The A-to-Z of Going Broke Building EVs
By Bill Moore
Posted: 06 Dec 2011
This past Friday, I received an email press release from Aptera, the company that had developed one of the most exciting, in my view, and innovative new concepts in personal mobility. Designed as a three-wheeler, in part to avoid costly government crash certification as an "automobile," the Aptera 2e, as it became known, generated lots of great buzz and pulled in its share of start-up capital. It seated two side-by-side in an airplane-like cockpit and could get the equivalent, the company boasted, of better than 230 miles per gallon in equivalent energy consumption. Of course, it wasn't without its flaws: the wide stance of its front wheels, designed to prevent tip-over while cornering, also gave it much too wide a turning radius, I was told. During cornering tests at the Automotive X Prize competition, it driver's side door sprung open. Thankfully, the driver was securely belted in. The 2e was eventually eliminated from the competition, ending the development team's hopes of capturing a share of the much-needed $10 million purse.
That event might be viewed as the high water mark for the company based in Carlsbad, California. From that point onward, the company's struggles to raise capital either from investors or the U.S. government through the ATVM loan program would pre-occupy its management. Eventually, the Energy Department would tentatively agree to a $125 million loan guarantee, but the company would have to match it, a task that would prove futile in the current economic climate, where cautious investors are sitting on hundreds of billions of dollars they are afraid to risk.
Sadly, the inevitable happened. Through the company's public relations agency, Paul Wilbur, Aptera's president, announced that the company was "closing its doors." So, another promising electric vehicle start-up launched in the last decade couldn't pull off what is one of the most daunting endeavors imaginable, bringing an electric car to market and then being able to build a successful business.
Of course, Aptera hasn't the first to implode. The list of start-ups that have gone before it are many. I sat down and tried to recall just some of the ones I remember since launching EV World in 1998. Here's what I came up with:
Dynasty -- Canadian designed and built neighborhood electric vehicle (NEV) that saw limited production of three models vaguely resembling the VW New Beetle. Company assets were bought and shipped to Asia. Its current status is unknown.
Miles -- Funded by entrepreneur Miles Ruben, it imported two models of gasoline engine vehicles from China, modifying them into electric vehicles: a small SUV and a cab-over, flatbed truck, both classified as NEVs, avoiding NHTSA crash test certification. The company spun off CODA, essentially abandoning the NEV market.
Phoenix -- Imported two truck models from Korea, modifying them into electric vehicles. It was one of the first companies to utilize Altarnano lithium batteries (another company we hear little about these days). Its business model relied on selling air quality credits to larger carmakers in California from the sale of its trucks to various fleets in the state. The company declared bankruptcy, had its assets bought by a Middle Eastern concern and largely vanished.
Sparrow -- A single-seat three-wheeler developed by Corbin, the motorcycle accessories firm. It holds the distinction of being among the first "modern" EV company to go bust. Its assets, including dozens of unfinished production models, were acquired by an Ohio firm which completed the unfinished vehicles, making some engineering improvements, and offering them under the name NMG (no more gas).
Think -- Surely the current world record holder for bankruptcies and revivals. Designed and built originally in Norway, it was bought briefly by Ford who put more millions into re-engineering it, only to sell it at a steep loss. That company ended up closing its doors, as well. Norwegian and other investors bought it, reopened it and moved production to Finland. In 2010, the company again shut down and was bought out by one of its Russian investors. Its current status is unknown.
Triac -- After developing a few prototypes and receiving financial support from the city of Salanas, California, the company shut its doors and slipped away one night earlier this year, leaving the mayor red-faced and blaming the state's Energy Commission for leaving the company short of operating capital.
ZENN -- Canadian company that imported French-made microcars and converted them to electric as NEVs, again as a strategy to avoid costly NHTSA crash testing, despite the cars being legal to drive on public roads in France under a special EU classification. The company bet heavily on a promising breakthrough battery technology that never materialized. The fact that the cars couldn't even be sold in most of Canada, didn't help their cause. ZENN announced it was ceasing its vehicle re-manufacturing business and concentrating on EV drivetrain and battery development. Little has been heard from them since.
If there is a central lesson in this A-to-Z litany of short-lived electric car enterprises, it's that breaking into the automotive business can be relatively easy; making a success of it is pretty damned near impossible, regardless of what type of propulsion system you favor: ICE-age or otherwise; and it's especially tough if you decide to go electric. Beyond this, the reasons for individual failures are myriad and multiple: right product, wrong time, wrong product; wrong time, etc. Management missteps, unrealistic investor expectations and impatience, government responsiveness, inept marketing, unanticipated technical setbacks, product shortcomings, public resistance to change: the list is long.
Of course, if you're familiar with the history of the automotive industry, you'll appreciate this is not a new phenomenon. A century ago, there were some 100 electric car manufacturers, but by the end of World War One, most of them were extinct, and by the onset of the "Great Depression", virtually all of them had ceased to exist and even the ICE-age carmakers were struggling. By the end of World War Two, the market had shrunk to three large OEMs and a handful of smaller car builders that would eventually disappear or be absorbed by the 'Big Three.'
That we're seeing a similar resurgence of electric vehicle companies from Fisker and Tesla to relatively new start-ups like Terry McAuliffe's MyCar and the yet to be revealed Next Autoworks (formerly V-Vehicles), isn't all that surprising. In any paradigm shift, bright people see opportunities. Some will succeed, most will fail. It's the nature of the beast: it's sort of the industry equivalent of evolution.
What the North American EV industry will look like by 2020 is anyone's guess: Nissan and Mitsubishi certainly are determined to be key leaders. Figure GM and Ford will be there too, along with Toyota and Honda. But will we also see EVs from China? Probably? Europe? Most likely. And start-ups like Tesla and Fisker? Hopefully. As for the others, they may meet the same fate as Aptera and Zenn whose dreams and ambitions unfortunately exceeded their grasp. Only time and the vagaries of the market will tell who wins and who loses, and even that is never permanent.
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