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Ron Defatta
Total EV managing director, Ron Defatta at PMI distribution center near Dallas in more halcyon days.

Whatever Happen To Total EV?

CycleElectric International consultant offers his perspective on the demise of Total EV

By Ed Benjamin

One of the moving forces of the EV industry shuttered its doors late last year as its parent company forced it out of business, but not before having a profound impact on the development of the retail electric bicycle and scooter business in America.

As a company it did many things right and just as many wrong.

Total EV - - headquartered in Tulsa, Oklahoma with a distribution center in Dallas, Texas -- was the business unit of American Electric Power. It concentrated on distributing electric vehicles in the USA from 1998-2001

[Editor's note: Total EV was our distributor for electric bicycles on our now-suspended EV World online Electric Shop. Overall, our experience with Total EV was good.].

The Total EV idea was a far-reaching and brilliant one that ran into fatal problems due to lack of support from the parent company and lack of relevant expertise and experience by key managers.

Originally Total EV was a business unit of CSW - a major electric utility company in the southern USA. TEV was a concept created by the strategic planning department of CSW. The aim was to create a market for electricity by creating transportation users of electricity by distributing electric vehicles.

When TEV started, there was only a tiny amount of business activity in electric bikes and scooters. TEV was quickly the largest buyer and distributor of light electric vehicles, and the top customer for almost all the existing players in the USA market. TEV sold to as many as 1000 accounts - mostly small retailers - and purchased an estimated 20 million dollars of inventory 1998 - 2001. However, sales are thought to be only 4 million in 2000, and most sales in 2001 were at or below cost and are estimated at about 7 million total.

CSW was purchased by AEP - another and larger electric utility company. When this transaction was finalized in 2000, AEP chose to divest themselves of many of the CSW business units that were not in the core business of generation and distribution of electricity.

This forced divesture resulted in the liquidation of the TEV inventory and created many unusual forces in the light electric vehicle market in 2001.

What went well:

  1. Strategic vision was excellent.
  2. . Timing was nearly perfect.
  3. The concept "All the Best Brands at One Outlet" was an attention getter for retailers looking for ways to enter the market. The wide range of products allowed for sales to almost anyone.
  4. Because an electric utility company owned them, they had huge cash resources, a professional advertising agency, and instant credibility with suppliers.
Things that went poorly:
  1. A multitude of brands and products meant that the sales team had no focus; almost all suppliers were disappointed in sales of any one product.
  2. Managers were from strategic planning area of utility business - not trained or equipped to run a company with marketing, sales and distribution activities.
  3. The sales management team was very weak - resulting in inadequate sales, disastrous planning predictions, and destroying retailer relationships.
  4. The sale of CSW to AEP and AEP's unwillingness to continue destroyed the ability of TEV to call on unlimited cash resources and required TEV to try and sell itself.
  5. TEV extended too much credit, too easily. Much of this was overdue, and much was never collected.
  6. TEV had, at one point, management offices in two cities, and warehouses in 3 locations, with the service center in still another location. The internal communications were poor and affected all aspects of TEV operations. The communications costs were significant.
Staffing

The managers truly believed in their vision, and their hearts were in the business. They wanted to succeed. TEV pursued a policy of hiring no employees. The only full time "TEV" employees were the original CSW personnel - 3 people in total. All others were subcontracted in one way or another.

This led to a "staff" that was poorly paid, had no benefits, and no interest in the long-term success of the company. There was no participation in the success of the company in any way - and the structure made it clear to all the staff that there never would be. This led to a low level of customer service, and a suspected high incidence of employee theft.

A number of advisors in marketing, service, sourcing and other areas were hired. But for the most part, managers ignored the advice given.

Distribution Operations

TEV subcontracted the storage and shipping of their inventory to PMI of Dallas Texas.

PMI was a profit making entity, and not directly controlled by TEV. This combined with the "off site" location of PMI and the inventory meant that TEV could not affect or control the time and accuracy of shipments. Resolving problems for dealers on shipments or parts was a slow and laborious process.

Website and Marketing

TEV created a website that attracted more visits and was more professionally executed than any other light electric vehicle website.

They created an excellent email newsletter that was widely ready world wide by the trade, retailers and consumers.

TEV contracted with Brothers and Company of Tulsa Oklahoma to do advertising and marketing work. The materials produced were quite good - but TEV spent very little on placement of the advertisements.

Sourcing and Suppliers

At one point, TEV offered products from 17 suppliers. Many of these were duplications of each other, and the results were confused retailers, consumers, and sales staff. TEV did business with most of the viable suppliers at the time. This created a wide range of products, but also brought TEV into full contact with the problems of an infant industry.

Some suppliers provided products of very poor quality, even safety problems. Other suppliers could not meet delivery dates. Business arrangements between TEV and TEV suppliers were strained as tiny manufacturers with inexperienced managers grew exponentially, and tried to make the best decisions for their company - negotiating with TEV managers who were equally inexperienced.

When a number of Chinese scooter makers emerged in late 99 with prices that were _ to _ of the prices TEV was paying, TEV managers disregarded the advise of industry advisors and continued to purchase products at much higher prices - most of which were sold at a loss in 2001.

Lessons learned:

  1. Light Electric Vehicle distribution for a profit can work. It can be a major business activity and a success.
  2. Strategic and operations are different. Different skills and experiences are needed.
  3. The light electric vehicle industry needs and will support a distributor.
  4. All the functions of a Light Electric Vehicle distributor need to be in the same building and under the control of the distributor.
  5. The quality of the Sales Manager will determine the success of the company.
  6. Staff participation, both in money and emotion, in the success of the company are essential.
  7. Keep inventory to a minimum.
  8. Keep staff to a minimum. And they must work directly for the company and be controlled by the company. Fire and prosecute thieves.
  9. Extend credit in modest amounts to well researched accounts only. Collect aggressively.
  10. Listen to the advisors.
  11. Find the best lines and offer a limited number of choices. Focus the entire energy of the company on these products. Do not get distracted.
  12. This industry changes quickly, stay flexible and ready to change with it.
  13. Customer service to dealers and consumers is critical.
  14. Attention to safety and quality must start with heavy interaction with the suppliers before the products are manufactured, while they are manufactured and after they are sold.
  15. Advertise! Educate the consumer on what the vehicles are, and why to buy them.
Ed Benjamin and Heather O'Donnell are principals of CycleElectric International Consulting Group

Times Article Viewed: 7838
Published: 12-Jan-2002

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