These are rough days to be in the startup car business. I would know.
Last year, I was overseeing communications at Fisker Inc. as the company wound down in bankruptcy. It certainly wasn't alone in its fate. Nikola and Canoo have both entered Chapter 11 proceedings as well and will likely liquidate.
Even the "established" startups have a tough road ahead. Lucid has a promising product, but it needs to drastically scale up sales. Rivian has a last-man-standing quality and a lot of Volkswagen Group cash, but it still needs to pull off a fully profitable year. Even Tesla is under the most extreme stress it has endured in years.
Zoom out to the larger auto industry and even without the Trump administration’s shambolic tariffs and their negative impacts on the U.S. car business, growth in the electric vehicle market has slowed enough to spook investors, entrepreneurs and legacy automakers alike. There are more EVs on the road than ever before in human history, but a darkening cloud still hangs over the whole thing.
In this environment, anyone dreaming of creating a car company could be forgiven for abandoning the ambition. Building another Tesla looks unbelievably daunting at the moment, and with good reason: Carmakers have been rising and falling for over a century, and there’s almost no better way in 2025 to take a billion dollars (or more) and lose it.
That said, if there’s no risk, there’s obviously no reward. Though it has a ton to prove, Jeff Bezos-backed Slate Auto has gotten more early hype than any new automotive venture in years. It's risky too, making a profitable EV that will supposedly start in the $20,000 range. But imagine the payoff if it works.
And if we can take away a core lesson from Tesla’s relative success, it’s that an enthusiasm for risk is what pushes the auto industry forward. Big Auto has shown some appetite for risk in the past—the Toyota Prius is my fallback exhibit A—but typically, the industry prefers to let startups lead the way.
That’s why I think more entrepreneurs should be starting car companies—because there’s not that much competition for the risk.
The Slate Truck Makes A Case For Taking Risks
Taking big swings is how you wind up with the next Tesla Model 3 or Rivian R1T, vehicles that break the mold and force slow-moving incumbents to shape up. Only a startup could’ve dreamt up the Slate truck. This daringly simple and customizable electric pickup may finally deliver the affordable EV that conventional wisdom says the auto industry can’t produce.
I can already hear the snap objection: There’s no way I could raise enough money to start a carmaker that isn’t a totally niche play and that has any hope of succeeding in the industry as it’s now configured. This view is an unfortunate consequence of the pandemic SPAC boom, where table stakes for automotive startups were bid up to historically high levels. The common thinking in the business is that you either have a $1 billion or you go home.
This is true if you want to attack the mass market and need to launch a vehicle on a tight timeline. But remember, Tesla brought the original Roadster to market with far less than that. Go back through the decades and you’ll find all manner of wild schemes and plucky efforts to create new brands. One of my favorites is the oft-ridiculed Yugo, Malcolm Bricklin’s cheap import that actually sold nearly 49,000 units in the U.S. in 1987.
Another is Ferrari’s road-car business, which racing-obsessed Enzo had to be talked into and is now a juggernaut brand worth over $80 billion. Along the way, Ferrari’s struggles led to a scrapped acquisition by Ford and eventually a buyout by Fiat, decades before the wildly successful IPO that gave us the company we know today.
My point is that you don’t have to do it all at once. A small, lean startup can develop a solid concept for a few million bucks in early-stage funding, generate some buzz and then drip-fund its way to a prototype before chasing the major-league investments that would allow for a serious launch.
Startups Can Fill New Niches In The Car Space
If I were going to do this, I’d think about a subcompact hybrid that could be sold to ride-hailing fleet providers. (Full disclosure: At Fisker, we developed an all-electric version of this idea, the Pear, and in bankruptcy the company struck a deal to sell off an inventory of Ocean SUVs to a leasing firm that works with Uber and Lyft drivers.)
Lest you think such a narrow-casted vehicle would stand no chance against legacy brands, recall that Checker cabs once roamed the streets of Manhattan, and that black cabs still roam the streets of London. An inexpensive, durable car that’s optimized for the gig transportation economy would be plugging into a buyer base that’s already shown a certain level of business stability. (Robotaxis likely won't arrive at scale for another decade, so Uber is probably safe for a while.)
Mind you, this is just an off-the-cuff effort to demonstrate that I can easily concoct a plausible case for a startup and integrate it with pre-established businesses and some proven technology. But maybe you don’t want to produce an entire car. Don’t forget that the automotive supply chain is also open to innovation.
Years ago, as a journalist, I briefly covered a startup called Transonic Combustion that hoped to revolutionize internal-combustion engines with a disruptive approach to fuel injection. It failed in 2015, but still raised over $40 million and attracted a fair amount of media attention for a technology that promised to double the efficiency of gas engines.
Investors also urgently need stuff to invest in. Even with unfavorable interest rates, by some estimates, over $600 billion in venture capital is sitting on the sidelines. The mechanics of Silicon Valley VC might favor big bets (and the major players have lately been captivated by AI and crypto) but that doesn’t mean angel, seed and modest early rounds aren’t available to entrepreneurs with good ideas for the transportation industry. Don’t dismiss bootstrapping, either.
Any knowledgeable reader should now point out that the past 125 years are littered with failed automotive startups. It would be easy to gaze into the crystal ball of the second quarter of the 21st century and conclude that the game is settled, what with Tesla’s success (threatened as it currently is), the rise of Chinese brands such as BYD and the sheer heft that the legacy automakers can throw around.
That attitude overlooks a flashing-green chance to do something epic. In the U.S., total EV sales are still under 10% of the total market. That means 90% remains up for grabs by the right disruptive player, and Big Auto is currently retrenching. With startups stumbling or vanishing, overall competition has declined (and investors aren’t being asked to come up with follow-on rounds in the hundreds of millions).
I call this a golden opportunity. And if there are entrepreneurs out there for whom the car business is even slightly alluring, I say go for it. The worst case is failure, but the alternative is a staid career in a subdivision of a major automaker—rewarding perhaps, but hardly challenging.
Yes, it looks rather dark out there. But the flame of innovation should be hard to extinguish, and we need entrepreneurs to stoke it. After all, somebody must be the next Elon or Enzo.
Matthew DeBord is the former VP, Communications for Fisker Inc. He has covered the global auto industry for two decades, most recently as a Senior Correspondent at Business Insider, and is the author of "Return to Glory: The Story of Ford's Revival and Victory at the Toughest Race in the World."
