Inside James Dyson’s costly decision to kill his electric car

The 72-year-old British inventor speaks exclusively to Fortune on the death of his passion project.

WIND BLOWN: James Dyson is beaten but not bowed by the failure of his electric car, a project many years in the making. JULIAN ANDERSON—EYEVINE/REDUX PICTURES

JULIAN ANDERSON—EYEVINE/REDUX PICTURES

James Dyson, the billionaire British inventor and entrepreneur, is standing on a small stage at the mid-September gala opening of his new flagship retail store in Paris. The space is more high-end art gallery than appliance mart: matte black walls and ceiling, gray tile floors, and stylish gadgets displayed like sculptures, spotlighted on white-topped plinths.

Dyson, spry and lanky at 72 years old, is wearing owlish blue-frame glasses and a copper-toned, thigh-length jacket evocative of a mad scientist’s lab coat. In his cut-glass English accent he’s running through his company’s latest wares: a hair dryer that uses circular airflow to avoid heat damage; a hair styler that wraps curls using a vortex of air; a bladeless oval air purifier that blows hot and cold; a combination water faucet and hand dryer. The list goes on, ending, inevitably, with a cordless vacuum cleaner, the category consumers most closely associate with Dyson’s name.

For all the eye-catching design and technological wonder of Dyson’s body of work, many in the audience are hoping he’ll make a pronouncement about the one much-discussed Dyson product that’s not yet for sale. Then the great man utters the words they’ve longed to hear: “the car.” He flicks to an aerial photograph, not of an automobile, but of the former Royal Air Force base in rural England where his team has been working in great secrecy to design an electric vehicle. “That’s about all I’ll say about the car this evening,” he declares. True to his word, he pivots to rhapsodizing about an LED lamp designed by his 47-year-old son and heir apparent, Jake.

Within weeks, the reason behind Dyson’s reticence becomes clear: He had already decided the car project was doomed. In fact, while he was exuberantly peddling vacuums and hair stylers, his bankers were unsuccessfully scrambling to find a buyer for the electric vehicle program to which Dyson had committed four years, hundreds of engineers, and 2 billion pounds ($2.5 billion). On Oct. 10, Dyson said his privately held company would cease work on the project, ending his electric car dreams before the first model ever rolled off the assembly line.

BUNKER MENTALITY: Reminders of World War II, like this hangar, remain at the former air base, where Dyson prototyped its doomed car.

COURTESY OF DYSON

It was a gutsy decision and a rare public setback for Dyson, who, with his family, owns the entirety of the company that bears his name. He had put his estimable reputation on the line with the car, promising a “radically different” vehicle that would feature “revolutionary” battery technology while outperforming more experienced competitors. And he had promised to have it in customers’ hands by 2021, a dramatically short time frame for a neophyte automaker. In the end, a chagrined Dyson says the decision came down to a simple business proposition. “It just wasn’t commercially viable,” he said, in an exclusive interview with Fortune the day after news broke of the car’s demise. Although Dyson’s crack auto team successfully created an innovative new car, he wasn’t willing to price it below cost, as he believes the competition is doing. “It’s a tragedy, really, because our engineers have done a brilliant job.”

Dyson’s inability to produce a profitable automobile speaks volumes about the current perilous state of the electric vehicle industry, in which companies like Elon Musk’s Tesla and Chinese startup Nio are burning through billions of dollars annually with no sign of black ink on the horizon. The story of his audacious but ultimately failed project also says much about Dyson, the rare executive who can combine blue-sky dreaming with steely-eyed financial discipline. At a time when every company speaks about innovation and disruption, Dyson’s decision to kill his electric car is a case study in the delicate balancing act of embracing ingenuity while keeping an eye on profits.

Improbable though it seems in retrospect, there were good reasons for James Dyson to attempt to make an all-electric automobile. Electrification presented a once-in-a-century opportunity in the auto industry, one that Dyson was not alone in spotting. Electric powertrains require only about 20 moving parts compared with more than 2,000 for cars with internal combustion engines—a fact that theoretically lowers barriers to entry. What’s more, Tesla had caught the global automotive industry sleeping on EVs, and several years ago, it looked as if there was room for more entrants. Apple was rumored to be working on a car, for example, as was Google. “Anybody can build an electric car,” veteran automotive analyst Maryann Keller says. “It’s an open playing field.”

