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Alpha Motor has a straightforward mission – to deliver an entry-level electric vehicle that has appeal to the masses.
In the crowded electric vehicle marketplace, it’s an area where there is great opportunity, but the pathway to scale a new automotive company is a longer and windier road filled with more potholes than Mulholland Drive in a downpour.
The Irvine-based automaker has slowly and steadily made an entrance into the electric vehicle marketplace with their Wolf, an electric truck designed for the masses with a price point that will range from $40,000 to $46,000. The truck, which features a full-size bed, an estimated 268 HP electric motor and an up to 325-mile range also features design cues, courtesy of founder and CEO Edward Lee’s auto design background, that give it an eye-catching look unlike anything on the road.
Alpha is on track to deliver 150 custom-built vehicles this year as it solidifies its manufacturing process with an eye toward scalability in the coming years. “We design, engineer and produce everything locally,” said Edward Lee, co-founder and CEO. “We also have several prototypes and manufacture them on a custom vehicle basis.”
Alpha’s design philosophy is built from solving issues with design, fitment and performance on a software level vs. traditional mockup, saving time and most importantly, Lee said, cost. Knowing parts will fit and function prior to manufacturing allows the company to scale quickly, he added.
The company uses a modular, frame-on approach to build its cars, rather than the unibody architecture favored by many manufacturers where the cabin of the vehicle is fused with the chassis. The modular design allows for a wider range of materials and parts in the vehicle’s construction because each element can be interchangeable and sourced from multiple suppliers. Parts are sourced 100% domestically, leading to a tariff-proof – and largely, a shortage-proof – supply chain, part of what Lee says will keep costs down and large-scale manufacturing feasible.
Once the frame is created, batteries and powertrains can be selected by a consumer based on their needs and price constraints. With the Wolf, this can be its single-motor design or an all-wheel-drive setup good for an estimated 335 HP and increased off-roading capability. The modular design also allows consumers to save on costs if they want a smaller battery capacity for more local commuting.
The market for electric vehicle powertrains (their electric motors and the batteries that power them) is expected to grow exponentially over the next two decades as the technology increases electric vehicle adoption rates worldwide. The electric vehicle powertrain market was valued at $20 billion this year and is likely to reach approximately $159.8 billion by 2035, according to a recent industry report from Future Market Insights Inc., which equates to a 23.1% compound annual growth rate.
“The approach that we’re taking is to separate what is expensive from what is affordable, meaning that we separate the battery and powertrain from everything else,” said Lee. “We want to make sure that our process is efficient, flexible and scalable.”
Founders Jada Lee and Edward Lee.
A Startup Mentality with a Personal Touch
Edward Lee and co-founder and COO Jada Lee (unrelated) have been friends since high school and remained in contact as they pursued careers in distinctly separate fields. Edward Lee has worked with several major auto manufacturers as an engineer for vehicle design and development. Jada Lee went to law school and worked with large law firms on corporate financing and transactions.
Edward Lee approached Jada Lee for operational advice. She had experience working with companies on fundraising, new business formation, mergers and public offerings. Several clients have approached her throughout her career to join their companies, but she has always declined. However, she reached a point in life where she felt comfortable making a career change and trusted Edward Lee’s knowledge of the automotive industry.
The pair launched the company in 2020 with their own funds and have supported growth without venture capital or institutional investment. While launching a company during the height of the pandemic may not seem ideal, Jada Lee noted that it allowed them to save time and costs by meeting suppliers on video calls rather than taking costly trips for meet-and-greets.
“We held meetings with suppliers that traditionally you’d have to fly over to meet, but people were fine doing everything virtually. It made things more efficient for us,” said Jada Lee.
The pandemic also focused attention on the electric vehicle industry. Investment funds that had large amounts of capital available to pursue new technologies invested heavily in several electric vehicle startups. Companies such as Fisker Automotive, which was originally based in Manhattan Beach, and Torrance-based Canoo tried to scale rapidly but folded quickly as they couldn’t establish a large enough consumer base for their vehicles.
One area where Alpha has connected with its potential customers – and raised funds in the process – is through equity crowdfunding. It’s a process that was created with legislation about 10 years ago that allows small investors to purchase shares directly in companies. The size of offerings is limited to up to $15 million. In addition to stock, investors can receive other perks such as discounts on product purchases.
Alpha Motor has raised about $2.5 million through offerings on StartEngine, an equity crowdfunding platform. It has conducted two rounds of fundraising on the site, most recently at a $350-million company valuation. Although the funds help with operations, it’s not nearly enough to scale the company to produce a vehicle for the mass market. Instead, the campaigns were utilized as a test to see if there was interest in the company and allow people to be part of its community from the early stages. That vision has been supported by more than 80,000 vehicle preorder indications to date with zero ad dollars spent. In addition, the company is profitable and has generated more than $1 million in revenue since its founding.
“Crowdfunding offers an opportunity to engage with our supporters without an intermediary which ensures that message remains clear, authentic, and it creates a space where our voice prevails, unfiltered and unaltered,” said Jada Lee. “This is really important when we’re trying to set our mission and stay focused on our vision.”
Many startup companies are utilizing this style of revenue building, including electric auto manufacturers. For example, Carlsbad-based Aptera Motors Corp. has designed a solar-powered vehicle that can generate enough electricity to drive 40 miles per day and is supported by a battery with a 400-mile range. Aptera was founded in 2019 and has raised more than $135 million and taken reservations for 48,000 vehicles. Yet despite its significant fundraising, Aptera is utilizing a crowdfunding campaign to connect with customers by providing investors with a discount and priority on new orders.
Electric Vehicle Market Outlook – Wider Adoption with Challenges
In the United States, electric vehicles account for about 8% of new vehicle sales annually. Many traditional manufacturers such as Ford, General Motors, Toyota and others have launched new models, but their adoption has been slow.
“Traditional auto OEMs launched a lot of new models last year. When new vehicles come online, the expectation is that more would be purchased, but the adoption rate for electric cars has held steady compared to prior years,” said Lenny LaRocca, U.S. automotive industry leader for global accounting and advisory firm KPMG. “The electric vehicle space is a difficult one to turn a profit.”
Furthermore, there is competition in the global market from Chinese automakers that produce entry-level vehicles with a much broader appeal to younger car buyers due to their lower prices. Entry-level electric vehicles can be purchased in China with starting prices below $10,000. In the United States, the Nissan Leaf is one of the lowest-priced mainstream electric vehicles and has a starting price of around $30,000. Overall, cars are slightly more expensive in the United States. According to data from Kelley Blue Book, the average sale price for electric cars was $59,205 in March, compared with gas-powered vehicles at $47,462.
Those prices are thought to go up with a looming tariff showdown that could affect products such as cars. Those higher costs are compounded by persistently high interest rates and increasingly negative consumer sentiment.
For Edward Lee, the current economic conditions, however, are not nearly as challenging as the economic downturn that auto manufacturers weathered in 2008-09. During that period, he was working as a designer at Toyota and saw firsthand how one of the world’s largest automakers focused on operational efficiency and the needs of the consumer without compromising quality.
“Fundamentally, this is the reason why we are confident in what we are doing and know that we can persevere and be resilient through evolving market conditions. We have a lot of people who want to buy our cars,” he said.
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