Progressive Automotive X PRIZE

Launching a New Car Company is No Small Feat

Bringing a new vehicle to market is a complicated and expensive process, even for established car companies. It’s not unusual to spend hundreds of millions of dollars to do it. So it’s no wonder companies like Honda, Ford and GM tend to stick with the tried and true -- and the profitable. Even those that went out on a limb, like Toyota with its Prius hybrid, lost a lot of money before eventually turning a profit for what many skeptics once dubbed a risky experiment. Similarly, whether GM’s Chevy Volt or Nissan's Leaf will be popular and profitable is today a question for debate.

 

Indeed, start-up companies -- such as any one of the finalist teams in the Progressive Insurance Automotive X PRIZE -- face an even steeper challenge, largely because of massive up-front capital costs. Cars not only have to be engineered, they have to be built, and part costs are a major barrier to profitability in low volumes. Even more expensive, however, are the machines used to put all those parts together. Auto-related news stories often feature one class of tooling machines common to the auto industry -- hulking robots that precisely lift, position and weld frames, doors and windows together on the factory assembly line to make a car.

 

Unfortunately, it costs far more per vehicle to produce a limited run of vehicles than it is to produce at high volumes. The limiting factor is that there are few ways to start small and cheap, and then scale up as demand increases. To use a simple example, if an aspiring automaker has to spend $10 million to produce 10 vehicles, then each vehicle has to bear $1 million of that cost, before adding any margin for profit. 

 

Clearly, to make a business case to investors, startup car companies must prove that sufficient demand exists to assure their investors will get their money back, plus a bit more. That means selling enough cars to make up the cost of the parts, labor, and excruciatingly expensive tooling.

 

Tesla Motors has taken heat from skeptics and admirers alike for selling its groundbreaking electric roadster for $109,000, a price far out of reach for most consumers. While hardly a car for the masses, it well illustrates the difficulty automotive start-ups face. Even with the successful sale of over 1,000 roadsters, Tesla nevertheless required a substantial government-backed loan to produce its next generation all-electric Model S sedan. Even with the loan, Tesla estimates the Model S will cost consumers more than $50,000, and that’s with a $7,500 federal subsidy.

 

Indeed, when innovation moves at a snail’s pace in the auto industry, it should come as no surprise that Tesla was the first American automotive IPO in more than 50 years.

 

It is my sincere hope that other automotive IPOs will follow. Certainly, the winners and finalists in the Progressive Insurance Automotive X PRIZE have proved that attractive and safe vehicles can get 100 MPGe, and I truly believe Americans are ready for such an automotive revolution. While the journey to this point has just begun for many of these teams, I look forward to the day when consumers have a wide range of truly ground-breaking energy efficient models to choose from.

 

The Origins of the Progressive Insurance Automotive X PRIZE -- And Its Impact

This is a guest posting by Felix Kramer, Founder of the California Cars Initiative (CalCars.org)

Five years ago, when the Automotive X Prize was just an idea, gas prices were seesawing, and people were fed up with paying a billion dollars a day for foreign oil.  We're still addicted to oil -- but thanks in large part to the X Prize, we can see a way out.

Back then, the famed Hypercar spinoff from Rocky Mountain Institute had previewed a future of lightweight, aerodynamic, safe autos. And everyone who'd looked at ways to reduce greenhouse gases knew the answer had to include getting our vehicles off fossil fuels. It was time for cars to take a quantum leap.

Meanwhile, promising cars like the GM EV1 and Toyota RAV4 EV were history. But the death of the electric car turned out to be just the end of one chapter. In 2004, CalCars.org showed how to convert hybrids to plug in, plastering five-foot wide signs proclaiming "100+MPG" on the sides of our Prius retrofits. And Tesla raised money to build a sexy sportscar that would beat almost anything on the road. We could see a future of optimized vehicles running on cleaner, cheaper, domestic electricity.

