 Live from Las Vegas, extracting the signal from the noise. It's theCUBE, covering IBM Insight 2015, brought to you by IBM. Welcome back, this is theCUBE, Paul Gillen here from IBM Insight. We're at the IBM Insight 2015 conference at the Mandalay Bay Hotel in Las Vegas. And this is our flagship operation, theCUBE. We go out to the conferences, we extract the signal from the noise, and I'm very glad to welcome our next guest here from IBM Insight. A little bit of a different take on analytics, not really even an analytic story here, but one that I think is quite fascinating anyway. Elle Shelley and Jay Rogers from Local Motors. So what is Local Motors? Well they're building the first production 3D printed car. And we're going to get a photo up here on the screen for you so you can see what it looks like. They're showing one of their production models here at IBM Insight. As part of the whole developer track and really the trend toward maker, which is maker is a huge phenomenon right now Jay, would you say? Yeah, absolutely, it's a big trend and thanks for having us on to talk about it. Getting kids and adults, both in work and out of work more involved in the manufacturing environment is really something that's come on strong in the last 10 years. Well now you're 3D printing a car and I think people look at that and they say, people's heads explode and they try to think about something like that. Are you actually printing in one shot the entire vehicle from top to bottom? Or what does that process look like? In the first construct that we did, the first example, the first proof of concept for us, we printed it all in one shot. And that was to make a point, to show that for a complex device you could use structural grade material and you could print it from the ground up. But in point of fact, when we go to production there will probably be several pieces that come together that we use to print. You talk about production. Tell us about the first vehicle. It's sort of a proof of concept but it is road worthy, is that true? That's right. Well the first vehicle that we printed the Strati as a proof of concept was a driving car. We printed it in the IMTS show in Chicago in 2014 and we drove it off the show floor on the roads of Chicago. That didn't mean it was licensed or crash tested at the time but it was meant to show that you could do something like that. Print, assemble and drive. And so now what we're looking at is making the car road worthy from a point of view of federal motor vehicle safety, standard testing and EPA certification. So you're still in federal certification at this point. Do you have the necessary road worthy permits or what's that process been like? The car will debut at the end of 2016 so we're in the process right now. And the manufacturing process should be highly customized. What will customers be able to do when they buy one of your vehicles that they can't do now even custom ordering from Detroit? You know the customer experience is changing entirely here. And really I think what we've pioneered is this idea of customer 2.0 where customers share with us their best ideas and we think of them as contributors or solvers if you will. And then we put that into a vehicle and then we sell it to the very same audience that has become interested in the development of the vehicle. So those customers are looking for the latest technology. They're looking for things that they can't find in other cars at the pace in which we can put it in our car. So we can test at a very low volume and when there are new batteries, new sensors, new connected devices, new materials, new safety features, everything is about upgrading the car at the pace of the cell phone instead of upgrading it at the pace of today's automotive which is once every five years. Part of your strategy is an open source development strategy where you're actually open sourcing the design of the cars and even the manufacturer will be distributed. So you can have as I understand it multiple manufacturing points around the globe. How does open sourcing a car work? Open sourcing a car is really about making a mind shift on where the value in the company lies. So if you believe that the value of a car company is in intellectual property, then you would keep it closed and then you would develop it in-house with your employed folks and then you would manufacture it in your proprietary manufacturing facility. We believe that there are enough things left to solve an automotive given the pace of development of technology that we need more minds involved. We need better insights. We need to find those insights more quickly. And so open sourcing is about saying we'll make our money from manufacturing and distribution and service but not from intellectual property protection. We think that we will put ourselves on a faster pace of development to always be ahead of the market and that's really how open source works for us. How active has the community been in contributing to open sourcing? How much of this car actually, of the design of this car was actually contributed by people who don't work for you? That's a great question. For us, every vehicle that we work on has original contribution, derivative contribution and then voting likes, dislikes, those sorts of things. And so there are layers of different types of contribution. In a vehicle, you might have 500 people that contribute thought. You might have 50 that contribute original thought and then you might have the balance, the 450 that contribute derivative thought and then you may have tens of thousands of people that will vote it and then you may have hundreds of thousands of people if not millions of people that will share it. And so all of that makes up the circles of the community around a vehicle. Elle, you have the responsibility of marketing this to an audience. I imagine most people can't believe it when they hear it. What are the kinds of questions you get or the kind of pushback that you get when you try to describe what local motors is doing? We get all the questions that you normally do when you're going to