Dyson thought he had a better shot than most. His company was thriving, with 2018 sales jumping 25% to a record $5.6 billion. Pretax operating profits topped $1 billion for the first time, driven by strong demand in Asia, where Dyson is a status-conferring consumer brand. Through its vacuums, Dyson’s company already was a global leader in electric motors. It knew batteries too, thanks to its cordless products. Key EV concepts like airflow and climate control also were present in all of Dyson’s appliances. “When we realized, almost by accident, that we had the technology to build an electric car, it was natural to go into it,” Dyson says. Back in 2015, when he first conceived of it, Dyson says there seemed to be ample room in the market for a chassis-to-moonroof rethink of what an EV should be. “You have to remember that four or five years ago, only Tesla was on the scene,” he says. “So it was a very different sort of environment.”

The inventor had made a career of proving skeptics wrong. He’d successfully reimagined one mundane household product after another, starting with an innovative wheelbarrow in 1974. He’d made his name and fortune with the bagless vacuum cleaner, which used a “cyclone” effect to draw dust out of the air. Launched in 1993, the vacuums featured a transparent bin that let you see exactly how much dust you’d sucked up. (He famously overruled marketing experts who told him no one would buy a vacuum that showcased the dirt.) New models included advancements such as ball-like handle attachments for maneuvering into tight corners. Slim cordless uprights were made possible by the company’s electric motor research. Dyson was also adept at extending his expertise into new categories, like the Airblade hand dryer as well as bladeless fans and air purifiers.

While a car may have looked like a leap, Dyson had been building up to designing one for years, in part because of a hankering to invent a solution for the pollution-spewing internal combustion engine. Affronted by the smell and smoke from diesel engines, in the late 1980s and early 1990s he developed a filter for the particulate belched by trucks, based on technology used in his bagless vacuum. But trucking companies refused to buy it, he says, because they didn’t want to have to empty the filter. He also blames U.K. and European regulators who insisted that diesel was “green and clean,” despite abundant scientific evidence of ill-health effects. “There was a sort of jilted feeling,” he says, acknowledging his search for new technology “has been lurking” ever since. Grand projects have been started for shakier reasons. (Story continues below after sidebar.)

James Dyson

At 72, the British inventor has been innovating his whole adult life. His contraptions span from gardening to hair styling.

Inventor

Dyson’s first hit came in 1974, a redesigned wheelbarrow that replaced the typical narrow rubber wheel with a plastic sphere that resisted sinking into muddy ground. He called it the Ballbarrow.

Dyson then turned his attention to the bagless vacuum. It took a decade and 5,127 prototypes to perfect his design for the product that ultimately would make his name and fortune.

Environmentalist

Dyson has been worked up about pollution for decades, but not out of concern for global warming. He loathed the exhaust spewed into the air by diesel-burning engines popular in Europe. “I hated the smell,” he says. “I hated the black smoke.”

He developed a filter to capture diesel particulates but couldn’t persuade trucking companies to buy it. His dislike of fossil-fuel burning engines persisted.

Landowner, philanthropist, patriot

Aside from his day job, Dyson runs a profitable agriculture business. He owns more farmland than anyone else in the U.K., including Queen Elizabeth II.

His James Dyson Foundation runs an annual award program in 27 countries, in search of the most innovative inventions. To train more U.K. engineers, he founded the James Dyson Institute, which offers undergraduates free engineering degrees and work experience.

He also likes to display the work of other British inventors on the grounds of his company’s corporate campus in rural Wiltshire, 100 miles west of London. A Brexit supporter, Dyson had critics who chafed at his plans to relocate HQ to Singapore.

Secret Keeper

Dyson is a 14,000-person company whose paranoia for protecting corporate secrets, dating back to piracy of the Ballbarrow’s design, rivals Apple’s. It is an active litigant on its patent portfolio, having tussled with the likes of Hoover and Samsung.Employees generally operate on a “need to know” basis and are expected not to discuss projects outside their teams, including in communal cafeterias.

Work on the top-secret car program began in earnest in 2015, as Dyson recruited auto industry veterans from Aston Martin and Jaguar Land Rover. The company is accustomed to operating clandestinely. Bitter experience from Dyson’s earliest days as an inventor, when he says a competitor pinched his wheelbarrow design, taught the entrepreneur to be paranoid. Products inside the company are known only by a number until they are publicly unveiled. (An early version of the doomed car was called “N526.”) Fingerprint scanners control access to labs.

But this time the secret got out. The U.K. government accidentally revealed Dyson’s work on an electric car in an industrial strategy report it published online. That, and the increasing scale of the endeavor—which included a 200-million-pound refurbishment of the old RAF airfield to serve as the design and testing hub for the car and the hiring of hundreds of people—forced Dyson to come clean. In September 2017, he held a press conference in London to officially announce the project, saying he was committing 2 billion pounds to the endeavor, including 1 billion aimed at producing a breakthrough in battery technology.

