Dyson’s plan to join electric car race a big gamble

James Dyson is to open a new campus in Wiltshire, where he is likely to develop electric cars © FT montage; Heathcliff O'Malley

It was in 1993 that a floppy-haired inventor appeared on the British children's television programme Blue Peter with a filter for car engines that he said could suck harmful particles out of a diesel exhaust to produce clean air.

The creator was James Dyson, then gaining attention for a bagless vacuum cleaner that was the first product from his young eponymous brand that was to make him a household name and put him on the map as one of Britain's most original inventors.

But carmakers were not interested in the filter, so he switched focus to develop his bagless cleaners that have since made him a billionaire and one of Britain's richest men.

Now, more than two decades later, Sir James, who was knighted in the 2007 New Year honours list, is back in the car game, revealing this week that he is in the race to build the vehicles of the future.

"I decided to start developing electric motors and batteries," says Sir James as he believes the only solution to mounting air pollution was electric cars.

His company plans to develop a suite of fully electric vehicles with the first expected to hit the roads by 2020, although he has not decided where to manufacture the batteries or the cars.

Despite having moved its production to Asia, Sir James said the UK was a strong candidate as a manufacturing location for the car, but added that China would be its largest market because of concerns over air quality.

Significantly, the products will be developed in-house without the help of any established carmakers in a £2bn investment that represents the most audacious wager yet by the billionaire entrepreneur.

The endeavour is fraught with risks as the car industry goes through a time of intense change and technological disruption.

It will test the engineering and marketing capabilities of a company sometimes referred to as the "UK's Apple" as it puts the group up against the juggernauts of the car sector.

The likes of Volkswagen, Daimler, Ford, GM and the Renault-Nissan Alliance will make tough competitors — as will Tesla, the pure electric carmaker and Silicon Valley group that has done much to disrupt the industry.

"I think they can do it, but it's going to be very difficult," says Erik Gordon, clinical assistant professor at the University of Michigan's Ross School of Business. "It's very high-risk . . . He could be risking his company."

If he can pull it off, it would mark a crowning moment for Sir James, whose privately owned Dyson group has transformed the household consumer goods sector with products ranging from hairdryers to air purifiers.

"The chances of success are pretty high as Dyson is such a fantastic individual and makes things happen," says Steve Carden of PA Consulting. "[But] while Dyson is a brilliant manufacturer of things and has supply chains set up, there's something about cars, which is an order of magnitude harder to make work."

Sir James has 400 engineers working on the project, which began two-and-a-half years ago. He says the motor for the car is ready after drawing on his company's core strengths, with its long experience of building powerful miniature motors.

Dyson found success with vacuum cleaners, then branched into washing machines, hair dryers, hand dryers and air conditioning with varying success © FT montage

The company's credentials developing batteries go back further, almost two decades. Rather than liquid batteries found in current electric cars, Sir James will use "solid state" cells, which are safer, hold higher power and charge more quickly.

Toyota has said it expects to launch cars powered by solid-state batteries in the 2020s, while other manufacturers are also working on comparable versions of a technology expected to dominate motor vehicles by the middle of this century.

Although Sir James has disclosed few other details, seasoned industry analysts rate his chances for success highly.

"While it is certainly too early to say whether Dyson can make a successful entry into the [electric vehicle] market, we acknowledge that it is a company with a record for strong products and genuine engineering innovation," wrote analysts at ISI Evercore.

The company has a Midas touch in most of the areas it has entered since vacuum cleaners; a notable exception was its washing machines, which were lossmaking and discontinued.

Sir James will spend £1bn on the battery, £1bn on designing and making the car and expects to make a profit.

However, this comes out of a previously announced £2.5bn investment plan underpinning a broader expansion, which includes the development of technologies such as robotics, artificial intelligence and vision systems.

Tesla, a listed company, has repeatedly tapped investors for capital to fund production as it ramps up to become a major force in the car industry. As a privately owned group, Dyson does not have the same options.

Philippe Houchois, an analyst at Jefferies, says Dyson will need greater access to funds if it is to provide financing for consumers to buy its vehicle — or even more if it rents cars to consumers under a subscription model, something it is considering.

"If you provide leasing, then own the asset and it's a totally different capital requirement," adds Mr Houchois. "That's when you tip this privately owned enterprise into the need to go public because the capital requirements are massive."

Source: Dyson's plan to join electric car race a big gamble