How to Start a Car Company

by Lindsay Kramer - Updated November 08, 2018
Car dealer is giving key for a new car to a businesswoman

Launching your own automobile company is ambitious, and like most ambitious goals, it can be a stressful process. It can also be quite expensive, but if your company is successful, you can earn far more than you initially invested in the company and proudly call yourself an automotive visionary.

Develop a Concept that Can Change or Innovate the Automotive Industry

You won’t be successful by bringing more of the “same old” to any industry. Identify a need in the automotive industry that you can fill with your new company, like cars with simple controls for senior or young drivers or a car that uses fuel in a more efficient, innovative way. Develop your concept as far as you can by identifying your target consumers and their price points, the technology your vehicle will use and how that relates to its proposed price point, how it will comply with local environmental and safety regulations, and how it will be manufactured.

Before you can secure funding for your fledgling company, you need a prototype you can show to investors to demonstrate why they should invest in you. Hire designers with experience designing for the automotive industry to create a design that works, and have a prototype built at a manufacturing plant, either domestically or overseas. Keep in mind that a prototype won’t necessarily be the same as the end product that reaches consumers, but it should communicate your vision for that final product to investors and manufacturers.

Create a Solid Business Plan and Register the Business

Your business plan needs to account for everything, such as:

  • Your operating costs.
  • Your projected profits.
  • Your employees, for example, how many employees you’ll need, their skill levels and the positions they’ll fill.
  • Will you outsource all or part of your production?
  • Your corporate structure.
  • Your government compliance plans.

This is the plan you’ll show to investors to secure funding, the next step in starting your car company. At this point, register your business with your state and file for patents for all your intellectual property connected to the company such as designs, names, slogans and proprietary technology.

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Determine how many cars you can realistically produce your first year and during the company’s first five years. Then, work out how you’ll actually have them built. Will you build a manufacturing plant, either domestically or abroad, or rent space in an existing plant? Come up with advertising cost projections, administrative cost projections and expenses you’ll likely incur for research and development. These all need to be accounted for in your business plan. In addition to these calculations, determine how you’ll continue to cover your own living expenses while your company reaches the point of becoming profitable. Most businesses are not profitable for five years or more after launch.

Secure Funding for the Business

You can’t start a car company without sufficient funding. Unless you’re capable of launching the company with your own savings, you’ll need to secure funding. Depending on the technology you’re using and the type of company you’re launching, you could qualify for government grants. Other options that you might use exclusively or alongside grants are:

  • Angel investors.
  • Kickstarter campaigns.
  • Partnerships with larger, established companies.

Once you’ve secured funding, you can start acquiring all you’ll need for the new business, like office space, a skilled workforce and a manufacturing plant.

This isn’t the finish line for your car company; it’s the starting point. Think of these steps as the prep work you have to do before you can actually start the hands-on part of launching a car startup. With a working prototype, a comprehensive business plan and sufficient funding under your belt, you’re ready to get to work on filling your niche in the automotive industry.

About the Author

Lindsay Kramer has been a full-time writer since 2014. In that time, she's experienced the ups, downs and crazy twists life tends to take when you're launching, building and leading a small business. As a small business owner, her favorite aspect about writing in this field is helping other small business owners and aspiring entrepreneurs become more fluent in the terminology and concepts they face in this role. Previously, she's written on entrepreneurship for 99designs and covered business law topics for law firms.

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