LocostUSA.com

I recently took a slide down the Intertubes over to http://www.mevltd.co.uk and really liked what I found there. For me, I'd love to build a Sonic 7, but I know there are others on here that are chomping at the bit for an LHD version of the Exocet. Can't say I blame them - I could be convinced!

The trouble is, MEV does not currently export to North America. So I asked MEV founder Stuart Mills (very helpful, responsive guy) what it would take to become a distributor. Well, they don't want a distributor - they want an authorized North American manufacturer.

See, he's already swamped with orders from his neck of the woods for the Exocet (booked solid for the next 12 weeks. Adding capacity for North America just isn't worth it for the shipping costs. So what he'd like to have happen is have someone get set up to build the Exocet in North America, and pay a royalty for each chassis sold. He said that for £25k (a hair shy o f$40k US) they would give someone all welding jigs and GRP moulds necessary to be able to start production of the Exocet. Royalty on each vehicle would start at about $250, and could be reduced based on annual volume. MEV would provide technical support to both the manufacturer and end customers, advertising, and publicity as well.

From my standpoint, it seems a bit silly to ship welding jigs across the Atlantic, so I asked him about instead providing CAD data on the chassis and other weldments, in order for a manufacturer to develop their own jigs. Ditto with the moulds. He was open to the idea, so the initial outlay could be less than $40k, although he is obviously well within his right to try to recoup the cost of development of his vehicles.

As much as I'd love to be the one, I simply have no means to do this. What's needed is someone with a shop, a 2" tube bender, welder, and someone with fiberglass skills. I know there are people on this board with those skills, and with a love for fast toys. So how about it?

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Andrew

Exploring every single option, permutation, and possibility, to figure out what flavour of awesome I want.

> ...he is obviously well within his right to try to recoup the cost of development of his vehicles.

Right. That's what the royalty is for. Recoup, and then hopefully profit. But to draw someone into an agreement of this nature, he'll have to make it possible (perhaps even likely) for the licensee to recoup and profit as well.

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Locost builder and adventurer, and founder (but no longer owner) of Kinetic Vehicles

He'd have to be a blithering idiot (which I do not believe he is) to think that he's going to rope someone into doing this to simply break even (let alone do so at a loss). And anyone going into it would have to be an equally daft numbskull (which I doubt they would be) to do so willingly.

I did some (very rough) calculations and figured that even if one paid for the jigs and moulds, one would be able to break even after a quantity of 40 kits, with only a slight increase in kit cost (and that's including materials, labour, and overhead on each kit too, as well as paying for the original investment). I'll be the first to admit my numbers are rough, but it's possible at a price less than what a kit shipped direct from MEV would cost. I'll also admit I have no idea if 40 is a big number for kit car sales. It does not account for, however, upselling, accessories, and so on and so forth (a.k.a. profit padding).

Really, all it would take to realize a profit is to already be set up for welding and fiberglass work. Get the CAD data from MEV instead of buying the jigs and moulds, have jigs and moulds made here, build one LHD variant as a development mule, and you're off. If you're serious about it, it would take, what, 4 months? Ink a deal, get the data, have jigs and moulds designed within a few weeks, produced in a few more, the first mule working a month after that, and then shakedown and marketing. That's assuming full-time, of course.

I'll admit I'm hoping this has piqued your curiosity, Jack. Along with a few others that will go nameless (unless they speak up here too).

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Andrew

Exploring every single option, permutation, and possibility, to figure out what flavour of awesome I want.

Some back-of-the-napkin analysis...

The Exocet list price is GBP2500, inclusive of VAT at 17.5%. So GBP2128 exclusive of VAT or US$3343 at USD1.571/GBP. Less the USD250 royalty puts you at USD3093. Assuming you could clear 20% profit before the royalty leaves USD419 net profit on each car. Assume that since you're a small shop (just a welder/fiberglasser/you) you can only produce 1 a month at best. I would also venture that an annual turnover of 12 per year in the first several years is extremely optimistic given the state of the US market. Anyhow, that's 12 x USD419 = USD5028 annual income. Ignoring Uncle Sam's cut and time value of money, it would take 8 years to break even on your initial USD40,000 investment.

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Steve

Personally I would think it would be more profitable to sell a more complete kit to allow for a higher amount of profit per unit. I think if you had the construction process very detailed and simplified you should be able to sell quite a few kits.

For back of the napkin calculations, You should use a US sell price of what the market will bear. For one, I would start at the US price landed here including any import duties. I know nothing about these costs but based on others experience on this list, I'd expect this to be around $1500 USD including US ground shipping. This puts a US based build sell price at around 3343 + 1500 or $4843 USD. This shoud equal a shipped to the customer price. Whether you would have people knocking at your door for this price, I don't know.

