Five EV Lessons From California

Last Updated Aug 16, 2010 9:23 PM EDT

After visits to California-based EV companies Coda, Tesla and Fisker, I came away with five lessons these startups are learning as they try to meet deadlines to get their plug-in cars to market by the end of this year or early next:
  1. Don't underestimate new model costs. Complete a sober financial analysis of the launch revenue, then probably double it. At Tesla, CEO Elon Musk told me that the company's successful IPO has "quieted down" speculation about cash flow. If all Tesla were doing is providing powertrains and battery packs to other companies, including Daimler, Smart and Toyota, it would be profitable and looking at 20 percent growth. The core business is healthy, he said. But all of the company's resources are being committed to the new Model S sedan, a half-billion-dollar enterprise that is aimed at giving consumers a more affordable alternative to the pricey Roadster. Thanks to the IPO and Tesla's federal loan ($50 million of which has so far been drawn down), "We have sufficient capital to complete the Model S," Musk said.
  2. Commit plentiful resources to marketing (and cash if it's available). This is crucial for startups, which are forced to complete with established brands with dealer networks, large advertising budgets and track records. Mike Jackson, the sales and marketing chief at Coda, said consumers invariably shop on the Internet before they visit dealerships, so giving them a good online experience is crucial. And just getting them to consider an EV is a big step. "We need to educate people about what their real driving patterns and needs are," he said, "and about what an EV actually is." Further, word of mouth will be powerful for companies forced to rely on guerrilla marketing. "One hundred percent of consumers who test drive an EV tell other people about it. They'll become advocates if they try an EV."
  3. You don't have to be a carmaker. Tom Gage, the president and CEO of AC Propulsion, has been preaching this gospel since 1992. "Our business is drive systems," he said. An excursion into series production (AC converted Scion xBs to EVs, with Tom Hanks as a customer) was not an experience the company is likely to repeat. AC Propulsion did indeed create its own car in the late 1990s, the ultra-fast TZero, but it was built as a test bed and rolling advertisement for the company's powertrains â€" not with production intent. "We built it with no concession to manufacturability and safety regulations," he said. Only three were made. It was left to others to see a future for the TZero. In the hands of Martin Eberhard and Elon Musk, it became the Tesla Roadster, and a very big deal. But Gage has no regrets. Then as now, his business is powertrains.
  4. Look east. This is a lesson several of these EV companies have learned. Tesla has taken on Toyota as a partner, and is working on a prototype RAV4 EV near its old headquarters in San Carlos. Coda's chassis is sourced in China, and it is building batteries in a joint operating agreement with Lishen. China can be a market as well as a manufacturing source. Its annual auto sales have topped those of the U.S., and growth (stagnant in the U.S.) is exponential. AC Propulsion operates a subsidiary factory in Shanghai, and is supplying electric drivetrains to Yulon, Taiwan's biggest carmaker, for use in a new electric minivan. "China is a huge market," says Gage. "That's where the growth is, because the Chinese government is behind it." He adds that one reason the Chinese are subsidizing EVs is that they realize there are limitations to the availability of oil.
  5. The chicken and egg race is over. Even as federal, state and local subsidies ensure that California will have a charging infrastructure (including 480-volt fast charging) unparalleled in the U.S., there's a parallel realization that most charging will be done at home. Since most people drive far less per day than the 100-mile range of most EVs, they'll be able to make it home without a stopover. Public charging is a security blanket that will help build public confidence in EVs, and will make them more widely versatile, but they can proceed in its absence. At a recent management briefing in Michigan, Honda environmental strategist Robert Bienenfeld commented, "Very little charging is needed in the public sector. He argued that some public charging will become "stranded assets.'
I could easily add another five lessons, so a Part II is inevitable.

Related: Photo: Jim Motavalli
  • jim motavalli

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