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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?
Magazine Contributor
5 min read

This story appears in the October 2007 issue of Entrepreneur. Subscribe »

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.

AC Propulsion

Having a celebrity client never hurts. That's Tom Hanks on the website of AC Propulsion Inc., holding the keys to his eBox electric car. The San Dimas, California, company, co-founded in 1992 by Alan Cocconi, 49, designs and manufactures electric power systems for clients such as Wrightspeed. Its eBox, which debuted in 2006, can run for up to 150 miles on a single charge.

AC Propulsion expects to sell more than 100 electric cars in 2008 and over 1,000 by 2010, says president and CEO Tom Gage. The company also creates prototypes for small companies developing electric vehicle technology and for large companies, including Volkswagen and Volvo. "We're confident we can be successful with a market of several thousand cars per year, which by auto industry standards is essentially zero," says Gage.

Even the market for better-known electric hybrids is small. About 247,000 hybrid-electric vehicles, including Toyota Priuses, were sold nationwide last year according to the Electric Drive Transportation Association. Compare that to the federal estimate of 136.6 million passenger cars and 103.8 million trucks on the road in 2005.

But Eberhard believes attitudes are changing. "A few years ago, people thought electric cars were ugly little dorky things nobody wanted to drive. You had to be a hero to be seen in one," he says. Tesla "set about to change that."

We may not know for another generation if these companies are on the road to profitability, but electric vehicles are no longer the nerds of the highway.

The Message Is Clear

In case you haven't heard, water from a bottle is passé. From San Francisco to Los Angeles to New York City, upscale restaurants are opting for filtered water instead. Importing bottled water consumes gasoline and wastes plastic, and helping reduce consumption of these fossil fuels speaks to a forward-thinking consumer. "You can't give lip service to being a protector of the environment and buy bottled water from Europe," says Larry Mindel, founder of Poggio, a multimillion-dollar Italian trattoria in Sausalito, California. So if your business is in the bottle, keep an eye on what's happening on the outside. --Sara Wilson

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