Now subtract from that sell price, the cost of shipping(750?), crating costs(250?), build materials (2750?)the 250 USD royalty fee, etc to come to a profit per unit sold (843?). And that is figuring you are working out of your own garage or have no fixed overhead costs. I figure that the galss work is outsourced as is the frame build. This reduces the break even period considerably. One ends up operating much like Jack's Kinetic Vehicles where there is a minimum of overhead and much of the actual labor is outsourced.

I wonder if MEV would consider a different plan where the royalty is higher and the fixture/mold costs are much less.

One business plan is as good or bad as another. The big question is how many can be sold and at what price level? This is a bare bones kit as has been stated already. It can't command a very high price. I wonder what the real market is for a minimalistic kit? I guess we'll never know.

Just thinkin'

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Chuck.

“Any suspension will work if you don’t let it.” - Colin Chapman

Visit my ongoing MGB Rustoration log: over HERE

Or my Wankel powered Locost log : over HERE

And don't forget my Cushman Truckster resto Locostusa.com/forums/viewtopic.php?f=36&t=17766

At least not on my nickel...

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Steve

Depends on your definition of "bare bones". From what I understand, you need absolutely nothing more than this GBP2500 kit and a Miata donor to build a working vehicle. I wouldn't call that "bare bones" - it's complete! Of course, for that you get a minimalist vehicle, but minimalist is very different than bare bones.

Even if it does qualify as "bare bones", you get a drivable exo-style vehicle, complete for, let's say $5k US (assuming you break even or better on parting your donor Miata, as they claim). How many other kits - or scratch-built vehicles - can do the same? The Exocet may develop the low end of the kit car market to an extent that we wouldn't expect.


If you try to make this deal and have the capacity for only 12 vehicles per year, MEV would be stupid to agree to the deal in the first place. You're only going to get out of the business (or any business, for that matter) what you put into it. If you treat it like an after-work hobby, expect hobby income. Treat it like a full business and expand where you need to, that's where you'll make your coin.

I can't imagine that 12/year is optimistic. Think of it this way: all the people that were thinking of spending $20k on a FFR kit now have to put that idea on hold, and they find this kit for $5k - they're going to jump on it. That, and I think you'll find people like me, on a tight budget, and this kit finally falls within reach. 25 a year shouldn't be a stretch - that's one person for ever two states (totally ignoring Canada and Mexico, of course) every year.

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Andrew

Exploring every single option, permutation, and possibility, to figure out what flavour of awesome I want.

Okay, I'm going to chime in here. I have experience both as a manufacturer (Pterodactyl Ltd and others) and as a designer licensing a product (Cuyunair and others).

For starters, note that the market isn't bearing the US price landed plus duties, as shown by the rarity of Exocets in the US. If retail customers were importing 60 a year at that price, one could reasonably hope to sell 60 a year locally built at that price. The current purchase price does not define "What the market will bear" if they're not selling. Licensing the design makes good business sense because it's a way to get the price <down> to what the market will bear.



Well, there's the 40 thousand dollar signing fee. I'd figure the cost of building your own tooling is about equal to the cost of crating and shipping the UK tooling, so it's pretty much a wash if the tooling is done here or there. If you sell 40 Exocets, that's another grand per car. And if you have no overhead costs, then maybe you should rent out your facilities to somebody else and profit from the rent--seriously, why bother manufacturing if you have something as valuable as a zero overhead manufacturing operation? Let somebody else use your shop, and have them mail you a check every month.



Well heck, if you're not counting your own labor in your costs, how does outsourcing lower the break even point? Why not do it for free yourself?



Grrr. Seen my lease lately? How about my insurance premium? Darn near <all> of my "actual labor" is outsourced, because A) I can't weld well enough to meet my standards for quality products, B) I don't have enough work to make payments on a CNC laser cutter, and B) if I spent my time fiberglassing, I wouldn't have time to take on the projects that pay my "minimum of overhead."

I think the entry costs and the royalty are unrealistic. As a licensor, I've never charged more than a 2-1/2% royalty on anything I've ever designed. As a licensee, I've agreed to more royalty than that on specialized low quantity items (e.g. Haynes Roadster noses) where the tooling costs exceed the expected royalty costs and the shipping (again, HR noses) makes stocking the original item impractical. But once you have significant sales, the problem with high royalties is, it encourages others to knock you out of your own market.

If a manufacturer is making 15% return on investment, it's doing darn good and everybody in management has a secure job. If it gets under 10% then management has some explaining to do. If it gets up around 20%, then next year (or maybe even next month) you have other businesses doing the same thing you're doing, and undercutting you by 5%.

