A Tale of Two Electrics

Two stories caught Blawgconomics' eye this week for the contrasting pictures they paint of one of the more interesting areas of the green industry, electric automobiles. The first story is about the recently folded Green Vehicles Inc. and how it lost its investors' money after not being able to generate enough capital to continue as a going concern. The second story regards the still up and running Tesla Motors and the returns it has earned for its investors on the stock market recently.

Green Vehicles (whose website helpfully remains) recently folded after not being able to grow and after only selling a few units of its all-electric designs, the TRIAC 2.0 and the MOOSE. The company, despite its aspirational goals, 'To make the best clean commuter vehicles in the world; To manufacture with a radical sense of responsibility; To engage in deep transparency as an inspiration for new ways of doing business' simply did not have the capital to continue.

While Blawgconomics may appreciate the loftiness of Green's vision it is unlikely that the city of Salinas, California does. This is because it lost over half a million dollars in in grant money on an investment it made in the company upon Green's relocation there from San Jose. The city anticipated recouping that investment through tax revenues, but it is now very likely that Salinas will have to write the investment off to the detriment of its citizens.

It doesn't appear that there was any fraud or unfair dealings at Green Vehicles, there was just not enough investment or sales to move the company forward. Presumably, if the market were ready for the product that Green was producing, the company would have succeeded (pending price points, quality, availability, proper marketing, etc.). So does the Green Vehicles situation indicate that there isn't a market for pure electrics yet? A contra example from another California company would suggest that, despite the evidence to the contrary provided by Green Vehicles, perhaps the world is ready for electric cars.

Tesla, founded in 2003, is not quite yet profitable, but it is generating positive buzz from analysts and is meeting its own internal projections for growth. It has also laid out an aggressive expansion plan for a sedan and an SUV to join its Roadster model in its vehicle lineup. As a result, shares in the company are up over 15% since since it went public in the middle of last year and are around 8% higher in the past three months (both as of July 15).

Then again, maybe it is just a matter of aesthetics...The Tesla Roadster (left) and the Green Vehicles Triac 2.0

Why the difference? There could be a few different reasons. Tesla is targeting the premium market, competing against luxury makers, rather than the mass market. It also tapped into the equity markets rather than depending on private financing and economic development grants. At least in the eyes of this author, its vehicle lineup is far more attractive (Roadster and Model S designs are favorably reminiscent of certain Lotus and Aston Martin models respectively). Looks aren't everything, but they are certainly something, particularly when it comes to the decision to purchase a vehicle. Maybe its management team, or expansion plans, or the production plant or any number of almost infinite things were better than Green's. Maybe the cosmic plan flipped a coin and the side with the Roadster came out on top. 

If it is unclear why, exactly, Tesla succeeded where Green failed, it is impossible to glean lessons from the situation? While it is difficult to say for sure, here is an attempt at a 'moral of the story.' Despite many people being very excited about renewable energy and the broader green industry, certain things still matter. Good management of companies and solid fundamentals are key, as are well-defined expansion plans and target markets. In other words, while they are willing to takes risks on growth and potential, investors are looking for the same things in green companies as they are in other investments; simply having 'cool' technology or a catchy name is not going to cut it in this market. Maybe the ultimate lesson therefore is that we have learned from the tech bubble after all...


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  3. Josh Sturtevant19/9/11 11:12

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