It's Electrifying

When even Honda can't make a go of its hybrid Accord, it's tempting to write off electric cars as glorified scooters. Can any company make a profit on them? Will consumers ever warm to a ride that needs recharging?

Several entrepreneurial companies are betting on it. They include Silicon Valley-based Wrightspeed Inc., whose electric prototype blasted from 0 to 100 mph in less than seven seconds during track testing. Odyne Corp. in Hauppauge, New York, developed a plug-in electric hybrid powertrain for trucks and buses. At New York City-based Visionary Vehicles, Malcolm Bricklin, founder of Subaru of America, is designing and engineering plug-in vehicles to be manufactured in China and projected to be sold here, via a 250-dealer network, by 2010.

Companies and municipalities have also expressed interest in electrics and hybrids for their fleets. The city of Chicago, for instance, is in the fleet-testing phase for a prototype plug-in hybrid.

As gas prices rise, Middle East politics gyrate and environmental concerns grow, the time seems right. Chelsea Sexton, executive director of the advocacy group Plug In America, anticipates investments in electric cars rising. That's already happened for Tesla Motors of San Carlos, California, whose investors include PayPal co-founder Elon Musk. Musk, VCs and private investment firms infused $45 million into the company in May.

Sexton also predicts that in five to 10 years, major automakers will roll out electric cars geared toward families. But not everyone is convinced. "Small businesses are the field's current visionaries," says Bill Elrick, an alternative-fuels consultant with The Torrington Group. "[But] I'm not as optimistic as I once was about their success, [given] larger corporations' resources, influence and networks."

Martin Eberhard, 47, who founded Tesla with Marc Tarpenning, 43, agrees. Many entrepreneurs "have good intentions and high ideals but are inexperienced," he says. "If you think you can put a real production car on the road for a few million dollars, you don't understand this business."

But if any electric car company is on the brink of mainstream success, it's his. "The hands-down leader is Tesla," says Sexton. "They started out well-capitalized. They designed a sexy car worth the price. Their market doesn't blink at the price tag," which rose from $92,000 to $98,000 in June.

Within five years, Eberhard predicts, Tesla will be in production with its second car and will likely launch a third model. If it meets its projections, Tesla will have sold tens of thousands of cars by then, he says, with some potentially costing a more budget-friendly $30,000 or so. "In five years, I think I can address that market," he says.

Eberhard believes there's pent-up demand for electric fleet vehicles. That's the market Phoenix Motorcars Inc., in Ontario, California, is going after. Founded by Dan Riegert, 55, and Dana Muscato, 54, Phoenix plans to produce 150 all-electric sport utility trucks this year at about $45,000 a piece. It targets public utilities, public transportation and delivery services, and expects to launch a line of consumer SUVs next year. "Many fleets are trying to improve their environmental footprint and reduce their expenditures on fuel and maintenance," says CEO Dan Elliott. Phoenix clients include Pacific Gas & Electric Co.

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This article was originally published in the October 2007 print edition of Entrepreneur with the headline: It's Electrifying.

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