purchase a new vehicle. Is it safe to go on the road? That was some of your first questions. What about insurance? How fast can it go? And then of course the ultimate question that everybody wants to know is, what can I do to it? So the whole premise or promise of 3D printing is tool list manufacturing which really unlocks the power of design. We say you can go from art to part and get to almost custom vehicles on a one to one basis. So that's really what we're exploring and what we're using this technology to do to find and stretch the limits of where we can go. What have been some of the toughest technical problems you've had to resolve when it comes to, I guess both the design but in particular the manufacturing process and materials process? Well, I'll start with that and then maybe kick it over to you. Technically when you're using a new material that has literally almost an unlimited number of variations, figuring out which materials are the best materials for which part of the vehicle, what you want to be soft, what you want to be ductile, what you want to be structural and how they will behave over time and interact, those are some of the toughest challenges. Other pieces that we have is that we have to be fixed to certain supply chain pieces. We literally can't reinvent the wheel and so when we choose a battery and we choose a motor, we can't do those at an end of one. We have to commit to hundreds or thousands of units in order to be able to do that. So we have to learn how to integrate and remix components to be able to make them work. So those are constraints for us and getting the community to understand those constraints and to get their designs to hue or to live by those constraints, those are big challenges for us. Your thoughts? Yeah, this is a fun question because our soul is so open sour. So we use open innovation principles to do everything that we do. But what we're doing right now is so bleeding edge, using big area additive manufacturing to make cars that we along with our partners at Oak Ridge National Laboratory are really the experts in the field. So it seems like a contradiction that we're trying to ask the whole world to co-create and solve problems together with us and yet we're the experts here. And so this dichotomy is actually allowed us to do something very interesting which is where I think innovation happens. We're going to other industries. We're seeing what other people are doing and we're trying to find all of these intersections across various industries to solve our problems faster. And that's where the magic happens. That's where the true innovation actually is occurring. Best ideas often come from people who aren't even in your industry. Exactly. It's a major proud source here. You're planning to have, being commercial production by the end of 2016, who is your market? Is it the low end? Is it the enthusiast? Who are you targeting? You want to take it? Absolutely. So local motors is the car company for the next generation. So what we're really looking at are all of the consumer preferences of the next generation to figure out what exactly they want and what that looks like. We're really exploring what upgradable hardware looks like. And we're all laughing that we have Fitbits. Fitbits a good example, right? It's a piece of hardware but the software is connected to our phone. So as we get new software updates, it's easily connected. But eventually we're going to need a new piece of hardware and so our relationship will change. We're really looking at that same relationship and trying to translate it to vehicles and automotive. As I, have you heard from the other car manufacturers, have you gotten calls from GM and Ford and are they interested in what you're doing or are they looking for ways to stamp you out? Well, we hear about this all the time. You know, there are movies about who killed the electric car and various conspiracy theories. I'm not a big conspiracy theorist. What I believe is that early on we have seen that car companies around the world are made up of people who are truly passionate and enthusiastic about automotive. They are rooting for technology to succeed. Corporate and institutionally there is certain competitions or other things like that. But when you're a small company and especially one that believes in low volume and high mix it's sort of difficult to think of us as a competitor because after all we are rewiring the supply chain of OEMs to think of some of them as actual suppliers to our business. And of course to think about their tiered suppliers as suppliers to the business. So we almost work as a better partner or an early entrant to certain early adopters in the market than we work as something worth competing against. We look at them in a very friendly light because we just don't think we're going after the same market. But you mentioned OEMs. How much of the car is actually printed by you and how much of it is sourced from other suppliers? By volume we probably make about 80 to 85% of the car. By SKU less than half. And so we'll buy wheels and brake calipers and motors and batteries and wire harnesses to a degree from other people. And then we will integrate them into a vehicle which is made by us. Where we'll take care of glass, we'll take care of the structure, we'll take care of the body, we'll take care of the interior, we'll take care of the many of the suspension components, those sorts of things. Now one of the things, in theory at least this car should be almost infinitely customizable. So describe what, maybe Elle you can start with this one. What's your vision of what the buyer experience will be like? That's actually what we're developing right now. We're envisioning a completely different experience where your buying experience is based off of all of your individual preferences. So forget what you think you know about packages or upgradeable features. We really want to understand psychographics. What is it that makes you you? And I'll tell you a funny story about me. So I'm actually not a great driver. I hit curbs a lot. And just to put it in