Cutting-edge carmakers are inventing what we'll drive next

carbon_e7.top.jpgBy Jonathan Blum


(Fortune Small Business) -- Of all the changes in the American economy over the past 18 months, perhaps the most startling has been the rapid collapse of the major car manufacturers.

As the Great Recession wreaked havoc on the credit market and job losses mounted, car sales nose-dived and Detroit finally ran out of gas. General Motors -- once a model of American ingenuity and prosperity -- entered Chapter 11; Chrysler was taken over by Italy's Fiat; and Ford is struggling to survive.

But as the risk-averse Big Three failed, innovation-minded entrepreneurs saw opportunity. Independent carmakers are using a variety of cutting-edge technologies -- from electric-powered engines to new construction materials to rapid customization -- to drag what's left of the U.S. auto industry into the 21st century.

"We are seeing an explosion of ideas," says Tom Libby, president of the Society of Automotive Analysts, based in Birmingham, Mich. "The automotive industry was very much an oligopoly, but the turmoil and uncertainty have changed that. Now hundreds of new entrants are vying to be innovative."

These upstarts are also taking advantage of the fact that for the past 30 years big car manufacturers have flooded the market with dozens of brands for every type of consumer -- fracturing the auto market into a series of niches. Which plays directly into the hands of small competitors.

"It's a great opportunity for small manufacturers with niche products," says Laurie Harbour-Felax, president of the Harbour-Felax Group, a Detroit-based automotive research firm. "The whole business is going that way."

By the end of 2010, small carmakers will bring to market luxe high-performance cars as well as purpose-built vehicles for package delivery and mid-distance commutes of, say, 30 miles or less. Even in-town drivers who are going only 10 miles are getting their own brands.

Of course, some doubt the wisdom of playing it small in the car business -- especially after the economy rebounds. The big car companies in Detroit, Toyota City and Stuttgart won't go down without a fight and are already plotting their comebacks.

Still, there is palpable swagger among small carmakers. Here are six at the starting line, waiting to race for the biggest prize of all: the future of the American automobile.

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Questions & Answers



QHow does a florist sell more in this economy? We changed our business to designing weddings and events only, as the everyday flowers are not selling. We had to throw out too much product at the end of the week -- flowers are perishable! More
Get Answer
- The Flower Lady, Suwanee, Ga.
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.29%4.30%
15 yr fixed3.23%3.29%
5/1 ARM3.33%3.45%
30 yr refi4.26%4.27%
15 yr refi3.20%3.26%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,912.11 -70.48 -0.42%
Nasdaq 4,442.70 -2.21 -0.05%
S&P 500 1,969.95 -8.96 -0.45%
Treasuries 2.46 -0.03 -1.16%
Data as of 1:42am ET
Company Price Change % Change
Frontier Communicati... 6.79 0.85 14.31%
Windstream Holdings ... 11.83 1.30 12.35%
AT&T Inc 36.59 0.94 2.64%
CenturyLink Inc 39.90 2.19 5.81%
Bank of America Corp... 15.34 -0.16 -1.03%
Data as of Jul 29

Sections

McDonald's may be liable for worker lawsuits, not just franchisees, in a government ruling that could change the fast-food business. More

Amgen is the latest to continue corporate America's cost cutting strategy, even as the economy is supposedly on the mend More

Bunch o Balloons allows multiple water balloons to be filled at once. Parents are loving it -- to the tune of $645,000. More

Steve Mason, a pastor from California, inherited more than $100,000 in student loan debt when his 27-year-old daughter died suddenly in 2009. With interest and late penalties, the debt has since ballooned to $200,000. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.