Automotive experts thought the sum was paltry compared with what would be needed to build a car. But it was orders of magnitude bigger than anything Dyson had ever spent on a new product. Its Supersonic hair dryer, for instance, which it launched in 2016, had taken four years and cost $71 million to develop. Many also doubted Dyson’s premise that its technical know-how would transfer to electric cars. “An electric vehicle is not just a big hair dryer,” says George Crabtree, director of the U.S. Department of Energy’s Joint Center for Energy Storage Research at the Argonne National Laboratory.

Dyson was undeterred. The company was committed to rethinking the car from first principles—a philosophy that had underpinned Dyson’s success in household products. “We wanted to change everything and not use other people’s architectural layout,” Dyson says. The company would design all its components in-house, from motors to windshield wipers. “If you look at the way other auto companies operate, they treat components as black boxes,” says Andrew Clothier, Dyson’s director of technical research. They buy parts off the shelf and bolt them together. That’s cheaper and faster but comes at the expense of innovation, he says. Dyson would try a completely different approach. (Tesla also designs its own electric motors, battery packs, and chargers.)

The car Dyson’s team came up with was about the size of a Range Rover but with a longer wheelbase; a lower roofline; and a short, stubbed nose leading to a dramatically sloped windscreen, according to patent filings made public in May. Dyson says now the long wheelbase was necessary to accommodate a very large battery pack that would have given the car more range than any EV currently on the market. The tires were taller and narrower than usual too. That reduced rolling resistance as well as accommodating more interior space and, by allowing for lower tire pressure, provided a more comfortable ride. “We were after aerodynamic efficiency, rolling resistance efficiency, electric motor efficiency, and battery efficiency,” Dyson says.

Every EV on the road today uses “wet” lithium-ion batteries, in which a cathode made of lithium mixed with other metals (usually nickel, manganese, and cobalt) is separated from a graphite anode by an electrolyte solution. These cells are efficient but take time to charge and are prone to catching fire. Dyson thought he could gain an edge by using solid-state batteries instead. Such batteries, which replace the liquid electrolyte with a ceramic material and use a pure lithium metal anode, are the Holy Grail for EVs. They pack more power for their weight, meaning they would vastly extend the car’s range. They also charge far faster and are much safer.

Last year, Dyson selected Singapore as the site for his future EV factory. The company already made its other products in neighboring Malaysia, and it saw the region as a key potential market for the car. Then, earlier this year, Dyson announced it would shift its global corporate headquarters to Singapore too. The founder bought a $54 million penthouse apartment in the city-state. Tabloids leveled accusations of betrayal at the entrepreneur, who had called for a revival of British industrial prowess and is a prominent proponent of Brexit, the U.K.’s decision to leave the European Union. Dyson notes he continues to employ 5,000 people in the U.K.

All along, James Dyson knew this project was likely to be harder than any he’d attempted previously. And that was before automakers like General Motors, Volkswagen, and others committed wholeheartedly to EVs. He knew that he’d have to spend a lot of money and that without a dealer network, he would have to rely on direct sales through digital channels, much like Tesla, and find a way to support and service the cars in the aftermarket. But he was unprepared for just how tough the task would prove to be.

Most daunting was the competition. European and Chinese regulatory moves to ban gas engines in coming decades acted as a catalyst for major automakers. Together, they are expected to pump $300 billion into electric car development in the next decade. Suddenly, Dyson’s team faced a financial reckoning just as it was time to begin installing manufacturing equipment in Singapore. “Doing everything from scratch probably put up the cost,” Dyson reflects. He also says that because the company could not guarantee high volumes, it could not strike the best deals with suppliers, as it had throughout decades of building appliances. And, without revealing any details, he admits the battery that the company wanted to use was more expensive than industry standards.

Dyson always knew his car wouldn’t be cheap. He had previously joked to reporters that it might be more appropriate to talk about the size of the down payment required to buy one rather than the sticker price. But there’s expensive, and then there’s exorbitant. If his EV were to turn a profit, it would have to enter the market “right at the top end,” Dyson says. While he declines to reveal the price the company was considering, the Tesla Model X starts at about $104,000, and Faraday Future, a Chinese-backed startup in California, is planning to launch an ultraluxury SUV that may cost as much as $180,000. “It’s a price where we could sell some but not enough,” Dyson says.

A NOT-SO-SIMPLE PLAN: Patent applications hint at what a Dyson car might have looked like.

Courtesy of Dyson

At the end of the day, Dyson didn’t blink at the “sunk costs” of capital already invested in the car project. “It wasn’t the investment at all,” he says. “We’d already committed that.” Fiscally conservative, Dyson says he would never consider putting his company in financial jeopardy for the sake of his car. At the end of 2018, Dyson’s debt was a manageable 368 million pounds ($492 million), most of it long term. He refused to overleverage Dyson or take it public, which would dilute his control. “We don’t have endless shareholders’ money or the potential to raise shareholders’ money,” he says. “We’re a family business.”