The Automotive X Prize launched in 2006-07 with ambitions to inspire the public and spark innovation to change the auto industry. Getting the competition right wasn't easy for its dedicated, creative staff:

• When "100 MPG" came up against vehicles powered by different fuels, experts developed "MPGe" for apples-to-apples comparisons of electricity with petroleum and renewable biofuels.
• Faced with public expectations for glitzy track races, planners who knew drivers most need a fuel-miser for 25-mile-a-day commutes worked out new tests. They enlisted the U.S. Department of Energy's National Labs to validate the performance of innovative solutions.
• With hopes that some great idea would emerge from a quirky corner, they split the Prize into mainstream and alternative paths.
• And, knowing that imaginative, unique solutions also had to find their ways to millions of drivers, they made competitors show their designs could be safe, affordably mass-produced, and sold for a profit.

As we reach the end of this historic competition, we all wonder who will win. But it's never been more true that "the journey is the reward." Competitors that didn't make it all the way have gained significant visibility, investments, and partnerships. Some may become successful manufacturers. Others will see their teams, intellectual property, and visions acquired by larger companies. Many will celebrate their victories.

And the Prize's impact extends far beyond the competition. X Prize raising the MPG bar certainly encouraged Congress to increase fuel efficiency standards. As we debate what new car stickers should say about efficiency and emissions, a new coalition is urging a goal of 60 MPG by 2025. The DOE has funded development of an advanced U.S. battery industry and lent carmakers billions to retool for green automotive jobs. States and companies have added their incentive programs to the federal $7,500 tax credits for new plug-in cars. Engineering students have been inspired to find jobs in a reviving auto industry. High schoolers have seen how cars can be cool and clean.

And automakers? They've been watching closely and making industry-changing decisions. In 2006, I became the world's first consumer owner of a plug-in hybrid. Now, before the end of this X Prize year, my family hopes to replace that PHEV conversion with a Chevy Volt that we can drive everywhere. And we'll trade our reliable Toyota Camry Hybrid for a Nissan LEAF's daily drives with no gasoline. The cars are coming: the U.S. is on track for a million mass-produced plug-in cars by 2015!

What's next? How about a follow-on prize? As the high-MPG cars arrive, it's clear it will take decades before they'll make up a large enough fraction of our country's 250 million vehicles to have much impact on fossil fuel use. Visionaries like Andy Grove are urging us to retrofit tens of millions of pickup trucks, SUVs, vans, and buses. Like the Home Star building retrofits we're now accelerating, national gas guzzler conversions could create green jobs in communities everywhere. So CalCars hopes for a Drive Star competition -- from X Prize, DOE, or another sponsor -- to spark "The Big Fix," creating a global industry to upgrade many of the world's 900 million vehicles.

X Prize began with the Ansari X Prize for space flight. As the X Prize Foundation broadens, with prizes in genomics, lunar exploration, and ocean oil cleanup, it's never been clearer that humanity and our planet face immense challenges. We used to say "the sky's the limit." Now that we recognize we need to save that one sky ASAP, we look to future competitions for inspiration, ideas, and a global rescue.

Congrats to the teams for driving more choices in super fuel-efficient vehicles

This is a guest post by Glenn Renwick - President and CEO of Progressive Insurance

Today is the culmination of a lot of hard work from all of the competing teams in the Progressive Insurance Automotive X PRIZE. I commend them all on their efforts and automotive achievements. And while we announced the winners this morning, they’re all winners in my, and Progressive’s, mind.

During the competition we’ve seen a lot of really powerful breakthroughs; breakthroughs we hope to see enter the mainstream of automotive engineering.

That’s what this competition is all about: advancing the science behind automotive technology to create revolutionary change. These advancements redefine what’s possible and will ultimately create more consumer choices in super fuel-efficient vehicles, which we think will make people’s lives better.

Giving consumers choices that improve their lives—that’s why we got involved and why we’re so proud to be a part of this competition. In a world where many companies are working to establish a strong brand with relevance to consumers we have been delighted to associate the Progressive name with the X PRIZE.

We have a long and rich history of making things better in car insurance. And sponsoring the Progressive Insurance Automotive X PRIZE gave us the chance to make things better for consumers in a different way—in the form of spurring more choices of safe, super efficient vehicles.

