(Bloomberg Businessweek) -- On an isolated stretch of industrial flatland outside Knoxville, Tenn., a minibus is taking shape in a car factory unlike any other. The space is small, the size of a supermarket, and all but tool-free. No pneumatic pumps, no shuttling parts bins, no robotic arms or conveyor belts carrying skeletons of cars. Instead, perched in the center is the world’s largest 3D printer, a gangly 10-by-40-foot behemoth with a steel-gray exterior, thick columnar footings, and derrick-like roof beams to true its frame.
When the print heads are in motion, the equipment emits little more than a whisper, dexterously cutting sharp angles and rounded edges. Programmers on laptops and quality-control experts with tablets mill around, inputting design changes and fine-tuning the minibus’s sensor instructions. Beyond the assembly room lies a kind of alchemist’s playground, where young staffers with advanced degrees in materials science and mechanical engineering synthesize nanopolymers or test exotic particles for strength or thermal and electrical conductivity.
The minibus, named Olli, is the latest offbeat product from Local Motors Inc., an 11-year-old startup. Costing around $400,000 and standing hunchbacked at about 8 feet tall, 7 feet wide, and 12 feet long, the self-driving electric bus seats 12 and can be hailed by an app. It was designed to ferry people around crowded urban downtowns, shopping districts, and large campuses and to help the elderly get around in suburban communities with little public transportation. And the minibus can be manufactured to order, so it could end up as a clinic on wheels, a roaming soup kitchen, or a traveling classroom. Olli also has sufficient artificial intelligence to converse with riders. One day, company co-founder and Chief Executive Officer John “Jay” Rogers hopes, it will be sophisticated enough to share a modified pesto recipe with a passenger, then reroute him to the grocery with the freshest sun-dried tomatoes.
Olli took its maiden autonomous spin in July 2016 at a relatively empty Maryland real estate development. It’s since been street-tested in Berlin, Copenhagen, and other places. At the time the bus went on the market this fall, Local had first-year international orders for 70 vehicles. Initial buyers include Goodyear Tire & Rubber Co., the State University of New York at Buffalo, the Australian city of Adelaide, and Denmark’s largest automotive distributor, Semler Gruppen A/S.
Selling cars isn’t entirely the point, though. “A lot of companies make cars,” says Rogers, a former serviceman who favors bow ties and a buzz cut. “That’s not us. We want to turn the rules of manufacturing upside down.”
For such a mission-oriented company, Local has a haphazard origin story. In 1999, Rogers joined the U.S. Marine Corps, seeking to bring discipline to a desultory career that had taken him from aerospace engineering to a Chinese medical-equipment factory to investment banking. Even choosing to enlist was a bit random; he’d been about to enter the MBA program at Stanford, but on orientation day he struck up a conversation with a fellow student who’d been a Marine. “Why would you go to business school?” the man asked when he heard Rogers’s nomadic résumé. “You know business and banking. You need to learn how to lead people.” Within months, Rogers was in the service, not quite sure why or to what end. He stayed for two tours, including a deployment in Iraq.
In April 2004 a platoon led by a buddy of his, Captain Brent Morel, was ambushed by several dozen Sunni insurgents as they traveled in a three-Humvee convoy through heavily contested Anbar province. Morel ordered his team to leave their vehicles and counterattack. The enemy scattered, but Morel was killed. “It didn’t have to happen,” Rogers says. “It was pure stupidity to deploy Humvees in Iraq. Those vehicles are an exercise in asinine design. They have a huge engine, so you can’t hear anything from the inside, leaving you vulnerable. And to get out of them when you have your full battle rattle on … imagine a clown car unloading five or six Marines through a door hole the size of half a human, and you get the picture.”
A couple of years later, another friend, Major Joseph McCloud, drowned when his Boeing Vertol CH-46 Sea Knight helicopter was forced to make an emergency landing and flipped over upon hitting the water, a known risk for the aircraft. The incident further convinced Rogers that companies simply weren’t making smart enough products. “If Humvees and Sea Knights were the best that American manufacturing could do, something was wrong,” he says. (Boeing Co. declined to comment for this article. AM General LLC, manufacturer of the Humvee, said that while it couldn’t comment on the incident involving Rogers’s friend, the vehicle “has continued to evolve and improve during the past 15 years.”)
