Thursday, January 15, 2009

Sports cars go electric

DETROIT — Several startup automakers are in hot pursuit of electric-powered vehicles, but they face an uphill road as they challenge major car companies like Toyota and General Motors in the race for the green car market.

California-based Tesla Motors Inc. and Fisker Automotive are displaying cars at the North American International Auto Show this week, grabbing attention with sleek electric-drive vehicles that combine environmentally friendly chic with sports car sex appeal.


Tesla, which started in 2004, showcased its $109,000 all-electric two-seat Roadster sports car at the Detroit show and hopes to unveil its Model S electric car in late February, CEO Elon Musk said in an address Tuesday before the Society of Automotive Analysts.

Musk announced that Tesla has been working with Daimler AG since late 2007 in a partnership to produce 1,000 electric Smart microcars. He said Tesla would produce the battery pack and charger for the vehicle, which is expected to be leased to customers.

"If the 1,000-vehicle fleet is a success and the economics make sense and the product is compelling, that will expand to tens of thousands of vehicles per year," Musk said. "Daimler is really looking at this as a very serious product."

Musk said the deal was nonexclusive and Tesla was looking to establish more strategic relationships with other automakers.

Fisker is showing off the production version of its $87,900 Karma plug-in luxury sports sedan, a four-seater with solar panels and the ability to drive gas-free for 50 miles. Fisker, which expects the cars to roll off the production line in October, also unveiled the Karma S, a convertible expected in 2011.

"We really don't have any competition, at least in the next two years," in the luxury plug-in segment, said Henrik Fisker, the company's founder. "Being able to do 50 miles on electric only and then drive after as a normal car, as a normal hybrid, there's no other car that can do that."

Doubters aplenty

All swagger aside, the startups have plenty of doubters. Many question whether the niche companies will be able to survive the contraction of the U.S. auto market and the recent difficulty obtaining credit that is key to financing future growth.

"No matter what (the car) does, no matter what's under the hood, you can't sell tens of thousands of an $84,000 car in the U.S. today," said Shai Agassi, founder and chief executive of Better Place, a Palo Alto, Calif., company developing electric vehicle networks.

Tesla said in October that it would push back the production of its Model S all-electric sedan, expected to have a more reasonable $60,000 price tag, until mid-2011 to focus on its Roadster and a profitable powertrain unit. The company said it would reduce its work force but did not elaborate.

Fisker raised more than $90 million in venture capital in 2008, the company said. Its investors include top venture capital firms such as California-based Kleiner Perkins Caufield & Byers, of which former Vice President Al Gore is a partner, and Palo Alto Investors.

Tesla has raised at least $165 million since 2006, according to estimates by analysts, and its top investors include Musk, former eBay Inc. President Jeffrey Skoll and Google Inc.'s founders Larry Page and Sergey Brin. Tesla announced $40 million in financing in November to expand its powertrain venture and continue future development.

Both are seeking significant funding from the Energy Department's $25 billion loan program to develop advanced vehicles. The outgoing Bush administration has not yet announced any awards.

Growing pains

The companies face the typical growing pains of a startup auto company along with the challenges of electric transportation, competing with billions of dollars in investments by General Motors Corp. and Toyota Motor Corp. GM is hoping to bring the Chevrolet Volt extended-range electric vehicle to the market by 2010, and Toyota outlined plans in Detroit to bring an all-electric car to market by 2012.

David Cole, president of the Center for Automotive Research in Ann Arbor, Mich., said the complexity of integrating electric drive into a vehicle's powertrain could not be underestimated.

And even with extensive engineering teams, the large companies are grappling with uncertainties about how lithium-ion batteries will perform in the vehicles long-term.

"What (the startup companies are) finding is that it's not quite as easy to do as it is to talk," Cole said.

Jim Lentz, Toyota's top U.S. sales executive, said the new companies probably will foster innovation and competition.

"At the price point where they're entering the market, they're at a very different place," said Lentz, president of Toyota Motor Sales USA. "It's interesting for us to look at the technologies and how they're developing their electronics."




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