perspective, about a year ago I hit a curb and I caused $7,000 worth of damage to my car. So there you go, not a good driver. In that same vein, what we want to experience or we want to create for our customers is an understanding about those things and then figuring out ways for the vehicle to actually augment or otherwise help you. We want to figure out how to use technology to sort of save you from yourself. So for me, for example, they know that I have a propensity to hit curb. So is there a way to create a vehicle where I'm actually going to use technology to protect me from myself? Rubber bumpers perhaps. Exactly, exactly. But for the buyer experience, I mean we're accustomed most of us to go into a dealer and buying from a limited palette of options. What will it be like for your buyer? Will they have carte blanche? Really our buyers are getting involved a lot earlier and for them to be able to go in and think about it as click, print, drive where they're coming in, they're selecting what they want online before they even come in and it's a destination experience for them. So what they're going to be able to do is the traditional bespoke things that you'd think about for a very high end car. So being able to specify what they want their interior to be like, being able to choose from a much higher volume of models that they want and those models are all locally directed. So if you are in an area, the vehicles that we sell there are fit for that local area. You may find that same vehicle in 10 different markets across the country but really the focus is on making the local area the star if you will. And so then of course your choices on how you decorate the vehicle will be much stronger than what you see in the automotive industry today and even up to that time before you've made your purchase decision, miniaturizing is also part of the strategy because additive manufacturing allows you to sort of make something at 75th percent scale, 60 percent scale, 12 percent scale. The ability for your kids, for your friends or for you before you buy to be able to try out different designs in challenges is something that will also fit for many of our customers. So from the small miniature to the full-size car you can play around with the design and then when you get the full-size car your interior and exterior are highly customizable to get that quick print drive experience. The, one of the disruptive things about 3D printing is that in theory it allows manufacturing to be decentralized and to take place at a much more local level. When you look at your vision of how the auto industry will evolve around designs like yours what does automotive manufacturing look like a decade from now? Our business is focused and planted on two pillars, open development that we've discussed and micro-production. Micro-production is really the micro-factory of the future or the dealership of the future which is a destination for people to do offline co-creations so when you're not talking online you come physically to the micro-factory and it's also your place to purchase and do service if you want to. So if you think about IKEA as a destination for shopping for your home once every couple of years or you think about Bass Pro or Cabela's those experiential places married to a high concept dealership where you are taking delivery of your car in a very personal way that is what our micro-factories look like. There's really nothing quite like it today. Rawl Dahl wrote about it in Charlie and the Chocolate Factory it's a small factory in the middle of your hometown that makes the most wonderful everlasting gobstoppers. That's the feeling we want people to come away with when they visit a micro-factory. And right now, what is the cost? What's the complexity involved in setting up the machinery that you use to print the vehicle? From a CAPEX perspective these are ultra-efficient facilities. Our target is to build these facilities for about $10 million with about 3,000 units a year production. If you think about that if you're amortizing your factory let's say over 10 years that's a million dollars of factory cost a year. That's 300 bucks a car for 3,000 units a year. I mean that's nothing. So really what you're talking about is incredibly efficient usage of capital to do low volume, high mix vehicle production. Now that's on the CAPEX side of doing vehicles for factory costs. The cost of the bill of materials of the vehicles are going to make it such that we can do everything from a neighborhood electric vehicle up to a highway vehicle because we have such great flexibility and the NEVs are going to come in around 10 to $12,000 and the highway vehicles are going to be around $50,000. So there'll be a choice in your local town. If you want to go highway you can start at 50 and if you want to go local you can go down to 10. Now 50 is fairly pricey for a consumer grade car. Where does that price point come from? So you could be a cost plus manufacturer or you could be a value added differentiated manufacturer. My old professor Michael Porter used to talk about two theories of competitive advantage. You're either the low cost producer or you make stuff that's more interesting and so people are willing to pay more for it. You can be both where you can have a lower cost of production and have more interesting features and in the end I think that's where local motors is going to be. Our ability to be able to produce with many fewer parts, with many fewer man hours involved is going to bring cost down aggressively but the ability to adopt the newest in autonomous technology, in battery technology, in connected devices is going to make this the kind of thing that people are going to want to pay up for. An example would have been the first iPhone. It wasn't a great phone and it really wasn't a great texting device. Your BlackBerry was better and your Motorola StarTac was a little easier to use as a phone but it pretended that it would soon be something where it would replace your computer. Everybody said why would I replace my computer? I love my laptop but the phone quickly became an