After leaving the Marines, Rogers spent a year at Harvard Business School, honing the model for the company he wanted to start. He founded Local in 2007. His elevator spiel was that it would build vehicles in low-volume minifactories using the latest production technology, lightweight materials, and manufacturing techniques. Each car would be made with a specific kind of customer in mind, whether it would operate on the battlefield, the Baja California peninsula, or the open road. This build-on-demand strategy, a buzzed-about goal for many manufacturers, was intended to give Local the essence of a craft shop—the best position, in Rogers’s mind, from which to succeed. “Our conceit was that we were artisans at the gates of big industry,” he says.
He was certain Silicon Valley venture capitalists would buy in, but he soon found that the enormous investments flowing into early electric-vehicle companies such as Tesla Inc. and Fisker Automotive had sapped enthusiasm for other industrial ventures. With the big venture companies abstaining, Rogers made do with shoestring funding from 45 individuals—family, friends, acquaintances, mavericky tycoons such as aerospace billionaire Robert Bass—who gave him a combined $10 million in seed capital. It wasn’t much, about 1 percent of what Nissan Motor Co. had paid to build a relatively small factory in Canton, Miss., a few years earlier.
The tiny bank account was a challenge, but for a company aspiring to artisanship, it was at least apt. Local’s debut product was the Rally Fighter, a souped-up, fiberglass-chassis dune buggy capable of hitting 130 mph on an open stretch of desert. Rogers couldn’t afford to design the vehicle in-house, so he took the unique step of crowdsourcing its concept, offering $20,000 for a winning idea. The top prize went to an art student who patterned the vehicle after the P-51 Mustang, an iconic single-seat fighter-bomber.
When Local’s high-riding, menacing-looking sand crawler rolled out in 2009, it became an instant obsession for gearheads, making appearances in the Fast & Furious film and Grand Theft Auto video game franchises and on the TV shows Jay Leno’s Garage and Top Gear. To sidestep regulatory requirements for street-legal cars, customers made Rally Fighters using a kit containing the parts and powertrain components (with help from staffers at Local’s flagship factory in Chandler, Ariz.). The company sold about 20 a year at prices that could top $120,000, with options such as a custom camouflage wrap, bright orange interiors, and wall-to-wall speakers.
The Rally Fighter bore out some pivotal assumptions of Rogers’s business model. By blending low costs and malleable materials with premium pricing, Local could, as he’d hoped, turn a profit relatively quickly. It took about 50 vehicles. But after peddling the Rally Fighter for a few years, he soured on the build-your-own program, concluding that it was a distraction for a company meant to reinvent manufacturing. He started phasing out the Rally Fighter in 2013, disappointing a line of waiting buyers, and began looking for a more useful product that would draw on new production technologies.
When small, affordable 3D printers hit the market in early 2014, Rogers threw down a challenge to his employees: Make the world’s first drivable 3D-printed automobile, in full view of attendees at that September’s International Manufacturing Technology Show in Chicago. He kicked things off with a six-week crowdsourced design contest, asking participants to “imagine if you could create the major elements of the exterior, the structure, and the interior of a vehicle in one part.” More than 200 entries later, the winner was the Strati (Italian for “layers”), a snub-nosed two-seater whose sides flare up and back like Batman’s cowl.
The vehicle was conceived by Michele Anoe, an Italian designer who’d worked for Fiat Automobiles SpA and Mercedes-Benz. It would, as Rogers had specified, use additive manufacturing (another term for 3D printing, because the process involves depositing strata of materials one after another), drawing on a new generation of carbon-based polymers to produce a body and chassis that weighed less than 500 pounds. Once the drivetrain, wheels, and brakes were added, the finished vehicle would contain fewer than 40 components, compared with as many as 30,000 for a typical compact sedan.
Local’s team worked on the Strati for months at its new, bigger factory in Knoxville, experimenting with materials and testing 3D printer limitations. Even so, when the trade show rolled around, Rogers was anything but confident. The Strati would be by far the largest 3D-printed item yet attempted, and it was impossible to predict whether the more than 200 printed tiers of thermoplastic—a polymer that becomes liquid when heated and solid when cooled—would fortify each other or cleave under their own weight. It was also unclear whether the polymer would retain its strength after being stretched into an intricate rounded form.