On behalf of our more than 24,000 employees and 30,000 local agents, it’s been a pleasure to partner with the X PRIZE during the course of the competition and observe the advancements made by the teams along the way. We congratulate you.

Perspectives of a Non-Car Guy

 This is a guest post by Will Pomerantz - Senior Director, Space Prizes - X PRIZE Foundation

I was never much of a car guy growing up: the Lamborghini poster came down off my wall when I was about ten years old, and no other car art took its place. When my high school friends would daydream about the car they'd buy if they won the lottery, I was likely to tell them I'd spend the same amount of money and buy 10 Geo Metro hatchbacks, so that I could swarm down the highway with a pack of my friends. As luck would have it, I moved away from Houston--where having a car is basically a necessity--just a month before I turned 16 and got a drivers license, and I spent most of the rest of my life in cities like Boston and Washington, DC, where owning a car was as much of a hindrance as anything else.

When I joined the X PRIZE Foundation in 2005 to work on our space prizes and heard about what would eventually become the Progressive Insurance Automotive X PRIZE, I figured that my eventual first-ever car purchase would be of one of the winners of that competition. But that plan went out the window when my wife and I moved to Los Angeles in late 2008, and it became time for me to graduate from a subway car to a real car. As I started to look into my first auto purchase, I was guided by two main factors: 1) having never owned a car, I was particularly unenthusiastic about paying for gas on an regular basis or maintenance essentially ever, and 2) the price of gas in Los Angeles was hovering right around four dollars a gallon. Combining those three factors with my affordable price range, my choice was pretty much between two cars: the Toyota Prius and the Honda Civic Hybrid.

Now, luckily for me, I found those cars attractive and reliable enough, and was able to pick one up without having to sit on a waiting list; but still, I was disappointed to have such a small selection. It doesn't help matters that my high tech hybrid, pitched to us by the salesman as "more advanced than the space shuttle" (he probably wasn't expecting the fact that my wife works at NASA), only just barely gets better mileage than those Geo Metros I'd been talking about a decade and a half earlier, or that I now often lose my car in a sea of identical Priuses every time I park at the grocery store. Fast forward two years later, and as my wife and I start to think about replacing her car, the situation isn't too much better. Sure, I'd love a Tesla Roadster--but even if I could afford one, I'd be out of luck, because my house doesn’t have a garage, a driveway, or a fixed parking spot. It doesn't seem quite right that I'd have to move if I wanted to be able to plug in my electric car at night--I'd much rather have some super-efficient gasoline powered car, instead.

So, with an eye on that next car purchase, I've been following the Progressive Insurance Automotive X PRIZE a lot more closely than I might have otherwise--I'm not just supporting my colleagues and the innovation community, I'm acting in self interest. It's been a lot more fun this way--and really encouraging. A 0.179 second differential in the final on-track event for the Alternative Side-by-Side class probably would have been exciting and dramatic no matter what, but it's so much cooler when I'm actually thinking "hey, I would buy one of those cars. No, scratch that--there's a good chance I actually will buy one of those very cars!" And following along with the story of those fabulous students from West Philly High? Probably pretty inspiring no matter what. But when I'm thinking "damn, I wish I could buy a car that looked that good and got that mileage?" Even more so.

I like to think that I'm pretty normal in that when I go out and make a purchase that sets me back tens of thousands of dollars, I like to have a little bit of choice. A binary decision between "a kind of efficient car" or "anything else" as I did in 2008, was better than what I might have had a few years earlier, but not by much. Thanks to the amazing teams that have competed in this competition--and of course, the hard working staff and the sponsors, donors, and supporters who made it possible--I'm one step closer to having a real choice to make, and that's a good thing.

So congratulations to all of our teams, and please, do me a favor: get those cars on the market, and quick!

