Is Tesla's most formidable challenger... this vacuum cleaner manufacturer?

Dyson, the British consumer goods company best known for its high-end vacuum cleaners and fans, will invest about $2.7 billion to launch a new line of battery-electric vehicles, with a factory in Singapore set to open in 2020.That would make Dyson just the latest in a growing list of start-ups entering the automotive space, positioning it against other new entrants including Tesla, Faraday Future, LeEco — and even Apple.dust extraction units for sale

There hasn’t been this much interest in challenging the established automotive order in nearly a century, not since the industry’s earliest days when, according to records kept by the Henry Ford Museum in Dearborn, Michigan, more than 800 different companies vied for a piece of the still-emerging U.S. automotive market.“To a great extent, the cost of entering is significantly lower than it ever was in the modern era,” said Joe Phillippi of AutoTrends Consulting.

One of the big questions has been why Dyson might want to enter the automotive market, a business that seldom delivers the high returns of a successful consumer goods business. But Dyson clearly has plenty of experience working with batteries and electric motors. And its sleek designs routinely command far greater prices — and margins — than more mundane competitors.

Traditionally, automakers have designed, engineered, and then manufactured all the critical elements of their vehicles. But, today, start-ups can outsource much of their styling and research and development. That’s the approach being taken by Vietnamese start-up VinFast, which plans to start building two new models by mid-2019, a mere two years after the company was founded. Some start-ups are even looking to contract out the manufacturing process.

Significantly, the vast majority of the new automotive start-ups, including Dyson, Tesla, Apple and Faraday, are focusing entirely on electric vehicles. There are plenty of sources for batteries and it’s a lot easier and cheaper to design and assemble electric motors when compared to gas and diesel powertrains, industry experts point out.

That said, making it all come together is no slam dunk. Both Faraday and LeEco have been facing serious financial problems that have delayed their projects. The former scrubbed plans to build a $1 billion assembly plant outside Las Vegas and might have folded were it not for a recent investment by Saudi Arabia’s sovereign investment fund. A number of other battery-car hopefuls have failed, including Think, a Norwegian start-up briefly backed by Ford. Fisker Automotive also collapsed, though much of its assets were purchased by Chinese Wanxiang Group and relaunched as Karma Automotive.

“Some of these new automakers will fly, some won’t,” said Stephanie Brinley, a senior analyst with IHS Automotive. “But they could post a big threat to existing manufacturers and, in 20 years, the market may look entirely different.”

For Tesla, the real test seems likely to come over the next year. The company only recently resolved production problems with its critical Model 3 battery-sedan, an issue that resulted in record losses during the first half of 2018. CEO Elon Musk promised a profit for the second half and will report third-quarter earnings on Oct. 31. Even if the California-based automaker does claw its way into the black, many analysts warn Tesla could need another capital infusion to move forward.