As the huge print heads whirred to life before a crowd of about 1,000 people, all Rogers could think was that he’d promised to take several city officials for a ride when the Strati was done. “What if it comes apart and leaves the mayor by the side of the road?” he remembers worrying. “That would pretty much have been the end of our business.”
The printing and test ride went off without a hitch. Some 100,000 trade-show attendees saw the Strati being made during its 48-hour construction process, and it swiftly became the talk of the automotive and technology press. It was only a concept car, capable of going about 45 mph at best, but it suggested that Rogers had finally hit upon a way to manufacture a product versatile enough to incorporate new technologies and materials and be potentially profitable at low volume. Soon after the test drive, he began pondering ideas for a vehicle Local could take to the global market.
Given his precarious early financing, Rogers might’ve had to tiptoe onto this larger stage. But around the time the Strati project was getting under way, Local had stumbled onto a new business. Its manufacturing exploits had piqued the interest of some large industrial companies outside the auto sector, which wanted to make their production methods more responsive to customer preferences and less wedded to risky, high-volume products. In February 2014, General Electric Co. became the first major manufacturer to license Local’s model, establishing GE FirstBuild, a tiny unit designed to pay for itself within a year, near Local’s Knoxville headquarters.
The aim was to use 3D printers to make products quickly and cheaply, in limited volume, to gauge the market for them. If it looked as if an item would be moderately popular—say, 300,000 units a year—FirstBuild would manufacture it itself. If it really took off, GE Appliances would take over using traditional high-volume manufacturing methods. The unit was “built for speed, unlike other parts of GE,” says Chip Blankenship, who as head of GE Appliances signed the deal with Local. (He’s now CEO of aviation company Arconic Inc.) “We learned from Jay and the team that speed is becoming more important than intellectual property. We had to figure out how to manufacture fast.”
They also had to learn to tap into customer tastes. In the first year the success of just two products, a $299 Bluetooth sous-vide cooker and a $550 nugget icemaker, more than covered the team’s production costs. FirstBuild has been profitable ever since, adding crowd pleasers such as a $10,000 residential pizza oven and a $29.99 retractable washing machine shelf that prevents clean clothes from falling on the floor as the barrel is being emptied.
The partnership brought in enough money that Local could afford to pursue its global ambitions. A few months after the Strati’s debut, the company was invited to participate in Berlin’s Urban Mobility Challenge, which was intended to create an emissions-free, mass-transit shuttle for the city. Rogers sent out a call to his network of designers—by now encompassing almost 200,000 amateur artists, engineers, and graphics specialists, whom Rogers collectively refers to as “co-creationists”—for blueprints to build an 8- to 12-seat minibus. Edgar Sarmiento, a 24-year-old Colombian industrial engineer, won the $20,000 top prize, plus residuals from future sales, with a rendering that would become Olli. (Other entries included a tantalizing, if not quite feasible, coterie of commuter copters, as well as the Berlin Pill, a single-seat antigravity levitation pod resembling Spock’s casket in Star Trek II: The Wrath of Khan.)
Olli was the fruition of Rogers’s vision for Local. In the rest of the industrial arena, additive-manufacturing breakthroughs have tended to be relatively minor, such as the first 3D-printed part in a production-series automobile, a pocket-size metal roof bracket in BMW AG’s 2018 i8 roadster. Olli’s entire chassis and body could be printed in less than a day, half the time it would take to assemble its mass-produced counterparts. And unlike the Strati and virtually all similarly manufactured items, it emerged from the printer without striated layer lines, because Local’s machine can smooth out materials as it extrudes the finished product.
Moreover, Olli’s low-volume, one-item-at-a-time process meant it could be customized to passengers’ sizes, preferences, and physical limitations without extending production schedules. Once the car was on the road, updates and changes to the specifications could be made as often as needed, eliminating the need for the billion-dollar-plus remodeling efforts commonly undertaken every five years or so to freshen an aging vehicle line.
With these advantages on its side, Olli raced from design to road testing in only nine months, for less than $6 million. Rogers likes to compare this cost with BMW’s $2.6 billion investment in the ill-fated 8 series, which hit showrooms in 1989 and was shelved a decade later after sales of only 30,000.
Olli also promised two technologies that weren’t part of Rogers’s original vision: autonomous driving and artificial intelligence. The possible benefits were too compatible with his early ideals to ignore. “This isn’t just finding a way to get email through the car dashboard,” he says. “Olli serves a higher purpose, improving people’s lives, which takes me back to the catalyst for the company when I was in Iraq.”
