Lit Motors/New Power Case Slides by Matt Dillabough, Chris Zhou, - - PowerPoint PPT Presentation

SLIDE 1

Lit Motors/New Power Case Slides

by Matt Dillabough, Chris Zhou, Wandi Che, and Jillian Lowey

By submitting this deck of case slides, the members

• f our team affirm that we all participated in the

analysis of the case and the creation of this document

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A New Power in Personal Transport: Sinclair’s pre existing name recognition and connections allowed him to create alliances with established manufacturers to develop an incredibly cheap, safe, and practical vehicle that has no competition in the UK

Overall Business Model Product Value Proposition Go To Market Plan

• Take advantage of the largely untapped

electric vehicle market in Britain (only 175K electric vehicles of which 90% are milk transportation vehicles) and aggressively take over the sector

• British laws strongly encourage the

manufacture of electric vehicles and will make the product viable for a huge population of possible customers

• Majority of the research and production is

conducted in house which will reduce costs in these areas

• Runs on an electric battery which is more economic

than a petrol vehicle (at least twice as efficient) and entices environmentally concerned customers

• The vehicle is incredibly cheap (£399) and does not

require a license, insurance, or a helmet so almost any demographic can drive the vehicle

• British laws give the vehicle many benefits which do not

exist for petrol cars (it is not taxed, does not need to abide by car parking laws, etc.)

• Extremely safe design that performs well in the

elements and encourages purchase for urban customers concerned about this aspect (families, kids, etc.)

• Multiple Hoover service centers will allow customers to

easily acquire new batteries, chargers, and maintenance

• Use partnership with Hoover to take advantage
• f their large scale manufacturing facilities
• Take advantage of Sinclair’s strong name

recognition to quickly build brand recognition and trust

• Extravagant launch to inspire investors and

customers while showcasing all of the features

• Launch a massive ad mail-order campaign to

raise awareness for the C5

• Initial mail-order campaign makes purchasing a

C5 much easier than going to a dealer to purchase another competing vehicle

• Being the sole owner of the company

makes it difficult to raise huge sums of money (for company expansion, research & development, paying down debt, etc.) because investors are less likely to give money without a share of the company

• Less targeted advertising: the £3M

advertising campaign on press and TV commercials seem to be very general and not cost-effective. To achieve more targeted customers, they need to conduct market research and specify the target

• The C5 is not weather proof on its own and requires
• ther velcro covers to protect it against rain.
• No indication of how long the vehicle battery lasts for
• As the most controversial newcomer to Britain’s road,

Sinclair is being labelled a toy

• Vulnerability in traffic: Transportation needs to

guarantee the safety of its passengers, but the C5 seems to be no more safe than an average motorcycle

• Very little specific details provided about the product so

it is hard to know what exactly a customer is purchasing

• Many crazy rumors surrounding the C5 existed

before the launch so it is possible that customers

• r investors had unrealistic expectations for what

the actual product would be and therefore not be interested in acquiring the actual product

• The marketing plan seems general: Having

both online channel and retail channel give more people access to the product; however, without enough careful market research, their plan to get into the market may not be the most cost-efficient way, given the fierce competition

Strengths Weaknesses

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Lit Motors: through resource-efficient prototyping and market analysis, Lit Motors was able to develop an attractive, economical, and practical product (with a stellar brand perception) that outperforms competing vehicles

Overall Business Model Product Value Proposition Go To Market Plan

• Clear focus on disruptive personal

transport innovations which has the potential to revolutionize the industry

• Professional design and engineering

support teams

• Partnerships to address sales and services

for startup with limited resources will allow Lit Motors to focus on their strengths (innovative design and effective marketing)

• Strategic and effective branding garners

customer interest despite a high initial price point ($24K)

• Once critical mass for product adoption

has been reached, the economy of scale will allow Lit Motors to produce and sell the C-1 at an unparalleled price point

• Saves time and improves safety compared to competitors.

Both are huge pains for automobile drivers and open air motor riders respectively

• Clear customer segmentation: Generation Jones and

young urban professionals looking for 2nd car

• Easily demonstrable cost savings compared to petrol car

from their running cost comparison chart

• Sleek design makes the product appealing and desirable

to a large population of possible customers

• Appeals to environmentally concerned customers due to

electric battery

• Operating costs ($2.4K + charging) are much cheaper

than an electric car ($17K + charging) and certainly cheaper than a petrol car

• If economy of scale is achieved, price can drop to $12K

and then $6K (similar and then below competition price) which could yield a net income of $100M+

• Effective product branding through informational

videos, apparel, and design made the C-1 an attractive product that appealed to the masses (not just a niche population like its competitors)

