Here’s the latest reader question, along with my reply!
Fred asks: What is up at Elio motors? Are the major manufacturers trying to kill real competition? Or possibly a scam?
My reply: It is difficult – bordering on impossible – to launch a new car company due to something called regulatory capture. This translates as the cost of complying with the myriad applicable regulations – in this case, things like crash test/safety requirements, emissions certification – which can entail millions of dollars in capital which a small start-up simply can’t afford to spend.
Henry Ford built his first cars car on a shoestring budget and was able to just sell them. This enabled him to build capital, which he invested in his growing company. But today, a company like Elio must spend capital it hasn’t got to comply with all the fatwas – leaving insufficient resources to build its first production cars. A few prototypes is typically as far as they ever get.
As in the case of Elio.
I do not think Paul Elio – the company’s founder – is a scammer. I think he has been trying very hard to get his car produced. But he can’t sell a production car until it meets all the federal fatwas and so far, he hasn’t managed to do this.
The established car companies love this, of course. Regulatory capture keeps competition from ruffling their feathery nest.
Got a question about cars – or anything else? Click on the “ask Eric” link and send ’em in!
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