Electric Vehicles for Sale! (But No One's Buying)

The Bright Idea: government funding needed for a fast start. (Bright Automotive)

The Harvard Business School wants you to pay $6.95 for a case study entitled "The Electric Car: The Major Players."

The report looks at an industry that was poised for greatness last year: "In 2008, the electric car industry was poised to take a giant leap forward, with start-up companies a step ahead of large automakers," it said. "Venture Capital firms were investing hundreds of millions of dollars in promising electric car and Plug-in Hybrid (PHEV) start-ups, while existing companies were pouring billions of dollars into electric car and PHEV research.... At the same time, battery makers were racing to build enough lithium-ion batteries for automobiles to meet the expected demand.... Electricity companies were taking an interest in the industry, and began partnering with automakers to test how extensively electric cars used the grid."

You can either pay your seven bucks or just read the business news. The industry is moving forward with stunning speed. The only part of it that really isn't happening is the flow of hundreds of millions of dollars in venture capital. Although no one disagrees that EVs are the future, there simply aren't a lot of loose dollars around. The same malaise has affected green energy startups (wind, solar and geothermal) also, and their coming dominance is unquestioned also.

In effect, the federal government has become the funder of last resort. And that's why there was such angst when the Department of Energy, in its multi-billion vehicle and battery manufacturing loan and grant funds, largely passed up startups. Last month, the DOE awarded $2.4 billion in grants, but the announcement was hardly dry before I started fielding complaints from startups that had been left out. The first phase of the loan program recognized Ford, Nissan and-the only startup-Tesla, maker of the ultra-fast $109,000 battery Roadster.

Indiana's Bright Automotive is a startup, spun off from the Rocky Mountain Institute, which makes a plug-in hybrid delivery van and wants to open a factory in 2012-and be producing 50,000 vans for major corporate customers by 2013.

Bright's co-founder, Vice President of Corporate Strategy Michael Brylawski, said in an interview, "It's very hard right now for capital-intensive businesses to raise the funds they need. That's why even the big players like Nissan and Ford are going after the DOE money. It's the backstop lender right now."

Brylawski predicts that venture capital will return, but not for several years. Both Bright and Fisker (which also produces plug-in hybrids, albeit very high-performance ones) say they will still make their vehicles without DOE money. But Fisker would have to delay its next-generation, lower-cost plug-in hybrid, and Bright's Brylawski said the Idea will "take a lot longer" without government funding. "Right now, this is the most promising path," he said.

Henrik Fisker says it can achieve high production volumes quickly, but government help is a big part of the equation, even for companies that make sexy supercars. "Yes, Obama's goal is achievable and Fisker Automotive will do its part to help fulfill that goal," Fisker said.  "We expect the Karma to reach production of 15,000 cars per year in 2011, and our future high-volume, low-cost vehicle will push that number well over 100,000 per year."

This is a clean car revolution that is primed and ready to go, but only the DOE can light the fuse.