So let's imagine you're a US manufacturer that has taken the offer to build Exocets for $40,000 down and $250 a unit, and you're selling the kits for $4843. You're paying $250 for your royalty and $400 each for the first 100 units for the privilege of making them. And you're personally making a poverty level profit of $16,000 a year, that's $160 a kit for 100 kits a year. Don't you think somebody else will be tempted to do the very same thing you're doing for $3999?



Not if a minimalistic kit manufacturer is going to send 10% of gross to another manufacturer, and pay half of that up front, and have to sell 160 minimalist kits before the design costs drop to 5% of gross.

All in all, the Exocet is an interesting concept and possibly one with market potential here in the US, were it US manufactured. But wow, forty grand as a buy-in, plus another 5% of retail on top of that per unit as a royalty, that doesn't leave a lot for the local manufacturer to take to the grocery store.

But that doesn't mean we'll never know. Plenty of people on this forum are perfectly capable of developing a drop-on-a-Miata frame and body combo for less than $40,000. I'd do it myself, but I don't think that "real market" is anywhere near 100 units a year in North America.

PS--
> If you try to make this deal and have the capacity for only 12 vehicles per year, MEV would be stupid to agree to the deal in the first place.

Are they selling 12 Exocets a year in North America now? If not, then they'd be getting $40,000 right off the bat, plus $250 per car for more cars than they're currently selling here. Doesn't sound all that stupid.

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Locost builder and adventurer, and founder (but no longer owner) of Kinetic Vehicles

Personally it looks to me like MEV is asking a bit much of their would be stateside manufacturer. They probably don't have more than $10k in the jigs and fiberglass tooling they are selling you for $40k and at that price they could probably care less how whether or not you ever sell a single vehicle since they've already made their profit. If yo do end up selling a bunch and some royalty checks start rolling it, that's just a bonus. The deal doesn't include any risk on their end, it's all on your end.

How many will you sell? Here's some real world numbers for you. Who hasn't heard of the Stalker? It's one of the most popular kits sold here in the USA. Based on the quote below lifted from their website they've been in building these since 2001. Over the past nine years they say they have sold 150 kits which works out to about 1 1/3 kits per month. So one a month is probably pretty optimistic for something that new and "different."



The problem I see with the whole deal is that for $40k you could easily design your own chassis and jigs and molds and you won't have to pay royalties to anyone. IMHO there appears to be plenty of room for improvement in the looks department. It looks to me like the product of a high speed crash between and At-om, a locost, and rowboat.

I kid. (mostly )

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He is a wise man who does not grieve for the things which he has not, but rejoices for those which he has.

Well, here's a radical thought: don't start with the Exocet. Sure, it's the model that MEV is selling the most of over in the UK, but that doesn't mean squat, really. There's no reason the Rocket or Sonic wouldn't sell over here too, and at twice the base cost for the kits there's that much more room for profit and royalty payments to fit nicely.

If you're really set on the Exocet but the profit margin is too thin on it, have them do what I suggested: make up a bunch, pack it all in a 40' shipping container, and sell them once they land. If you don't want to buy however many can fit in a container up front, offer to sell them on consignment, or some other such deal.

Has ANYONE seen an Exocet in North America? From what I understand, MEV isn't selling into the States right now, as shipping is a huge percentage of the cost of the kit and they don't have an LHD-spec Exocet figured out yet.

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Andrew

Exploring every single option, permutation, and possibility, to figure out what flavour of awesome I want.

Here is what you get for your money:



You get a frame with integrated roll bar (not designed to any club requirements), a 3 pieces of GRP, 4 fenders, a few pieces of sheet aluminum and some misc pieces of harware. Well, no seats, no lighting, no windscreen. You get to use a worn out suspension designed for a 2300# car...... everything else is from a clapped out Miata, with an assumed 100K miles to start out. Oh, you do get a graphics package, maybe that makes it a complete kit.


One thing about this vehicle and others like it, is that in Illinois, since it is of a unique visual design, I'd have to register it as a Specially Constructed Vehicle and would have to meet 2010 emissions and other safety equipment stuff. Will a 1990 Miata meet 2010 emissions? I don't know. My Locost can be registered as a modern replica of a vehicle made between 1948 and 1985 which makes it exempt from emissions, current equipment etc.

Jack, I wasn't trying to pick on Kinetic or you. I was looking at this venture as a 2nd job that may eventually work into a supporting business. In the mean time one would be investing time (plus the initial investment) rather than pulling a paycheck. In that respect, the manufacturing work would be outsourced. No employees to pay to sit around while you wait for the next order to come in. No unemployment benefits to pay when one decides to "pull the plug". Just a bare bones business. I'm also not suggesting that the numbers support it as a viable business. I didn't mean to suggest that that is your business model. It is just that Kinetic is closer to this than some other well know seven-based businesses.