Dig Your Well Before You’re Thirsty

 This is a guest post by David Bodde - Senior Fellow and Professor, Arthur M. Spiro Institute for Entrepreneurial Leadership, Clemson University

On 22 February, 2006 two vans packed with explosives crashed into the outer security fence guarding the giant Saudi oil processing facility at Abqaiq.  Though the news accounts are sketchy (no doubt deliberately so) one vehicle penetrated the security barrier, its apparent target the piping through which 60 percent of Saudi Arabia’s 10 million barrels per day flow.  Success for the terrorists would have taken enough oil off world markets to cause a stunning price spike and a likely crash of the global economy.  Instead, the terrorists’ explosives detonated near a secondary pipeline, which was quickly repaired.  

Afterward, the Saudi oil minister cited the failed attack as evidence that the world’s oil supply remains secure.  In truth, it is otherwise—it is evidence of the urgent need to move road transportation away from its current near-total dependence on oil.  We have known this as an intellectual proposition since the first oil embargo of October, 1973.  But knowing is not enough.  Purposeful action must flow from the thought.  In the 37 years following that embargo, energy policy has pursued a long series of fads—sometimes with expensive enthusiasm, sometimes with costly subsidies that accomplish little beyond benefitting favored recipients…and in between just kicking the can down the road.  

It is time to end serial fads as a substitute for serious policy.  The Progressive Automotive X-Prize has taken an important step in this direction, and not with a massive government program.  Instead, it engages the creativity of inventors around the nation, expands the envelope of the possible, and calls public attention to those possibilities.  This is much to the good.

It is just not enough.  For these inventions to make a difference to oil consumption, they must enter the marketplace.  And for this to happen, policy must enable the kind of entrepreneurs who competed for the X-Prize to revolutionize road mobility the old-fashioned way—through offering superior products and services in the marketplace.  The list of supporting policies is well known: allowing consistent price signals to guide consumer purchases; patient and durable policies that allow the marketplace to pick the winner; broad-based scientific research and technical education; and encouragement of grass-roots initiatives (like those of the X-Prize competitors).

It is truly easier to stay out of trouble than to get out of trouble.  Or as my Dad would have put it, dig your well before you’re thirsty.  Let’s start digging.

Small Groups, Huge Challenge

This is a guest post from Gene Lukianov - Technical Inspector for Progressive Insurance Automotive X PRIZE

While I participated in the Progressive Insurance Automotive X-Prize Competition as a technical inspector, I was struck by the enthusiasm and dedication of the teams to the goal of high mileage vehicles and their benefit to the human race and the environment.

The people in these teams came from many walks of life and professions; entrepreneurs, mechanical engineers, electrical engineers, nuclear engineers, dreamers, technicians, mechanics, professors, moms and dads, students, nuclear physicists, PhDs, and many more.  All had a clear goal; do their best to build a 100mpge vehicle that would satisfy the requirements of the competition and be able to compete in the events leading up to the finals.  Some chose to modify a production car, some chose to showcase a vehicle that they are intent in manufacturing in the near future or have recently started building, some chose to design and build an experimental vehicle from scratch.

Most were huge optimists; thinking that once the vehicle was designed and built, the vehicle was ready for competition. The design and build effort just got them through the gate into the competition. Then the hard work began to tune the vehicle to meet all the performance requirements and to keep the vehicle running throughout the competition events.

All the teams were small, some consisted of only two or three people, most were of five to ten people and a large team had what seemed to be a few dozen people behind them. With the exception of Tata Motors, no major OEMs (Original Equipment Manufacturers) were involved with their expansive knowledge of vehicle engineering, technical skills and extended funding. Maybe the OEMS know something that these teams do not?

So are these teams the dreamers or the realists?  Are they dedicated to an unachievable goal of 100 MPGe for a practical vehicle? Or are they the independent thinkers that will show to established manufacturers that there are ways to significantly alter our energy consumption? Maybe if one starts looking at personal transportation from a different perspective great change can happen.

Is it that these teams have little ‘mental inertia’ that they can dream, conceive, experiment and build something of significance?  Is it that large companies invest too much in doing it the way they have always done it and cannot envision more radical alternative solutions?

However it’s done, we all stand to benefit from more efficient alternatives to the cars we drive today.