tucker and Moulton Taylor or Bricklin or Delorean or Faraday. None are successful.
In fact, the only "new" car company since the 1950's to actually make a go of it and actually produce and sell working cars has been Tesla, which shows you how Herculean a task it is to make this work. And Tesla has not been without its teething troubles - and more troubles to come in an era of cheap gas and a new government unfriendly to electric cars.
What is amazing to me is that people continue to "invest" in wild ideas like this, even after so many in the past went bust. The odds are stacked against you trying to invest in "the next big thing!" and if you understand the automotive industry at all, you realize that it is an industry of margins, not wild profits, particularly at the lower end where economy cars reign. In fact, most car makers lose money on their small cars today, so they can make huge profits on larger ones (and still meet CAFE standards).
The problem is simple: There are few barriers to entry in the business, other than the staggering cost of tooling up a factory. Thus, even if such a three-wheeled car were successful, the other automakers would flood the market with "me too" products and put the original company out of business.
Such was the fate of Studebaker.
You may not recall this ancient piece of automotive history, but Studebaker started to go belly-up in the late 1950's. They merged with Packard, which was an odd marriage that really did little to help either company. Packard was famous for large "investment quality" cars from an era where rich folks drove cars they custom-ordered, with the chassis from a chassis manufacturer and the body from a coach builder. In the post-war era, cars became a commodity, and Packard lost its raison d'etre.
But anyway, getting back to Studebaker, they cut the ends off the Champion and made the compact Lark which became a big hit during the recession of the late 1950's. Problem was, they already had competition from the compact Rambler. And once the "big 3" saw that small cars could sell, they introduced the Falcon, the Chevy II, and the Dart - flooding the market with compact cars. Studebaker held on for a few more years, but by 1966, they threw in the towel. You can't be an auto-maker with only one model car, as Studebaker found out (the Avanti notwithstanding).
So the same would be true for the Dale or the Elio or the whatever. And it could happen to Tesla, although I think a buyout by a larger car company might be a more likely option, as Tesla has a lot of technology that would be worthwhile to others.
But the Elio? Hardly even technology, other than just off-the-shelf parts. Even the vaunted engine they had designed is based on an old Geo engine.
Now whether it was just a good idea gone bad or outright fraud, we'll find out shortly when the dust settles. With hundreds of millions in liabilities and no cash on hand, it is hard to see how they can survive - and build an assembly line and produce cars at a large enough profit to pay back debts and investors. But I guess we'll find out very shortly.