April 5, 2012 10:05
Imagine an industry. Let’s make it a high technology industry. And we’ll make it risky. It will be a new technology, linked to other new technologies. We’ll have over a dozen companies in this industry and some of them will partner with their suppliers or their customers, just as established industries do. And just because it is new technology doesn’t mean that old issues don’t matter. Each company will still have to satisfy investor expectations, raise money, hope demand stays ahead of supply, beat out their competition (both domestic and overseas) and avoid snafus of all sorts.
And if some of the companies in our imagined industry failed, would that surprise any of us? And if they got sued in shareholder derivative suits alleging misrepresentations in their 10Ks, that would be par for the course in the United States in the early 21st century, right?
Now hold those thoughts and transport yourself back to reality and listen to Carlos Ghosn, CEO of Nissan, at the New York Auto Show yesterday. His talk was basically an advertising pitch for Nissan, its turnaround and its increasing presence (with its partner Renault) in the world market. But if you can get to the question and answer session about halfway through you will get some insight into what the third largest car company alliance in the world is thinking about electric cars, and specifically about the Nissan Leaf. According to Mr. Ghosn by 2020 the Leaf will have ten percent of the market where it is available because Nissan is moving to local production, which will remove a bottleneck. It has built a quality product as evidenced by the remote monitoring being done by Nissan on every car: they have no quality problems. Consumer surveys show people want low carbon vehicles. And last, as the American and world economies get back on their feet, gas prices will continue to rise and the economic incentive to drive an electric vehicle will only become more powerful.
Mr. Ghosn is not alone in his vision. Nearly every other car company is in, or getting in, to the electric car business.
And nearly every bank was making subprime loans and we know how great an idea that was. And let’s not forget the train wrecks caused by the internet bubble when everyone could make millions off of companies like iVillage and AOL and it was a verity that bricks and mortar were things of the past.
And if we look at the electric vehicle segment we see lithium ion battery maker A123 and two of its officers subject to suit on March 2 for false and misleading statements where its stock price tanked after A123 disclosed that it was recalling thousands of batteries because of a manufacturing problem. In February automobile startup Fisker Automotive was sued by an investor upset that he was being forced to put more money into Fisker, which hadn’t met DOE funding milestones nor sales targets and needed millions more in cash. And in January Ener1 (parent to battery maker EnerDel) filed for bankruptcy citing increased competition from Korean and Japanese battery makers.
Some take these as signs of the demise of the industry. But if we go back to our imaginary industry, we see that none of this is surprising. Of course there are lawsuits, squabbles over the chase for funding, and bankruptcies. Wikipedia makes clear, however, that this is a competitive, active industry. It lists over a dozen battery companies in this new high technology area, joined with another new high technology industry (electric cars). We list them all below to emphasize the point. The travails of A123, Fisker and Ener1 prove nothing more than that it is a tough marketplace.
1List of Electric Vehicle Battery Manufacturers: A123Systems, Altairnano, Axeon, Concorde Battery, E-One Moli Energy, Electrovaya, EnerDel, Li-Tec Battery GmbH, NEC, Primearth EV Energy Co., Sanyo, Thunder Sky, XINCHI Li-ion Battery, Valence Technology, LG Chem, SB LiMotive, GS Yuasa.
2 List of Plug-In Electric Vehicle Manufacturers: Audi, BMW, Citroen, Ford, General Motors, Honda, Hyundai, Kia, Mercedes, Mitsubishi, Nissan, Opel, Peugeot, Renault, Rolls-Royce, Saab, Subaru, Suzuki, Toyota, Volkswagen, Volvo.