Dyson says he focused on “the BAM”—the build and materials cost—of the car and therefore where he’d have to price it to earn an acceptable margin. What worried Dyson wasn’t the billions competitors were investing in EVs; it was their willingness to sell cars at a loss. Sam Abuelsamid, an analyst who tracks the EV sector for the consulting firm Navigant, says the break-even price for a generic electric car is about $80,000. Mercedes, BMW, and Jaguar all have electric luxury SUVs entering the market this year with a starting price of around $70,000. And Tesla and Nio are selling mass-market electric cars at half that price. (Tesla’s burn rate hit an annual pace of $3.5 billion in 2018—more than Dyson had pledged to its entire EV project.) Dyson feared his EV would look even pricier in comparison.

Once before, Dyson had faced a similar dilemma. In November 2000, the company unveiled a washing machine called the Contrarotator. The ingenious design had two drums that spun in opposite directions. But, as with the car, Dyson says, the company’s novel design and low volumes gave it little leverage with suppliers. “I worked out it cost at least two-and-half times more to make than a conventional washing machine,” he says. Ultimately, Dyson sold the washers for about 1,000 pounds ($1,500 at the time), at least 30% more than competitors’, and even then it lost money on every one. Eventually, in 2005, the company decided to discontinue it. Dyson vowed never to sell a product below cost again.

Before deciding to abandon the car, Dyson hired bankers to try to sell the division. They approached “all the people you might imagine,” says Dyson. (The Financial Times reported Jaguar Land Rover was among them.) No one bit. “We didn’t really get close to anyone,” he says. In late September, Dyson made the fateful decision to pull the plug.

Killing fledgling products actually isn’t that unusual for Dyson. “It’s heartbreaking,” says Stephen Courtney, Dyson’s concept director. “But it is sort of the nature of working in research.” Normally, the buttoned-up company fails privately and quietly. With the EV, competitors, gearheads, battery experts, and business journalists were scrutinizing its every move. “It was the hardest decision we’ve ever had to make,” says Dyson. “So many designers and engineers have put so much effort into it, and it hadn’t seen the light of day.” The company plans to find roles elsewhere for as many as possible of the 523 employees who worked on the car. But there won’t be room for all of them.

ALL IMAGES COURTESY OF DYSON

Dyson’s 67-acre corporate campus in Malmesbury, about 100 miles west of London, is sprinkled with iconic examples of ingenious industrial design, among them an original Alec Issigonis–designed Mini Cooper, bisected to show off its clever use of interior space; a Honda Super Cub motorcycle; and two British fighter jets. One day a prototype of Dyson’s electric car may join them. In the meantime, there are already hints that the company’s automotive efforts won’t be wasted.

In a windowless industrial shed being constructed behind Dyson’s striking mirrored-glass D9 research lab, the company has built the largest advanced prototyping lab for solid-state batteries in Europe. Beyond EVs, solid-state batteries have potential uses in everything from mobile phones to consumer electronics to aircraft. And Dyson says it will continue its investment in them. “We think we’ve got something that is groundbreaking and revolutionary,” says Mike Rendall, Dyson’s head of energy storage industrialization. Called D9A, the new battery prototyping facility should enable Dyson “to bring solid-state batteries to market as soon as possible,” Rendall says.

The company is also investing heavily in robotics with uses beyond automobiles. Inside a section of the secretive D9 building, a team of 65 robotics researchers are working on machinery, much of it hidden under tarps for a journalist’s visit. It is clear from what little is visible—like the big brown armchair, curiously perched on a table, upon which sits something big under a sheet—that it is not simply an evolution of its existing robot vacuum cleaner, the Dyson’s 360 Eye. Dyson’s director of robotics research, Vincent Clerc, previously led SoftBank’s design of its humanoid robots Pepper and Romeo. Is Dyson developing a fully humanoid robot butler or maid? Clerc won’t say, although he allows that the company is focused on getting robots to perceive the world in three dimensions.

The day after canceling the car, Dyson seems subdued but philosophical. “There’s lots of exciting stuff,” he says of his product pipeline, including gadgets that may benefit from the automotive research. “And the silver lining of this horrible decision is we can concentrate on those.” Dyson may have missed his chance to beat rival billionaire Elon Musk. But the inventor seems eager to get back to the lab and put his name on yet another breakthrough product.

A version of this article appears in the November 2019 issue of Fortune with the headline “James Dyson’s Electric Shock.”