There’s something intriguing about a wholly new manufacturer entering the market, with none of the baggage of existing makers and their history of missteps and bungles. It’s a phenomenon smartphone manufacturers have been capitalizing on since the earliest days of the iPhone: the allure of novelty.
New automobile manufacturers like Lucid and Rivian have the advantage of starting with clean slates, and savvy newcomers will capitalize on their position by introducing new technology and innovations.
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Though new automakers don’t have the baggage of older companies, they also don’t have the trust capital that established brands have accrued, and in some cases carefully cultivated over decades.
So, is buying a vehicle from a new manufacturer worth the risk?
Pros of buying from a new manufacturer
Fresh design and innovation
Untethered by past design constraints, new manufacturers often bring fresh perspectives. They can challenge established conventions–everything from design fundamentals to pricing–and there tends to be less resistance to fresh ideas or even revolutionary advances. Newer companies are also typically smaller and more agile, so they can more rapidly deploy and test new ideas than some of the established behemoths in the auto industry.
In an era where self-driving cars are rapidly becoming a reality and AI-powered driver assistance is commonplace, new manufacturers are often out on the bleeding edge, driving innovation. This is also evident in the EV and hybrid markets, where new, fast-charging batteries are poised to reshape how we think about electric cars, while new manufacturers like INDI are promising EVs with “supercomputers” strapped under the hood.
Aggressive marketing offers
New manufacturers don’t have the advantage of brand loyalty, so to entice customers, they often offer aggressive deals and pricing to get consumers through their doors. While this is true of new companies in any field, it’s especially true in automotives, given how steep the initial investment is.
Cons of buying from a new manufacturer
Aside from being unproven, new manufacturers are often new to the entire manufacturing process, which opens up the possibility of defects. There’s also less long-term security regarding support and customer service, as the potential for the company to fold is significantly greater than with a major producer.
Limited track record
With no long history of reliability and internal learning to rely on, reliability and performance issues are a real, though theoretical, potential issue. Less data over less time means evaluating a new manufacturer’s vehicles across their entire lifespan is difficult.
Both of the above issues play into a potential for lower resale value. If it emerges that there are manufacturing defects or long-term reliability issues, the resale value of a vehicle from one of these manufacturers could crater. Resale value could also be negatively affected if the company closes its doors (though in some cases this may create a rarity market that increases the value of a given vehicle since they’re no longer being manufactured).
Service and maintenance
New manufacturers don’t benefit from the logistics of established brands, meaning there may not be widespread service centers or experienced mechanics available if you have issues. This problem can be compounded in the case of new vehicles with complex or cutting-edge technology, making the service market even more specialized and narrow.
If a new manufacturer does fold, it’s not just customer service and support that may disappear; it’s also potentially the availability of replacement parts or repair centers. There’s also the chance that your warranty may be affected when a company shuts down.
Real-world case studies
There are several examples of new manufacturers either thriving or collapsing, with lessons to be drawn in both cases. After all, every manufacturer is new at some point, and intelligent companies will look at their predecessors’ failures and successes when shaping their brand strategy.
Tesla is a recent example of a company that has largely succeeded in carving out a market niche for itself. Despite its share of controversies, the brand is one of the world’s most valuable companies, and the world’s most valuable automaker. Tesla owes a great deal of its success to entering the electric vehicle market early and aggressively, driving EV technology and designing and manufacturing many of the components of its electric vehicles internally, and by focusing on a single product/vehicle at a time.
By contrast, the story of Fisker Automotive is a cautionary tale. Founded in 2007, Fisker hoped to ride the wave of Tesla’s popularity with their plug-in hybrid, the Fisker Karma. Despite raising over $1.5 billion in investment capital, a series of stumbles and missed production deadlines–including a recall of its battery, lawsuits, and internal strife–led to the company being shuttered and sold to a Chinese company to be partly reconstituted as Karma Automotive. Karma owners are now left wondering whether it will be possible to service their vehicle as it ages, or if reselling is possible.
Key considerations before buying
Research is crucial
Research is even more critical when considering a vehicle from a new manufacturer. Take full advantage of tools like a vehicle history report to try and find out more about almost any existing models, and consider reading reports not only about the vehicles themselves, but about the company. Does it appear to have secured long-term investment? Does its business strategy seem sound and sustainable? Who are the personalities involved in driving the company, and do they have experience with automotive companies and successful business ventures? These are all potential considerations when buying a car from a new manufacturer.
Consider the warranty
While the possibility of a warranty being affected when a company goes under is a real consideration, many new manufacturers will offer longer or more generous warranties as an additional incentive to customers.
Wait and watch
Being an early adopter also means shouldering a larger share of the risk, so, if possible, it’s wise to wait and read reviews, monitor recalls, and generally observe a company’s fortunes before committing to a purchase.
Consult ownership communities
Online forums and communities can provide insights from early adopters. The most experienced and knowledgeable sources about a brand-new company are often vocal members of these communities, though beware of bias (both for and against) a new company that’s often highest amongst brand loyalists or consumers that have been burned by a new company’s offerings.
Ultimately, the decision to purchase a vehicle from a brand-new manufacturer comes down to one main consideration: Is the novelty, new technology, and price/warranty incentives enough to overcome the uncertainty of buying from an untested manufacturer? Regardless, you should always thoroughly research a new manufacturer before you decide, to spare yourself a potentially agonizing bout of buyer’s remorse. Using resources like our new and used car marketplace and Car Research Tool can equip you with all the necessary details to try and make an informed decision.
Frequently Asked Questions
How can I find out more about a new manufacturer's background?
The best way to research a company is to start at the source, gathering what you can from the company’s own website, before exploring less inherently biased sources like business and trade publications. Also consider forums focused on the manufacturer, as well as reviews and previews, including hands-on experience with a vehicle.
Are vehicles from new manufacturers more expensive to insure?
Vehicles from new manufacturers may be more expensive to insure than vehicles from established manufacturers. Insurers have less data on new manufacturers and their vehicles, making it more difficult to assess risk. Additionally, new manufacturers may use newer technologies and materials in their vehicles, which can be more expensive to repair or replace. This is especially true for electric vehicles, which have complex and expensive battery packs and other components.
What should I do if a new manufacturer goes out of business after I've bought their car?
The first step is to reach out to the manufacturer directly. Even if they’ve shuttered, a manufacturer may have resources to help existing customers, can advise them on next steps, or tell them how to continue to get one of their vehicles serviced. Also, consider finding an independent mechanic who will service your vehicle should the need arise.
Can I trust the reviews of vehicles from new manufacturers?
As with reviews of any product or service, it’s critical to consider the source. Professional reviewers at established outlets are generally more reliable than individual consumer reviews, though also consider that any review of a brand-new product lacks context about its long-term reliability and performance.
How do new manufacturers typically handle recalls or defects?
New car manufacturers typically handle recalls or defects similarly to established manufacturers. They will issue a recall notice to affected owners and generally offer to repair the defect free of charge.
However, there are a few things that new car manufacturers may do differently when handling recalls or defects. They may have less experience with recalls and may not have as large a network of authorized repair shops. They may have less data on their vehicles, making diagnosing and repairing defects more difficult.