SINGAPORE: It was on Sep 26, 2017 when British inventor James Dyson announced ambitious plans for his household appliance firm to plough in £2 billion (US$2.5 billion) to produce electric cars by 2020.
Cities around the world were filled with “smog-belching cars, lorries and buses” as major car makers “circumvented and duped clean air regulations”, he wrote in an email to employees then. Resolving air pollution woes was his “ambition”, the billionaire entrepreneur added.
And that solution would be in the form of electrically powered vehicles.
“Dyson has begun work on a battery electric vehicle, due to be launched by 2020,” Mr Dyson wrote, formally kicking off an ambitious project for his company, which is better known for its vacuum cleaners and bladeless fans.
A year later on Oct 23, the company said it had picked Singapore as the place to build its much-anticipated electric car plant. It followed up with another announcement three months later that it was moving its corporate head office to Singapore.
READ: Why did Dyson pick Singapore to build its electric car?
That Dyson chose Singapore reflected “the increasing importance of Asia” to its business, as well as the country’s attractiveness in having an extensive supply chain and a highly skilled workforce, the company said then.
In May this year, Dyson unveiled brief details of patents filed for its electric car and said that its vehicle would be more energy-efficient than rivals.
Dyson’s ambitious project seemed to remain in high gear until on Thursday (Oct 10) when the company said it was hitting the brakes.
Breaking the news in an email to employees, Mr Dyson wrote: “Though we have tried very hard throughout the development process, we simply can no longer see a way to make it commercially viable.
“I wanted you to hear directly from me that the Dyson board has therefore taken the very difficult decision to propose the closure of our automotive project.”
READ: Dyson to scrap car project, about 20 jobs in Singapore ‘affected’
U-TURN NOT A SURPRISE: EXPERTS
Two experts that CNA spoke to said they were not surprised by the company’s shift in gears.
“I would say that I half expected the project to not take off,” said Associate Professor Nitin Pangarkar, who had described the hype over Dyson’s Singapore car plant as “a load of hot air” in a commentary published in the South China Morning Post in November last year.
Echoing that, Associate Professor Zafar Momin from the Nanyang Technological University’s (NTU) Nanyang Business School said he had been “quite skeptical” of the company’s ability to pull off the ambitious venture.
“Using innovation to crack the home appliance market is one thing; making road-worthy electric cars and entering the automotive industry is a whole different ball game,” he said.
Both professors cited a myriad of factors. For one, producing electric cars is a complex process that requires new entrants to face “high-entry barriers on several fronts”.
Apart from perfecting the technology and design, Dyson would have to build up a reliable and cost-effective supply chain as well as a sales and distribution network across international markets. It would also have to comply with regulations on safety and reliability across various jurisdictions, among others.
“It is a tall order to assemble all these capabilities,” said Assoc Prof Pangarkar from the National University of Singapore’s business school.
READ: British technology company Dyson to build electric car in Singapore
Venturing into electric cars would also be capital intensive, with additional investments needed on a regular basis for product development, facilities, and research, said Assoc Prof Zafar.
Pointing out that with profitability a challenge even for leading manufacturers, the challenges were multiplied several times for Dyson in what has become an increasingly crowded market and a car industry that is “past its peak”.
“Even though Tesla has been a successful entrant into the car market from a product and brand standpoint, their profitability is highly suspect even after 15 years,” said Assoc Prof Zafar.
“With the current trend of established carmakers pivoting their investments toward electric vehicles, and new players entering the electric vehicle market, including several from China, the bar for cost-effectiveness, product performance and capital requirements would be significantly higher for a newcomer like Dyson.”
British technology company Dyson is closing its automotive division. (Photo: Dyson)
With the car industry seeing falling sales and profits, Assoc Prof Pangarkar said the risk-reward “doesn’t look great” even if a newcomer like Dyson assembles all the necessary capabilities.
This as the rise of the sharing economy and improvements in public transport mean many millennials see little point in owning a car. Some traditional car brands have also been riding on new concepts, such as car subscription plans.
“The car industry may be past its peak, especially in terms of sales and profits,” he told CNA.
Overall, both professors concurred that Dyson had “underestimated” the challenges of producing electric cars.
READ: Dyson to move corporate head office to Singapore
READ: Commentary: Why big businesses like Dyson have moved their HQs elsewhere in the world
But when asked if the British technology firm had made a bad move, experts disagreed and noted that the electric car venture was very much in line with the company’s innovative past, characterised by its bold designs and innovative reinventions of common household products.
