People who track the automotive industry predict at least two significant disruptions in the years to come – self–driving and electric cars, and in a small Virginia city there’s a third change underway – one that could have a big impact on the used car market.
Oliver Kuttner stands in the parking lot of an abandoned foundry outside Lynchburg, Virginia, where trucks are dropping off used cars. He surveys a sea of 7,000 vehicles sitting on 157 acres.
“Since the financial crisis we have been increasing the number of lease cars to a pretty insane percentage," Kuttner says. "I think people simply don’t make as much money. When you go to a leased car, you basically rent the car, and it’s a lower cost per month.”
But when the lease expires, most of those cars will go back to the manufacturers – three million this year alone, and Kuttner – who once owned a car dealership – says that’ll be a problem.
“In the United States we’re simply going to have too many used cars, so from a car manufacturer’s point of view, it would be best if some of this inventory gets taken off the market,” he explains.
To do that he’s formed a company called Off Lease that’s building a network of used car dealers in developing countries. There, he says, the main competition is new vehicles from China.
“A $6,000 Chinese car doesn’t do what a $12,000 used Volkswagen does. The Volkswagen gets a genuine 40-plus miles to the gallon. It’s really sophisticated. It’s really safe if you crash it. It’s a different animal, and some customers are going to value that,” Kuttner says.
He intends to train these dealers not only to sell but to maintain the cars Off Lease provides.
“These cars go to countries where a good mechanic might make $300 a month. The vehicle's life expectancy might be 30-40 more years."
Which doesn’t sound like the best business strategy, but Kuttner admits ulterior motives. First, he believes strongly in recycling and reusing.
“We, as human beings, have to learn how to do what we want with less materials and less of a footprint. It’s just that simple," he says.
And, second, he’s the guy who won the X-Prize in 2011, with a super light car that got more than a hundred miles to the gallon. He’s now got a company that will adapt his design to run on electricity, and make these cars in quantity, so he can sell them for just $12,000.
“That puts the car way below the Tesla 3, and where this becomes interesting is because the Very Light Car uses so little energy you can actually end up driving off solar a fair amount, and that becomes a game changer.”
Of course to start manufacturing, he’s going to need money, and he believes the new business will be very profitable. It will also provide a global channel for selling his car.
Julian Kalvet is the operations manager at Off Lease – orchestrating maintenance and helping company drivers locate and deliver cars to waiting trucks as orders come in. He worked on the Very Light Car and knew Kuttner many years ago when they drove race cars. That experience now provides a network for this new business venture.
“We have contacts around the world," Kalvet explains. " We call these people we used to race with to see if they can recommend dealers, and many of them say they want to get involved personally."
He and Kuttner conclude this business will help America’s car makers maintain the value of their used models. It’ll be good for customers in the developing world, and as a source of new exports, good for this country’s balance of trade.