Small Automakers Take Big Electric Leap
Saturday, August 8, 2009
Coda Automotive employs 41 people. It has a headquarters in Santa Monica, Calif., but it doesn't have its own factory. It doesn't have its own dealer network. It doesn't have a coterie of designers. Its chief executive, Kevin Czinger, a one-time college football star and former assistant U.S. attorney, has spent most of his career working in finance.
Yet Coda claims it will beat General Motors and other companies to market with an affordable, all-electric automobile built for the average American. This may not be a completely wild-eyed idea. Czinger was recently driving one of the prototypes -- a plain-looking but smooth-running sedan -- around the streets of Washington.
Inspired by the prospect of a new market for electric cars, Coda and other small entrepreneurial companies are tapping into the expertise of others in bids to launch new vehicle brands featuring technology they say will leapfrog the major manufacturers.
The Coda car is assembled in China, where six of the company's employees work. The chassis is licensed from Mitsubishi and made by a Chinese firm, Hafei Automobile Group. Delphi supplies the power steering. BorgWarner provides the transaxle. Lear provides an on-board charging device for the battery. The front and rear bumpers, hood and lights were designed by Porsche's design studio. The battery -- the main focus of Coda's 15-person engineering team -- was made by Tianjin Lishen Battery, one of the world's largest suppliers of lithium ion batteries to firms like Motorola and Samsung.
"We don't want to be an integrated car manufacturer," said Czinger, who grew up helping his older brothers fix cars in Cleveland. "We piggy back off of other organizations that have great know-how and work with them in an integrated way."
Coda Automotive is just one of growing number of upstart automakers looking to carve out electric-car niches in an industry long dominated by a handful of giants. Other upstarts include firms like Bright Automotive, which says it is developing hybrid-electric fleet vehicles capable of getting more than 100 miles per gallon. Elite sports car maker Tesla Motors is looking to break into the high-end sedan market. And Fisker is looking to grab a piece of the electric car market too.
Veteran auto industry analysts warn that even the best of these entrepreneurial car companies face daunting obstacles to success.
For starters, says veteran independent auto analyst Maryann Keller, it's one thing to obtain parts and expertise from various companies, but it's another thing to make sure they all work together. "You can't pick things off the shelf and be sure that your brakes are going to be appropriate for your car," she says. Keller notes that even major automakers rely on other firms' parts. She says, "it's the integration of those parts that is really key."
Distribution and marketing is the next challenge. "Everyone has historically underestimated the importance of the dealer network," Keller said. "It's all well and good to design a car out of some other company's parts, but then how do you sell it, finance it and fix it?"
Coda does not have a dealer network, and Czinger says he plans to deliver cars by "auto valet." Keller doubts that will be an economic model, though Czinger says it will save money to not have any dealers.
Coda, Bright and Tesla aren't the first entrepreneurial companies to try to break into the auto industry. In 1974, millionaire and Subaru of America founder Malcolm Bricklin launched his own sports car made in Canada, but the company went bankrupt in two years. In 1981, former GM executive John DeLorean launched his own car with parts made or designed by a variety of companies, but he failed, too.
Some larger companies that previously didn't dare tread on the turf of the auto giants are also looking to wedge their way into new parts of the business. Penske Group is shopping for cars to sell through the Saturn dealer network, which it has agreed to acquire from General Motors. Chinese or South Korean companies are eyeing the U.S. market. And India's Tata Motors is also a potential threat to the major automakers.