Why Dyson pulled the plug on its ‘fantastic’ electric car

Dyson’s electric car ride was not supposed to end like this.

Two years after the company best-known for bagless vacuum cleaners announced plans for a battery-powered vehicle, the project was cancelled this week.

In an email on Thursday, Sir James Dyson confessed to employees that its “fantastic car” would never enter production, throwing 500 roles into uncertainty and marking a rare public climbdown from the inventor and company founder.

The decision ends an audacious gamble from a British entrepreneur that might have cemented Sir James’s legacy as a risk-taking innovator and redefined his namesake business.

Conversations with current and former people involved in the project indicate the company was hit by internal delays and the dawning reality of challenging cash-rich incumbents in one of the world’s most competitive industries.

Shifting customer demands and a faster electric rollout from rivals, combined with hold-ups with the company’s own battery system, slowly whittled away at the business case.

Weekly meetings of the auto team, run by former BMW and Nissan executive Roland Krueger, who joined Dyson in January, reviewed the outlook for the car.

Having finished a batch of working prototypes from its new test plant at Hullavington in Wiltshire, Dyson in recent weeks came to the crucial phase of the project — beginning to build and install expensive manufacturing equipment in its new Singapore facility that would make the vehicle.

After deliberations, including a board meeting in the Asian city-state three weeks ago, the decision was taken to divert resources to other work.

“Even if everything had gone well, the result [of the auto business] would still have been marginal

The company, which had planned to invest £2bn in its car and battery, decided money would be better spent pursuing new ventures — both in its current line up of products, and moving into new, untapped areas where it could repurpose the research and development work.

“Even if everything had gone well, the result [of the auto business] would still have been marginal,” said one person inside the business.

The decision to pull the plug at this stage — before the costly construction and kitting out of a factory — shows decisiveness, people close to the company say, and may have saved Dyson from what could have gone down as an expensive act of folly.

“They decided to stop when they saw it didn’t make sense,” said Mate Rimac, who runs Rimac Automobili, an electric supercar and technology start-up in Croatia. “You have to respect that.”

Efforts to find a buyer for the project — either inside or outside the industry — were also unsuccessful. While several carmakers were approached, including Jaguar Land Rover, none presented acceptable bids.

Potential buyers from the technology space were nervous about getting into a sector that had claimed so many entrepreneurial scalps. JLR declined to comment, while Dyson declined to comment on possible buyers.

Within the company, a sense of inevitability grew over recent months.

Thursday’s announcement caused only modest surprise among staff, according to people inside the business.

“I’m surprised it’s gone this far to be honest,” says one person who worked on the project. “It was a tall ask anyway to develop a scratch team and build it out.”

In recent months, a number of people employed at the project had left, either to other posts within Dyson or to other employers, according to several people across the industry.

While Dyson said it aimed to redeploy the 500-odd staff on the project across its business, many are on gardening leave, while the company has put a stop on external appointments to allow the current staff to relocate.

However, the company hired several key auto executives, such as former Aston Martin director Ian Minards and Mr Krueger, who may be looking to return to the automotive world.

At the same time, Dyson CEO Jim Rowan has ordered all departments to move next year’s hiring plans into this quarter to help find new jobs for the car team.

The advent of battery vehicles was supposed to lower barriers to entry to the automotive arena, because the cars have fewer moving parts and are easier to assemble.

Dyson long argued that its expertise in gadget-making would help it. The company promised to harness the electric motor technology it developed for its vacuum cleaners and hairdryers, and the aerodynamics from its air filters, to create a “radically different” electric vehicle.

Its record was also strong: having entered the closed vacuum cleaner market in 1993, every new segment Dyson entered it grew to dominate, all bar washing machines.

Unlike other would-be carmakers, it understood complex scale manufacturing, with a product range from hand dryers to vacuum robots that it ships around the world.

Chief in its arsenal was a new battery, made with solid state lithium ion, that would give its car greater performance, longer range and faster charging than even the most advanced electric cars on the market, which use liquid-based batteries.

“Solid state batteries are really viewed by most analysts as being the next logical step in the evolution of lithium ion batteries,” said Graeme Purdy, chief executive of Ilika, a London-listed company that works in the field. “It would be a strong differentiator — that’s why a lot of automotive companies are investing in that technology.”

In 2015, the carmaker paid $90m for Sakti3, a US-based solid state start-up, while also developing its own solid state technology, in an internal race to get the best battery into its vehicle.

But the difficulty in successfully commercialising the technology led Dyson to write down the investment and it abandoned attempts to install the battery in the first of its cars.

While the vehicle’s other features, such as aerodynamic windshield and massive wheels to reduce road friction, would eke out greater range and performance than current competitors, without the battery the differentiation from rival products grew slimmer.

As delays inside Dyson dragged on, the window to take the lead over the incumbents of the industry was closing. Toyota, Volkswagen and Renault all anticipate having solid state-powered cars on the market by 2025.

Dyson’s planned first vehicle also sat at the very upper limits of the premium market — a Range Rover-sized car that would have commanded a hefty price tag. As a result, volume expectations were modest, fewer than 10,000 cars.

In addition, the market Dyson planned to enter was growing more crowded. Volkswagen alone plans dozens of models with a battery, while the German company’s earnings from its 10m annual car sales will help offset any losses incurred by its new vehicles.

In China, which Dyson had expected to be its largest market, sales of battery cars fell for the first time in July because of a slowing market and a cut in government subsidies.

Senior figures within the business realised that, despite the product’s strengths, it would not recoup the investments made so far.

Any further investments on future vehicles to help claw back the initial outlay would have had to come from cash flows or Mr Dyson’s personal wealth, which was made on the back of the domestic appliances empire he has built over a quarter of a century.

The businessman has long eschewed the idea of a stock market flotation, which would limit the company’s avenues to raise cash. By contrast, Tesla has repeatedly returned to the public equity and debt markets to cover its losses.

“The car industry is an expensive business to be in, and it takes a long time to bring any project to market,” said Ian Henry, a veteran auto analyst at AutoAnalysis. “You need to have phenomenally deep pockets and something quite different to make any impact. Reinventing the wheel is almost pointless.”

Additional reporting by Stefania Palma in Singapore