i3 - July/August 2018 - 28

Policy

By Sage Chandler

G U E ST B LO G

A Trade Tale of Two Companies:
HiberSense and Local Motors
HiberSense is a two-year-old startup
based in Pittsburgh. The company began
with a professor, two students and incubation funding from the University of
Pittsburgh to explore innovative solutions
for whole-house temperature control.
HiberSense's system controls the temperature in every room of a home using a
network of sensors and vents to ensure
maximum comfort and energy savings.
HiberSense uses human and machine
learning and predictive analytics to heat
and cool spaces by controlling
the thermostat to user preference. This startup has experienced strong demand and
manufactures its core product
components - sensors and control devices - in Pennsylvania.
HiberSense also conducts all
research, design and engineering for its products in the U.S.
The company is expanding, and
prior to the tariff announcement planned to hire three
additional U.S. employees.
HiberSense notes that it would like to
eventually try manufacturing all of their
components in the U.S.
However, this will not be possible
until they have established themselves
in the market. The administration's tariffs will place a 25 percent tariff on a single but core component used in
HiberSense's product that worries the
company about its economic viability.
Its system relies on a simple control
switch for its thermostat, a product
imported from China, an item on the
administration's tariff list that will be
taxed as of July 6. HiberSense reports
the thermostat is a fraction of its product's value, but a 25 percent duty will
place a significant burden on the small
company, its employees and the contract
manufacturing it supports in the U.S.
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JULY/AUGUST 2018

produce locally. CEO Jay Rogers founded
Local Motors in 2007 after serving seven
years as an infantry company commander
in the U.S. Marine Corps. Local Motors is
also working with the U.S. Marine Corps to
create new processes for the development
of future military vehicles.
The company prefers to use American
products and supply networks. However,
certain commodities, components and
systems cannot be sourced in the U.S.
Proposed tariffs could significantly
impact their cost of materials and harm
Local Motors' competitiveness
on its advanced projects, not
HiberSense uses
only with the U.S. military but
human and machine
also in the global transportalearning and predictive
analytics to control
tion market with Olli, its selfthe thermostat.
driving, electric shuttle. Local
Motors is particularly concerned that its two main competitors for Olli - both French
companies - would not be subject to the additional costs of
tariffs and could undercut
Local Motors in the marketplace. Tariff-driven costs could
slow Local Motors' production, reduce
ing suppliers could have a dire impact on
its ability to grow its market share and
the company and its ability to deliver on
affect U.S. hiring decisions.
time and on budget. Such a delay would
Although they were spared from the
put investments at risk and hamper the
first round of tariff imposition, questions
U.S. innovation and manufacturing used
remain whether autos and automobile
for the rest of the products, as well as
parts will receive tariffs. Local Motors
plans for expansion.
estimates the possible 25 percent tariff on
aluminum bars, rods and other parts will
Local Motors
increase its bill of materials cost comLocal Motors is headquartered in San
pared to its competitors. Projects in early
Francisco, CA. Including its U.S. headdevelopment, including an unmanned
quarters and sales offices, Local Motors
cargo system to deliver supplies to battleemploys 106 people in production,
fields, and a combat-support vehicle to
design and engineering across six cities
transport people quickly and efficiently
in Arizona, California, Colorado,
in hostile environments, could be put at
Maryland and Tennessee.
risk or, at minimum, have significant
Local Motors is a ground mobility comadded cost burdens.
pany that uses Launch Forth, a global
For trade related questions, email Sage
online design community, to develop vehiChandler at schandler@CTA.tech.
cles using a network of micro-factories to
Shifting HiberSense's thermostat supplier will result in compatibility delays,
and will complicate the launch of its
business. They will need to perform testing and programming on newly sourced
thermostats with their sensors and controllers - a process that negates over one
year of spending, testing and reforming
specs already performed.
None of these options are good for
HiberSense, which just last month
launched its product. The uncertainty
caused by tariffs and burden of switch-

I T I S I N N O VAT I O N

Courtesy of HiberSense

HiberSense

https://hibersense.com/ https://localmotors.com/

i3 - July/August 2018

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