EV Maker Zap Secures $25 Million in New Funding

(MoneyWatch)  When it comes to financing its electric vehicle operations, venerable California-based Zap looks east--specifically, to Asia. The company, which makes the Xebra and other EVs, has been through its share of controversy. But Zap is riding a tide of EV euphoria and has secured $31 million in new financing since June, up to $25 million of it announced this month.

The new investor is Cathaya Funds, which focuses on investments with synergies between China and international markets. The investment will be managed by Better World International, Ltd., which is Hong Kong-based and invests in electric car businesses and service providers (concentrating on joint partnerships with Chinese companies).

"In addition to targeting market opportunities in the European Union, Zap intends to pursue automotive opportunities in China, where there are "opportunities for increased volume production and sales," said Zap. The company also intends to work with partners on developing charging networks in China, including fast charging.

Delving further into Asia, Zap has also signed a memorandum of understanding with Malaysia's ETI Tech for the supply of lithium-ion batteries and battery management systems. ETI will become Zap's distributor in Malaysia and other markets.

Zap claims to have delivered more than 100,000 electric vehicles. In an interview, Zap's CEO, Steve Schneider, said the company was hoping to build a manufacturing facility in Kentucky, and had applied for a $200 million Department of Energy stimulus loan for that purpose. The plan would be to build highway-capable electric subcompact cars and trucks, plus larger sedans and pickups, there. The vehicles start at $14,500 and are built on General Motors platforms, and Schneider says "a few hundred" have so far been sold, mostly to government clients. "There's a lot of state interest, too," he said.

This post opened with an aside that the company has been through its share of controversy. Last year, Wired magazine wrote a detailed critique of Zap that claimed it promised more than it delivered. "Over the years, ZAP has taken millions from investors and dealers eager to see the company's line of green cars hit the road," the magazine wrote. "But that line has never materialized. Of nearly a dozen groundbreaking eco-vehicles ZAP has promised in public announcements and on its Web site, only the Xebra and its sibling, a truck version, have ever made it to market."

Two cars that haven't made it (at least not yet) are a $32,500 three-wheeled Alias sports EV, with a supposed 321 horsepower and speeds above 150 mph. Here's the Alias in what appears to be a computer-generated video: Also on tap at one time was the even more high-performance $60,000 Zap-X, which was slated for this year and was supposed to have 644 horsepower, zero to 60 in less than five seconds, and a top speed of 156 (with 10-minute recharging). Aaron Bragman, an auto analyst at Global Insight, proclaimed the Zap-X to be "vaporware."

Schneider says today that he "would love to bring the Zap-X to market, because it's a showcase for every piece of our technology, but the cost of manufacturing makes it not economically feasible. We had backers for it, but then the economy changed. We still own the technology and want to produce it."

He said the company is soldiering on with the Alias, "which is very on target with what Lotus designed it to be." The current specs on the car are 75 mph, 100 miles of range, zero to 60 in 7.8 seconds, but Schneider said "the car in our showroom exceeds all those statistics": Zero to 60 in less than four seconds, top speed of 120 to 130 mph, 150-mile range with lithium-ion batteries. Zap is taking $1,000 deposits on the Alias.

Zap was involved in an ill-fated venture to import Smart cars. It took orders for $2.2 billion in vehicles but was unable to deliver them--in part because what was then DaimlerChrysler had its own import plans and was uncooperative. "Certainly, it would appear from a public standpoint we over-promised and under-delivered," Schneider told USA Today in 2006.

With a new infusion of cash, perhaps now we will see a company that under-promises and over-delivers. A revitalized Zap would be good for the emergent EV industry.