• Giving units to popular companies (like Zipcar) and

celebrities made the product fashionable which strengthened their brand perception

• Sleek (but not masculine) design ensured that the C-1

would appeal to both sexes

• Possible partnership with an established manufacturer

would allow Lit Motors to focus on product development and marketing (the area they most differentiated themselves from competition)

• Lit Motors has a strong social media presence to

connect and create interest with a large population of possible early adopters (also allows them to receive feedback and make necessary changes in the future)

• Highly dependent on suppliers to keep

production costs low due to the capital-intensive process of bringing a vehicle to market

• Currently lacks brand awareness and any

slip up in the branding process could destroy the future of the product (similar to how Segways never became mainstream due to their “geeky” perception)

• $6M burn rate with only $280K cash on

hand means the company needs to become profitable or raise additional funds very soon

• First “innovative vehicle” to arrive on the market. Value

may be hard to grasp for prospective customers, even when it solves the pains they experience

• May run into gap between early adopters and mass

market

• Daniel wants virality, but in reality it will be hard to achieve

with the low volume he starts off with. 70 vehicles distributed across many target cities will have difficulty gaining traction

• Initial price of $24K is very steep and will make reaching

critical mass for product adoption hard to achieve

• If partnership with manufacturer falls through, Lit

Motors would need to dedicate more resources to establishing a supply chain and selling the product

• The C-1 is a unique and divergent product so they need

to convince customers it is safe and practical while giving it a stylish design

• Before achieving an economy of scale and reaching a

critical mass of early adopters, Lit Motors would need to take on a period of financial losses (costs $30K to produce a C-1 and sell for $24K which is net -$6K)

Strengths Weaknesses

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Recommendation

Both Companies Lit Motors New Power

• Lithium-ion batteries have

traditionally been huge cost barriers for electric vehicles. Both companies need to secure strategic partnerships to keep costs low despite ongoing market shortages and price raises.

• An automobile isn’t a one time
• purchase. Both companies need

to deploy both the parts and the human expertise behind service and maintenance of its products.

• Both companies need to

closely pay attention to regulatory updates in their relevant space as this could disrupt their business model.

• Marketers of innovative

products need to find ways to effectively brand in order to attract mainstream consumers to reach a critical mass of product adoption (instead of becoming limited to early adapting “geeks” similar to the Segway). We believe that Daniel should sell the rights for the cargo scooter to fund development of the C-1 for the following reasons:

• 1. One critical design flaw we observed on the cargo scooter

was that it’s designed to carry perfectly cubic cargo. In real life, we seldom find cubic boxes that can fit into the space they

• have. 200lb of cargo may be scattered in a small packages,

and without a tray-like container like a pickup truck, the cargo scooter won’t be useful in practice.

• 2. Lit Motors is still a young company and it should focus on
• ne group of customers only. The cargo scooter requires an

entirely different product value proposition and go to market plan which divert critical marketing resources from commercialization of the C-1. If Daniel is concerned with raising a lot of money at a low evaluation, he could consider raising convertible debt. His company is at an inflection point; they need to put out a minimally viable product that looks like the final design and can be road tested by consumers (half of his customers won’t order unless they test drive). Daniel’s main focus should be to resolve the design and supply challenges preventing him from bringing out functional prototypes. That will be the ultimate market assessment. People don’t really buy cars without feeling them. You need to build desire! While the potential for Lit Motors to become a market leader and extremely profitable company is huge, because of the dependence on reaching critical mass for product adoption (in order to become successful), we would not pursue this venture. While at first glance Sinclair’s C5 appears to be an undoubtable success, a lot of this prospect is founded

• n theory and few facts. Compared to Lit Motors, it

appears that Sinclair has conducted almost no market research or analysis regarding his new vehicle. While it seems obvious that there would be large demand for his C5 given its extensive list of revolutionary features,

• ne cannot be sure about this without at least

surveying some population of possible customers. For this reason, we would recommend that Sinclair shift his resources to confirming the necessity and desire for his product before he begins manufacturing it on a large scale. Additionally, while current laws in Britain regarding electric vehicles are favorable for the C5, it is unreasonable that these would last if and when the C5 becomes a mainstream product. It is hard to imagine the government would not institute changes if the streets of Britain were filled with 14 year old, unlicensed, and uninsured drivers. While these attractive laws are a significant selling point for the C5 currently, Sinclair’s business model should not be entirely dependent on them. For this reason, he is going to have to ensure that future iterations of the C5 include more revolutionary features to bring customers

• back. The future for Sinclair’s C5 looks promising as

long as he does not compromise on his innovative brand identity; being that this is likely, we would pursue this venture.