DeLorean Motor Co. grabbed business headlines last week when it unleashed a social media announcement just before the Super Bowl that it’s resurrecting the troubled 1980s sports car as an electric vehicle.
Along with that splash came a news release from San Antonio economic development officials that the new venture will locate its headquarters here, employing 450 people, “contingent on final approvals of various incentive packages.”
In prepared statements, Mayor Ron Nirenberg and Bexar County Judge Nelson Wolff trumpeted the announcement as a validation that the city, which has long struggled to transition its economy beyond the service sector, can be a beacon in the auto market.
However, experts in the electric vehicle market and in economic development warn those high fives may be premature. Despite the buzzy cult status of its brand, the ability of DeLorean to deliver those jobs, much less a commercially available electric car, is an open question.
While the electric vehicle, or EV, space is growing rapidly, it’s a risky place for startups to play, said Anjan Hemanth Kumar, an analyst for San Antonio-based market research firm Frost & Sullivan.
Every aspiring EV company would love to present itself as the next Tesla. However, even that company — run by billionaire Elon Musk, one of the wealthiest men in the world — took 18 years to achieve its first full year of profitability.
Few startups can burn through that much cash and survive, said Kumar, who’s tracked the EV industry for 15 years.
“You need to make hundreds of thousands of cars to achieve profitability, so that’s a huge problem,” he said. “It’s a huge mountain to move.”
Sparse details
It’s unclear just how deep the reborn DeLorean’s pockets are. Privately held, the company doesn’t disclose its financial data, and its website offers more opportunities to order branded shirts and ball caps than to find details about its new electric vehicle or its investors.
Company officials didn’t respond to the Current’s request for an interview.
We do know, however, that the new DeLorean venture is helmed by execs who previously worked for Karma Automotive, a China-backed EV startup. They appear to be working in partnership with Stephen Wynne, who acquired the DeLorean brand in the ’90s and refurbishes and provides parts for the few thousand original models that are still in circulation.
This isn’t Wynne’s first pledge to put the DeLorean back into production, according to reporting from Bloomberg News. Given the EV market’s growth, the idea of electrifying the DeLorean seems to make sense — on the surface, at least.
Sales of electric vehicles are expected to reach 32 million by 2030, up from 6.7 million last year, according to Frost & Sullivan projections.
But complicating things, the company is entering an already crowded market. Not only are there already 1,200 EV-related startups globally, according to Kumar’s estimates, nearly every existing automaker is spending big on electric.
Indeed, deep-pocketed tech companies like Google or Apple could even muscle into the space as well, he added.
Mixed record at best
It’s unclear just what kind of incentives local leaders are prepared to throw at DeLorean. Officials with both the city and the county would only say details are being negotiated right now.
However, observers caution that the Alamo City has a mixed record at best when it comes to incentivizing startups.
In one of the highest profile of those gambles, the city and county together poured $8 million into InCube, a bioscience incubator expected to employ at least 50 people with annual salaries of more than $50,000 in the next five years.
After that deadline came in 2015, InCube fell far short, creating just eight full-time jobs and faltering on a promise to raise $15 million in non-public funding.
Automotive strategy
Trinity University business professor Luis Martinez, who follows economic development and startup ventures, said DeLorean fits with San Antonio’s strategy of growing its automotive sector, anchored by Toyota’s $3 billion truck plant.
However, he acknowledges that the EV startup carries substantial risk. Cities, counties and their taxpayers must decide how big a roll of the dice they’re willing to take when cutting deals with businesses with little or no track record.
“Inherently, when you offer incentives to startups and early-stage businesses … there’s a risk you lose all of that capital and all of those incentives that you might have used for other projects,” he said.
Time will tell whether the electric DeLorean is a roaring success or a project that never leaves the driveway. In the shorter term, San Antonio taxpayers will see just how much risk local economic development officials are willing to take on.
Even in the best-case scenario, Frost & Sullivan’s Kumar warned that no one should expect quick success.
“This isn’t a short race; it’s not consumer electronics,” he said. “It’s a long and painful journey.”
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This article appears in Feb 23 – Mar 8, 2022.