Of course, self-driving and AI pose complex challenges that have made them primarily the province of major automakers and tech giants. To keep pace, Local forged research and development partnerships with International Business Machines Corp.’s Watson program for artificial intelligence and with Robotic Research LLC—which last year opened a breakthrough autonomous transportation hub at North Carolina’s Fort Bragg to ferry wounded soldiers from the barracks to doctors’ offices—for self-driving sensors and software.
The relationship with Robotic should maintain Local’s position at the cutting edge of autonomous-vehicle capabilities. AI could be another story. IBM’s artificial intelligence unit has largely sputtered, part of a larger trend of underwhelming advances in that field. Local may be forced to manage development in-house, as it’s done with materials.
Rogers has the advantage of customers willing to pay top dollar for Ollis right now, whereas rival autonomous-vehicle programs are thus far for internal use only. One of the first buyers was Goodyear, which is deploying Olli to collect data about tire performance on self-driving electric vehicles and to explore untried tire designs. The company hopes one day to provide tires and light maintenance for Olli convoys cruising through downtown areas of large cities. “We have to rethink our products faster than the auto industry is changing,” says Chris Helsel, Goodyear’s chief technology officer. “Olli is way ahead in the autonomous fleet segment, which we believe could be a big business.”
Before that day arrives, Local will have to clear some significant hurdles. Foremost is whether it can afford to wait until regulatory curbs on autonomous vehicles are lifted. One thing in the company’s favor is that a shuttle with a prescribed set of routes and somewhat predictable street conditions is likely to gain approval before a passenger car. But by the time that happens, Local could have heavy competition. In January 2018 at CES, for example, Toyota Motor Corp. unveiled a concept vehicle called E-Palette that looks strikingly like Olli and promises parallel capabilities.
Rogers believes Local’s manufacturing model gives it an edge. Because it can customize vehicles and add elements almost as easily as, say, Apple Inc. updates iOS, he thinks it will be able to offer new features faster and keep his profit margin high. “By the time Toyota comes out with their Olli, we will be up to version 10,” Rogers says. “My bet is, behind closed doors at Toyota, they will lose their minds, because every time they make something new for their concept car, Olli will have it on the road already.”
While established automakers privately offer grudging respect for Local, none has attempted to adopt its ideas. Ironically, part of the reason it would be difficult for them to do so is that their assembly methods are designed around lean manufacturing, a concept built upon continual plant improvements to boost the returns from high-volume production. Such changes make big systems more efficient, but they aren’t particularly helpful for small runs and customized markets. “A lot has changed in auto plants,” says John Bozella, CEO of Global Automakers, an industry trade group in Washington, D.C. “But it is still a very-long-lead-time industry that sells products in high volume, and the overall manufacturing approach remains as it has been. Local Motors is a much more transformative idea. It’s like starting over again.”
For now, Local will continue filling its war chest with manufacturing licensing agreements like the one with GE. It now counts Siemens AG, Airbus SE, and the U.S. Marines as clients, and, unlike with the FirstBuild deal, Local is typically specified as the manufacturer for any product that emerges from its design community. The demand for these partnerships has been so steady that Rogers recently spun off his co-creation unit into a sister business called Launch Forth.
Its collaborations often take partner companies far afield from their normal activities, letting them conduct experiments they might otherwise be too timid to get behind. Earlier this year the insurance giant Allianz SE solicited concepts to replace the wheelchair with a mobility device that can be adapted for purposes beyond going from point A to point B. The winner, the Segway-like 3T, can be operated by a joystick or directional body movements. It has a high standing seat made of foam pads that conform to a user’s shape, and the wheels can be swapped out for tank-style tracks for trail or off-road activities, or even for skis.
Rogers says he’s gratified by Local’s progress, but he eagerly awaits the moment when its reputation expands beyond gearhead and industry circles and enters the discussion about the future of transportation. That day is coming, he’s convinced. For now it would be enough, he says, if he could stop “having to convince people that there’s a future beyond Henry Ford.”
To contact the author of this story: Jeffrey Rothfeder in Manhattan at
To contact the editor responsible for this story: Jeremy Keehn at jkeehn3@bloomberg.net
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