interface where we started to build mobile browsing around it, we started to build mobile web based applications and all of the things started to change. That is a rapid adoption curve where you start beneath the market and you quickly come above the market. I wouldn't say that Apple was a low cost producer. They were just a differentiated producer. When you reinvent, when you reinvent the potential is not always evident, it's usually not evident initially. It's over time as people don't agree with new ways. It's evident to our community and then to the bigger, broader buying population which will be a little bit of a later adopter, they'll see it as it comes into the market. Al, have you driven one? Of course. What's it like? That's such a great question. Interestingly enough, it rides like a luxury vehicle because the parts have been reduced to less than 50, it's super smooth. There aren't all of these things that aren't perfectly unlocked, so it's super, super smooth and then because it's an EV, it's very quiet. And so we joke about it internally. What does the future sound like? It's quiet. It's quiet and it's smooth. It's a fantastic ride. Yeah, I should mention, it is an EV, so you plug it in. How many miles do you get on a charge? Right now we're shooting for a hundred miles on a charge. Of course, that's all about how much you want to pay. Batteries can be bigger and they're your biggest piece of bill of material cost. You know, we're here at IBM and we're talking about Insight, we're talking about analytics in some cases and we should focus on that for a second because what we're looking at when you think of big data in a car or you think about the gigabits of information that can come out of a vehicle in one drive. One drive in a car, in a traditional car can typically deliver around five gigabytes of information. If you reduce the number of parts in a car and you reduce the complexity of your powertrain to an electric vehicle and a vehicle with 50 parts, there quite simply is less to gather data on. So now we can free ourselves to start thinking about the more important things to gather data on, the world around you and most importantly to study the materials that you're driving on to see how they grow, progress and change over time. So you're going to see a more organic set of data come out, strain gauging and stress gauging the entire car so you can see how the material performs over time. That's the kind of stuff you're going to see that you don't typically see on a steel car today and it is so exciting to think about simplification in order to be able to get more out of the driving experience. You've had to build a community around the open source design concept. What has that process been like? Yeah, community building, it's really, really interesting. So we start by looking for enthusiasts, experts and we look at skill set. So we try to find people that are naturally curious about the automotive industry in general. A lot of hobbyists and then on top of that we look at people who are not necessarily in the auto industry but by skill set would be interested in what we're doing. And so we find a lot of intersections there. A lot of industrial designers. In fact, the design for the LM3D swim was from a community member named Kevin Lowe who by day is an industrial designer for HP. But I know it's not so interesting. Then by night he just loves cars and for fun he does sketches. He's been an active community member of ours for well over five years. And in fact he was one of the community members that helped work on the Domino's vehicle that we just delivered and announced last week. Well here he is four or five years later and he finally won a design competition for his hobby. What is that, how does that affect your cost and your cycle time for design compared to that of a conventional automotive company? Well our goal originally was to be five times faster than the traditional industry. On average the industry makes a vehicle in five to seven years so we wanted to make it in a year. The current vehicle that you see on the floor here at IBM Insight, the design was finished by Kevin Lowe around about August 4th and we were driving the car at 90 miles an hour on the road, September 21st. That's a month and 17 days to do a proof of concept that is the vehicle you see today. That kind of speed is only possible when you have community members contributing right from the get go. Trying to help us to understand the way in which we put the vehicle together and the way in which they would want to see it come together, you come upon some amazing arguments, discussions, agreements and general uplift. The pride that the community gets, Elle mentioned our Domino's Pizza Delivery Vehicle. If you read on the thread the pride that the contributing community members get from being part of that, it is earthy, it's elemental, though they will be remunerated for building vehicles that get sold to customers, the money is just about respect. What's about love and ownership is about the work that they did with co-contributors to be able to bring the vehicle to life. The question that a lot of our viewers are asking, how do I get one? So the real answer is we will begin a pre-sales, a pre-tail campaign effectively right now so that you can sign up, give us your email address and this spring we will be launching the first ever pre-tail campaign on Indiegogo where you'll be able to go in and buy a car for delivery within 2016 for the first ones that come and purchase. And it's going to be a completely new buying experience for a completely new vehicle. Come take delivery at the micro factory or have it delivered at your home. That's how you can get one. I'm sure you'll have no trouble finding buyers, first buyers. Jay, hell thank you so much for being here with us today. Can't wait to see the vehicle, can't wait to drive it, it's going to be very exciting. Thanks so much. Let's go for a ride. Let's do that next. Is it here? It's here. It's here. I'm there. This is Paul Gillan, we're at the Cube, we're at IBM Insight 2015. We'll be back in a minute.