Where is Our Money?


[PS image credit: itMoves]

With frustration mounting over the inability of the Obama administration to fulfill many of their pledges and promises (helped in no small part by an irresponsible party of NO), why hold back from our modest EV side? There is little to lose, now that it looks like we'll be facing an even more paralyzed Senate (can you believe it?) after the November elections.

As it is well known, one of the first and most promising decisions by the Obama administration was to set aside $25bn in loan guaranties to support the President’s goal to create green jobs in the automotive and component manufacturing industries. Although a small amount (compared to a $3.8 trillion budget, of which some $226bn were dedicated to DARPA), it was certainly a move in the right direction, at a time when the nascent industry needed it the most. It promised companies (and more importantly, their early investors) that there was light at the end of their R&D tunnel, where money would be available to take promising new ideas past the pre-production stage and into the real world. By the time Congress appropriated the budget in fall 2008, the global capital markets had frozen (remember Lehman?), and with private funding all of the sudden gone, these DOE loans looked like the only game in town.

Alas, in a wonderful demonstration of lobbying trouncing common sense, the biggest chunk went to Ford for retooling (obviously as a consolation prize after GM got $50bn, or maybe just to shut them up), with the second biggest going to Nissan (really? does a company with $90bn in revenue need $1.6bn from the DOE?). Tesla also got their loan, not without some drama (including a sneaky price rise of $6k that angered many of their early customers) before they miraculously announced their one and only profitable month. By the time Fisker got their piece of the pie, back in September '09, something funny was happening (as Darryl Siry smartly exposed on Wired last December): investors were no longer interested in companies which have not been anointed by the Federal Government.

Which brings me to the original question: where is our money? This is a question that many innovative startups in the EV space have been asking for many many months. While itMoves was several stages behind to even think about applying for the loans, there are three senior startups which in my opinion deserve the vote of confidence from the DOE:

  • Aptera: say what you want about their design, but this is innovation, and they have arguably contributed as much as Tesla to the idea that EVs are coming (if only by showing people what efficiency looks like). They used to have 4000 deposits, but they recently had management turmoil and decided to delay production. They also lost the Automotive X-prize...uhmmm.
  • Coda: yes they are built in China, they are pricing themselves out of the market and their car doesn't look innovative enough. But then Fisker is also manufacturing abroad, a Tesla Roadster is also an expensive conversion*, and they are offering a vehicle that looks very similar to what the average Joe likes (remember, coma inducing Corollas and Camrys are consistently on the top five best selling list). They are here (Santa Monica), and they are ready to roll, what else do they need?
  • Bright Automotive: listening to their founder John Waters speak at last year Plug-In conference was for me the highlight of the event. Weight reduction, cradle to cradle, efficiency, packaging innovation were all words that I could have said myself. Mr Waters is now out of the picture, but a recent (although small) investment by GM venture arm is supposed to keep the lights on until the DOE loan arrives. I certainly hope so.

Perhaps there are other companies that deserve some money (Wheego?), so the list is not necessarily comprehensive. I am also not going to claim better knowledge than faceless Washington bureaucrats. Perhaps they know many dark secrets inside these small companies and they are just doing their job, protecting the taxpayer. Unfortunately protecting the taxpayer would directly contradict the goal to support the development of advanced technology, since advanced technology by definition has a high failure rate (i.e. money needs to be wasted in dead ends in order for real innovation to flourish).

But let's not despair, since we might know soon if the Government really chose winners before the start. According to EV World, a California startup unknown to me (XP Vehicles) has filed a legal brief with the US Department of Justice alleging favoritism and discrimination against certain independent American alternative energy vehicle manufacturers.

Maybe all they needed were better lobbyists?


* A Lotus Elise cost around $47k in 2009 in the US. In the EU, you could get one for €34k (around $42k back then).