California dreaming In LA, German auto execs roll up sleeves to reinvent the car

Three car managers bade their diesel-besotted homeland farewell to become startup entrepreneurs in sunny Los Angeles. They're bent on proving that the future belongs not to Tesla or VW, but to the nimble designers of affordable e-cars.
Chasing Hollywood dreams.

Bob Marley is wailing from the speakers and Stefan Krause, 55, a former chief financial officer at German corporate behemoths BMW and Deutsche Bank, is proving a dab hand with a paint roller as he helps decorate the new offices of Los Angeles-based startup Evelozcity.

In his previous life, in the chrome and glass of corporate Germany, the thought of painting his own boardroom would presumably never have occurred to him. But Mr. Krause, his co-founder Ulrich Kranz, 60, the father of BMW’s i electric vehicle project, and Karl-Thomas Neumann, who was CEO of automaker Opel until last June, seem determined — relieved even — to break with the past.

To be sure, these middle-aged execs don’t quite fit the profile of messianic Californian startup entrepreneurs. Their selling point is that after decades of combined experience in the world’s most prestigious auto industry, they know what they’re doing, and they know where others — the Elon Musks and the established auto brands — are going wrong.

First, Musk. The Tesla founder, based just 20 minutes from LA in Hawthorne, made the mistake of trying to reinvent auto manufacturing, Mr. Krause said. “The auto industry doesn’t need a fresh start in manufacturing. It’s perfected that over the last century.”

Next, everyone else. “The automakers are locked in a dilemma,” the former BMW manager continued. They’re still doing so well with combustion vehicles that they’re shying away from the necessary radical overhaul of their business model.

29 p15 Electric cars worldwide-01

Mr. Neumann feels liberated since he left Opel in the course of the struggling automaker’s takeover by PSA Group of France last year. “It’s impossible to spend the morning driving the traditional auto business forward and then to complete reinvent yourself in the afternoon and become a startup,” he said. His former colleagues have called him crazy, but they’re just jealous. “When I was the head of Opel I couldn’t say that the combustion engine doesn’t have a long-term future. Now I can say it,” the 57-year-old said.

Evelozcity — it’s a tongue twister and something of a working title —  was founded last December with the aim of developing affordable electric cars and outsourcing production to firms in the United States and China. It wants to price vehicles at below $50,000 and hopes to have its first planned model, a minibus for commuters in inner cities, up for sale by 2021.

Mr. Krause brought the group together, setting up Evelozcity a few weeks after quitting his job as finance chief of Faraday Future. He managed to convince investors from Germany, China and Taiwan to provide $1 billion in funding to cover the development period right up to the planned start of production in 2020. He won’t say who the investors are.

Mike Ramsey, an analyst at Gartner Research, said Evelozcity has the advantage of being more nimble and capable of taking a new approach — even though its management comes from the old world of automaking. But the leap from the design stage to production presents a big challenge, particularly as VW, BMW, Daimler and GM are all getting into e-cars as well, he warned. If Evelozcity manages to pile up attractive patents, though, it could well become a takeover target, he said.

Managing the future of mobility.

Mr. Krause and his team are not considering any of these scenarios. They are developing a vehicle that can sell in three years’ time. For e-cars, the price is crucial, and more important than the range, said Mr. Krause. “A big battery leads to a big car and a high price which most people then can’t pay.” That’s why the startup won’t develop luxury limos like Tesla’s Model S. Its battery range will be just 400 kilometers.

That will save thousands of dollars, cut the price and make the cars suitable for the mass market, said Mr. Neumann. “Electric mobility will start in the cities, with small cars,” he said.

Mr. Kranz, the head of technology, is adapting the design to fit that idea. He’s putting the driver’s seat half a meter further forward because the engine needs less room. That will make the interior more spacious and easier to get in and out of. The company is also developing a skateboard-style platform on which different types of passenger cabins can be built. With delivery vehicles, for example, it will be possible to fit an oven or a refrigerator unit. Minibuses will get tables for meetings.

Evelozcity wants to be more a software company than a classic auto company. Mr. Neumann is dreaming of a “smartphone on wheels.” Like Apple, which has its iPhones made in China, he wants the company to outsource assembly and to focus on design and on dovetailing with mobility providers like Uber or with Alphabet subsidiary Waymo. Instead of dealership networks, Evelozcity aims for alliances with fleet operators such as Waymo, Uber and Amazon. The startup's workforce, now 130 strong, is expected to grow to no more than 350 by the end of next year.

“I’m realistic, there will be times when we have to expect headwind,” said Mr. Krause, stabbing a wheat tortilla with a plastic fork in front of a fast food van parked outside the office. There’s no denying their ambition, but, in true German fashion, the managers have their feet firmly on the ground. “We don’t want to take ourselves too seriously and not pretend as if we have all the answers already,” Mr. Neumann said.

Britta Weddeling lives in Silicon Valley and reports for Handelsblatt on the Internet and technology industry. To contact the author: [email protected]