The move by Dyson to call off the project after two years should not be seen too negatively, they added.
“Dyson may have had a far-fetched idea in the first place, but deemed it worthy of exploration and eventually concluded it to be unviable. There is nothing wrong with that. Trial and error is part of the innovation process,” said Assoc Prof Zafar.
“I think it was a case of ‘Let’s try and see if this works’ and this is perhaps typical of Dyson,” said CIMB Private Banking economist Song Seng Wun.
“Like their vacuum cleaners, they tend to think outside of the box but unfortunately, not all ideas that are outside of the box work.
“The fact that they were willing to think so much bigger than a consumer project is encouraging. So is the fact that were willing to cut losses so quickly once they realised it was not going to be making money,” he added.
This is not the first time that Dyson has ended an unprofitable project. In 2005, the company stopped its Contrarotator washing machine after bad sales.
In his email on Thursday, Mr Dyson said: “Since day one we have taken risks and dared to challenge the status quo with new products and technologies … This is not the first project which has changed direction and it will not be the last.”
WHAT IT MEANS FOR SINGAPORE
With the shuttering of Dyson’s automotive unit, plans for its maiden car plant in Singapore will be scrapped.
If Dyson’s plans had materialised, the plant could have brought about some benefits, said Maybank Kim Eng economist Chua Hak Bin.
“It was a different kind of manufacturing investment,” he said. “Dyson was a lot more futuristic and new tech so we wondered if it would bring parts of the supply chain, in terms of supporting industries, to Singapore.”
READ: Dyson looking to hire ‘substantially’ more electronic engineers, digital marketers in Singapore
READ: Dyson launches three new products – and they have origins right here in Singapore
When Dyson announced its Singapore plans last year, Prime Minister Lee Hsien Loong took to Facebook to describe it as “one of the companies creating new and exciting opportunities here” and urged local engineers to “rise to the challenge”.
Trade and Industry Minister Chan Chun Sing also posted on Facebook that he was “happy” about the announcement, as it reflected Singapore’s attractiveness as a base for investments in innovation.
The Economic Development Board, in its yearly report published in February, highlighted autonomous vehicles and smart mobility as one of its key priorities ahead, in a bid to ride on the crest of Dyson’s announcement.
The government agency was in “active negotiations or discussions” with a couple of other electric car makers so as to “build clusters”, its managing director Chng Kai Fong told Bloomberg during an interview in April.
In response to CNA’s queries on its strategy moving forward, EDB’s assistant managing director Tan Kong Hwee said Singapore remains interested in advanced manufacturing activities, including electric vehicles.
“We believe Singapore is well-positioned for activities that leverage on the deep skills of our workforce, the use of advanced technologies such as robotics and automation, and ecosystem of suppliers locally and in the region,” said the emailed response.
“Singapore’s proximity to the markets in Asia will also enable companies to capture growth opportunities in the region.”
READ: Commentary: Dyson’s Singapore car plant a tale of trade opportunities in turbulent times
The U-turn in Dyson’s plans is set to affect about 20 employees in Singapore. The company told CNA that it has “sufficient vacancies” to absorb most of those affected.
Dyson currently employs about 1,100 people in Singapore, with 350 of them being engineers.
While it may be a lost opportunity for Singapore to produce electric cars, economists think the scrapping of the plant will bring about minimal impact.
“Since the project was very much on the drawing board, I think there will be fairly minimal disruption to local labour force and supply chains,” said Mr Song.
He added: “It would have been a nice feather in the cap. But even without it, we haven’t done too badly going by the investment commitment numbers for the first half of the year.”
At almost S$8.1 billion, Singapore’s fixed-asset investment commitments during the first six months of 2019 already falls within the EDB’s full-year forecast of S$8 billion to S$10 billion.
This despite trade tensions and other global uncertainties slowing down economic growth.
READ: Singapore continues to attract investments despite global economic headwinds
Mr Rajiv Biswas, chief economist for Asia Pacific at IHS Markit, said Dyson has signalled its intention to continue expanding its operations here in Singapore.
“Dyson is expected to continue to develop R&D and technology segments related to electric vehicles, such as battery technology, robotics and artificial intelligence.
“Therefore Singapore’s manufacturing sector may continue to benefit from Dyson’s future R&D in a range of key high technology sectors,” he told CNA.