Yes, more money could be used for payoff of the fixtures by building the frame yourself, but that means a larger manufacturing space and electricity and gas and.........more fixed overhead. I believe that the more the fixed overhead, the more likely the failure is. It is tough to send out checks every month when there is no money coming in the door. It takes some very deep pockets to pull that off.


I was basing my original sales price on statements made earlier that MEV was not interested in exporting the Exocet to the USA. They were too busy as it is, filling orders for the UK. IF that were actually true, then my estimation of price would be close to correct. We also don't know if they are busy with the Exocet or the other models they offer.

I could go on...... but the bottom line is that MEV is asking a lot, both for the setup tooling and for the royalty fees.

Interesting that MEV, with the Exocet, has basically updated the Dune Buggy business model. Tear off the VW body and drop a GRP body on to it in a weekend. We all know how cut-throat that business got. literally hundreds of garage based businesses were started up and folded overnight. Anybody willing to roll their own and start up a new Miata-Buggy company to compete with MEV?

Peace!

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Chuck.

“Any suspension will work if you don’t let it.” - Colin Chapman

Visit my ongoing MGB Rustoration log: over HERE

Or my Wankel powered Locost log : over HERE

And don't forget my Cushman Truckster resto Locostusa.com/forums/viewtopic.php?f=36&t=17766

I think there would be a MUCH larger market for a new Miata based book. Done exactly like the Haynes, where you have every tube broken out, how to make jigs and everything. 99% of the information I think you'd need is here on this site. Basically just collect it all, make some nice cad drawings of the part breakouts. In the end it's easier to sell a $30 book, than it is to sell a $5000 kit.

Then be a supplier for every part, if someone doesn't want to make their suspension components, they can just buy them from you. Basically you take the roll of both 3GE in the UK and the book. I think if the process of building was simplified even further, more would enter the market. You could have a different edition of the manual where you use a Mustang as a donor, or a different suspension design for using Mustang II spindles.

I'd buy it.

I think about how much energy is put into the open source engine idea and I wonder if we could as a group basically create an open source North American locost. There is lots of CAD talent here, a ton of fabrication and real world experience. Basically if we had a separate forum and did poll's on what chassis size, what donor, then you could even have two suspension designs, one for a street car that may see the track, and another for a track car. Ideally if you could keep the suspension mount points the same, you could swap out your suspension and now have a track car. Does this idea excite anyone else?

I am an accountant with a manufacturing background, and can hear in Jack's assessment the voice of hard knock experience. Yes, running a shop is very expensive between rent, utilities, insurance, workers' comp, telephone, advertising, clerical help (if any), etc. I once worked in a shop where it cost $30k per month just to switch on the power (electrical demand charge). Dennis Brunton, successful as the Stalker is, only has room in the budget for maybe one or two full-time employees besides himself at a 1.5 cars per month rate. 12 Exocets per year would not make a worthwhile business by itself, though someone like Jack or Pook who has the shop and the skills could take it on as marginal business if the returns were attractive enough.

MEV is asking way too much with the 40k plus $250 per unit. After all, a US manufacturer could just invest their own design time and knock it off, as Chet suggested. The price of the license should be based on it being an attractive alternative to putting in the product development time.

If the Exocet were the talk of the automotive world, then a license would be much more valuable due to the amount of automatic sales that would come along it. Compare to the Ar-i-el At-om, for example.

So what's reasonable? I'd say (A) to facilitate tooling up at minimum cost and charging a modest royalty thereafter, or (B) selling a perpetual license for a one-time fee, but big up-front money plus a royalty is a pipe dream, IMO. Besides the Exocet being unknown here, how much longer is the Miata going to be a viable donor?


Edit: *EFR, WTF??

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Dreaming the dream since 2003. Haynes chassis, Miata uprights, everything else from 1987 NA RX7 donor.

Well said Pete.

Going thru some other paperwork today, I came across some notes I had made when talking to Steve L at CMC some years back. At the time I was looking into an Eleven body he was selling on e-Bay. Steve claimed CMC had produced about a dozen "Eleven" and 250 "Seven" kits. This was just before he went "missing". His crating charge for the body was $100 and shipping from Alabama to Chicago area was $600.

Just some data points to add.

Funny sidenote, I found out this last year that that eBay auction ended up selling to a fellow in the same town as me. Small world! I ended up buying the Ron Champion "Book" from CMC at the time. That started me down the Locost path.

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Chuck.

“Any suspension will work if you don’t let it.” - Colin Chapman

Visit my ongoing MGB Rustoration log: over HERE

Or my Wankel powered Locost log : over HERE

And don't forget my Cushman Truckster resto Locostusa.com/forums/viewtopic.php?f=36&t=17766