LA Times looks at the troubles of four EV start-ups in California
The Los Angeles Times has an article taking a look at the the four most prominent California-based electric vehicle start-ups and the difficulties they face. The article touches on Phoenix Motorcars, Zap, Fisker and, of course, Tesla. A lot of what the article covers has already been discussed around these parts on numerous occasions but for those playing catchup, it's a decent primer on the difficulties of creating a new car company. Building any new car that meets modern customer expectations, regulatory requirements and is reliable and durable is an extremely daunting task. All of that needs to happen before you even think about actually making money on the whole deal, which few car companies seem to be able to do. The technical issues of integrating all the powertrain electronics, safety, body and entertainment systems is extremely costly and time consuming but must be done if you expect people to actually big bucks for an electrically-driven car. If you don't accomplish all of that, you may sell a few cars to rich early adopters and enthusiasts, but you won't have a sustainable business. One correction to the article: the author states that Tesla plans to build 1,000 cars this year, that number is closer to 600 and even that may prove to be a stretch.
[Source: Los Angeles Times]
Reader Comments (Page 1 of 1)
Tim 6:28PM (4/08/2008)
The bottom line... MONEY, AND LOTS OF IT!
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Stins 6:33PM (4/08/2008)
Starting ANY company is no small feat. But Zap has certainly had it's fair share of abuse over the last few weeks (like the article from Wired and the review from Truth About Cars - http://greenhome.huddler.com/forum/thread/188/no-love-for-zap?replies=4).
On the whole, it seems like Tesla's been doing a little bit better as their Roadster has finally made it into regular production. But all those delays certainly didn't help. I've seen a few prototypes driving around the SF Bay Area which is definitely exciting (http://greenhome.huddler.com/forum/thread/1/i-saw-a-tesla-roadster-on-the-road?replies=23). I hope that once a few of them make it out of a 10 mile radius of the Tesla headquarters, people might believe that electric cars aren't just a pipe dream.
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KarenRei 7:13PM (4/08/2008)
600 cars at 100,000 each is 60 million dollars. Not bad for a first year.
I don't understand the pessimism. Has this person never covered startups before? Six months delay for a startup producing a vehicle is nothing.
Wonder why Aptera didn't make the list?
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Throwback 7:36PM (4/08/2008)
The pessimism comes from the track record of start-up car companies in the USA. That and the fact the car business is brutal with consumers showing little to no loyalty from brand to brand.
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tankd0g 10:48PM (4/08/2008)
"600 cars at 100,000 each is 60 million dollars. Not bad for a first year."
It's pretty bad if they cost you $100,001 each to build. Tesla flushed a lot of money early on and has zero mass production experience.
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meme 1:02AM (4/09/2008)
Tesla has 140m in investment, so that's the maximum they could possibly have spent. To recoup 40% of your total investment in your first year of sales is quite good.
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Kevin M 1:18AM (4/09/2008)
I can understand the author's pessimism for the most part. But I think Tesla has a solid plan. And I may be wrong about this, but I think each Roadster costs under $100,000 to produce. Of course that is negated by all the research and development put into creating the vehicle.
But Tesla has a business model that I think is going to make them the biggest force among electric vehicle startups. They sell a very expensive, very appealing car in order to start out with a good cash flow. Then they will work on a vehicle that is more affordable and practical. Few people want to pay the high costs of the Phoenix to get a vehicle that's sole advantage is that it's electric. Some people will buy it for that reason, but it's not as unique as the Tesla Roadster. And while I would love to own an Aptera Typ-1, it's just not a practical vehicle.
I believe (and hope) that Tesla can make it without being absorbed by one of the aging dinosaur ICE car makers.
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Wave54 1:34AM (4/09/2008)
To #6:
They would have to turn a $56 million PROFIT on sales of $60 million to be recouping 40% of the investment. Gross sales doesn't count for squat until you know what amount is left over -- free and clear to pay down the seed money.
If Tesla NETS $10K per car, it would take sales of 14,000 units to cover the initial investment. Will be interesting to watch, though.
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meme 3:11AM (4/09/2008)
"They would have to turn a $56 million PROFIT on sales of $60 million to be recouping 40% of the investment. Gross sales doesn't count for squat until you know what amount is left over -- free and clear to pay down the seed money."
I'm assuming that the capital to fund the first year's production run, which they've stated that they have, is part of the $140m. Meaning that they're guaranteed at least $60m cash on hand, meaning that even if they burned through every last bit of other cash, they'd still be returning over $0.40 on the dollar invested. For their first year, that's not bad at all.
Let's put it another way: the price/sales ratio. The price is $140m (since that's what people have invested, assuming no debt), and sales $60m, meaning a price/sales ratio of 2.333. 2.333 is *not* a bad ratio for a new car company.
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Niralisherni 6:18AM (4/09/2008)
I agree that any start up faces tremendous odds, both economic and technological. This is the reason that when companies like ZAP (http://www.zapworld.com) manage to persevere and continue to produce EVs in spite of the odds, it is praiseworthy.
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greg woulf 8:53AM (4/09/2008)
I like the Tesla and don't want to talk bad about them, but the other big factor to consider is that the roadster wasn't built by Tesla. The subcontracted the car out.
That means that there's not some great reduction in cost in building the car. There's no foward progress toward Tesla's future production capability. The same goes for Phoenix.
Even so, I think the Tesla did what we all wanted and goosed the big auto makers into getting started.
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BlackbirdHighway 8:39AM (4/09/2008)
Whatever number of cars Tesla produces in 2008, it will be more electric cars than GM, Ford, Chrysler, Toyota, Daimler, Honda, VW and BMW, all combined.
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wmorin 10:59AM (4/09/2008)
The trials and tribulations that all car manufacturers face are all due to the laws imposed in the country. I'm talking about safety standards, insurance, licensing and other automobile related politics. I wouldn't doubt that some of the bigger car manufactures are putting pressure on governments to make sure the laws stick. Take the Zenn ( http://www.zenncars.com ) OKay probably not the best example. Anyways, the Car / SUV is all electric, type and in manufactured in Quebec, roughly 7 hours from where I am currently living. Until this year, the car was not allowed to drive on Canadian streets, now, a province have to approve the use of the car. Only British Columbia has allow this. Personally the 21K sticker price for the 2008 model, would suit my driving needs for most day to day running around, Can I buy it .. Yes.. Can I drive it NO ..
Apparently though, my neighbors to the south ( Americans ) can drive the car legally. Talk about red tape.
As far as the conversation about re-couping start-up cost. The traditional business model Supply VS. Demand.
If you have a product that someone wants, they will buy it. As trends change, and when people realize that comfort, speed and sexy contours can be made into an electric car, the demand will be there. This usually comes in the form of Advertising. When was the last time you seen a Tesla Roadster Ad? or better yet, any Electric Car commercial. We are in the transitional period where Hybrid rein supreme, and companies like Tesla, Zap, Zenn, Phoenix, and Fisker will not profit until people open their eyes, and demand Electric Cars.
There is a funny YouTube clip with an edit of "Two and a half men" contain reference to electric cars.
:)
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Sirriniols 11:18AM (4/09/2008)
Reading this makes me feel like all of the other companies faults but Zap's is tame in comparison. I am all for jokes, but "Zap not acquired or bombed by warplanes according to news reports." sounds like a poor cry for help from a child craving attention.
"Shareholders call screaming, 'We want news, we want news,' and so we give it to them."~Steven Schneider
Some news they give.
On a side note, and I don't mean it as a personal attack, just personal interest, are you paid to say positive things, and put the link to the Zap webpage in the majority of your post Niralisherni?
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