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Local Motors: A New Kind of Car Company

When John B. Rogers was a Marine deployed in Iraq in 2004, he brought a book called Winning the Oil Endgame with him to the Gulf. The book, by environmental activist Amory B. Lovins, discusses how people can end their dependence on fossil fuels. Rogers says reading the volume inspired him to create a new type of car company, one he believes offers a more efficient and effective way of designing, manufacturing, and selling autos.

"I realized it was possible to run an environmentally focused car company in different ways," he says. Most of today's auto entrepreneurs, such as Tesla Motors and A Better Place, focus on alternative fuel sources. But Rogers looked at another way of building a sustainable car business. He imagined he could produce vehicles locally and on demand at "micro-factories," where buyers could watch and even participate in making the car. This would eliminate wasting resources on mass-producing and shipping cars that might sit unbought on a car dealer's lot. More than that, he wanted to source "dream car" concepts direct from potential buyers, rather than to dictate designs, as the major automakers do.

Having left active duty in the Marines in 2005, Rogers headed to Harvard Business School to study for an MBA and learn how to make his dream a reality. After raising $4 million from unnamed private investors, Local Motors made its official debut in March 2008, with a Web site that calls for designers to submit sketches of their dream cars. Contributors can also enter competitions to come up with ideas for a specific type of vehicle, such as an electric car for the eco-conscious San Francisco Bay Area. The site's online community votes on the designs, with winners chosen by the audience, not Local Motors' employees. Cash prizes range from $1,500 to $20,000, with over $30,000 awarded to date.

A Community of Designers

By March 2009 there were 2,400 active contributors to the site, uploading drawings, commenting on each others' work, and voting on designs. Today, Rogers says that number has climbed to 4,000. "And if you count our social media channels—our presence on YouTube, Facebook, and Twitter—there are 50 million more people in our community," he adds.

That might sound fanciful, but the company is now gearing up to produce its first vehicle: a rugged-looking, off-road vehicle called the Rally Fighter. The initial concept was posted online by community member Sangho Kim. On seeing the community's enthusiasm for the design, and recognizing that off-road vehicles present an underserved niche market, Local Motors decided to put the car into production. Interested buyers pay $99 for a place in line to purchase it. When production starts, in June 2010, buyers will be invited to the company's headquarters in Wareham, Mass., to help build the car. The eventual price tag? $50,000.

Rogers is confident that his company can eventually turn a profit. "A single Local Motors micro-factory has the capacity to sell 2,000 units a year at an average price of $40,000," he says. Currently, the Local Motors Web site indicates the tally for Rally Fighter orders is 23, a number that's not exactly likely to trouble any of the Big Three. But Rogers insists he is trying to rethink, rather than overtake, the traditional auto industry.

A Complicated Business

Still, success is far from certain. "Local Motors is an interesting idea in the context of the design of a vehicle. There are real benefits to drawing on a large community of designers; you can come up with truly unique designs and come up with interesting new niches," says Jeremy Anwyl, chief executive of car-buying guide "But it gets trickier when you take that notion and move into actually building a car—which is technically very complicated." Not to mention, highly regulated.

Rogers is unfazed. "Building a car is complex, but it is a well-understood science. This is not the challenge," he says. "The challenge is bringing cars to market in a sustainable manner—the cars people want, where they want, when they want. This is what Local Motors accomplishes."

Jana is the Innovation Dept. editor for BusinessWeek.

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