Customer rides of the Model S Beta

Romney lumped Tesla in with Solyndra, Fisker Automotive and Ener1 as examples of misplaced spending. It’s true that Solyndra and Ener1 went bankrupt, and Fisker Automotive has clearly been struggling. But Tesla in general has been a success story of the stimulus, and is producing a widely praised electric car in Fremont, Calif, at the rate of 100 vehicles a week (for the last week of September). (To clarify, Tesla’s loan was from the Advanced Vehicle Manufacturing Program, not The Troubled Asset Relief Program (TARP) that bailed out the auto industry).

In addition, Tesla has been paying back its loan, it created jobs in California, and it’s helping customers move off of oil for transportation. The company had a successful IPO back in 2010, and its stock has been trading surprisingly high for months, if not years.

Yes, Tesla made an announcement last week that it is about four to five weeks behind production schedule for its Model S electric sedan, and that meant the company had to cut its annual revenue guidance. But Tesla is still largely on track, and I believe it is a game changer in the industry. At an event a few weeks ago Tesla investor Nancy Pfund, a partner with DBL Investors, said she thought Tesla would emerge as one of the defining success stories of Obama’s stimulus. If Tesla continues on its current path, I would agree.

Tesla is certainly not Solyndra.

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The news isn’t a surprise to anyone that’s been following the company, which has been struggling to survive and sells its batteries to auto makers like startup Fisker Automotive. Earlier this month, A123 posted sharply lower revenues and losses for the first quarter of this year, and about two months ago it launched a program to replace batteries with defective cells. The replacement program cost the company dearly, including $51.6 million in warranty costs and an estimated $15.2 million for replacing defective batteries that were in its inventory.

A123 is far from the only battery maker that has struggled in recent months. Earlier this year, battery maker Ener1 filed for voluntary Chapter 11 bankruptcy, and was delisted from the Nasdaq. One of Ener1′s main customers was electric car maker Think, which also headed into bankruptcy.

As the Wall Street Journal points out in an extended article on Thursday, electric car battery makers were the recipients of significant government incentives, and yet the market for electric cars has moved more slowly than expected. The government funding partly created the over supply — and thus these struggles — because the electric car industry is still in an early stage.

A123 Systems received a $249 million matching grant from the Department of Energy to build factories to make at least 500 megawatt-hours of lithium-ion battery capacity per year — a far greater capacity than current demand for electric cars. Ener1 is the parent company of EnerDel, which back to summer 2009 received a $118 million grant from the DOE.

The Wall Street Journal writes:

Since 2009, the Obama administration has awarded more than $1 billion to American companies to make advanced batteries for electric vehicles. Halfway to a six-year goal of producing one million electric and plug-in hybrid vehicles, auto makers are barely at 50,000 cars.

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As a result of this “dramatic” and “sudden” reduction in Karma volume for A123′s batteries, as A123 execs described it in the call, A123 Systems had to lower its fourth-quarter and year-2011 guidance by $45 million. The entirety of that year-guidance cut seems to be coming from the sliced Fisker deal, and Fisker was A123 System’s largest revenue-generating transportation deal.

A123 Systems even had to cut both temporary workers and cell production for Q4 because of the Fisker volume reduction. A123 Systems quietly released the drop in guidance in the late afternoon last Friday, but it gave more details in its earnings call on Wednesday.

In the third quarter of this year A123 actually ramped up battery production to meet Fisker’s previously set production goals. Update: Fisker had to scale back its work with A123 because of the delay from the federal and state certification process, which Fisker expected to happen earlier, Fisker told me. I’m speculating, but it sounded like other suppliers potentially didn’t meet their production targets for the Karma, which is not so uncommon in the electric auto world. Because electric cars are so new, there are a limited number of suppliers.

Update: Fisker says it is busy ramping up production during Q4 to reach full run rates early next year. “The fact is that we have sufficient inventory of batteries at the plant currently to deal with our production plans, given that we did experience some delays due to regulatory issues. Therefore, we are not in need of more battery stocks at the present time,” says Roger Ormisher, the director of global communications at Fisker.

Fisker received federal and state certification for its Karma just last month and shipped almost 40 Karmas to the U.S. from its partner’s factory in Finland. Some of the first customers have received theirs — like investor Ray Lane and celebrity Leonardo DeCaprio — and the other cars were shipped to dealers as their first demonstration units.

A lot of industry watchers probably aren’t surprised by this. Fisker has delayed the launch of the Karma by months and years. It is a difficult task as a startup to get the first line of cars built — just ask Tesla, which struggled with the launch of the Roadster, too. Battery maker Ener1 placed its bet early on in the all-electric Think City car, and when that company went bankrupt, it practically took down Ener1 with it (the company was just delisted from the Nasdaq).

I’m surprised that with all the previous media attention from right-leaning media on how Fisker is using the Department of Energy loan to build cars in Finland (it’s not, the loan is mainly for its second car to be produced in the U.S.), more people aren’t paying attention to the real numbers and real issues with the company. If you’re just learning about Fisker, here are 10 things to know about it.

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The Chief Accounting Officer of Ener1, who is also the Chief Financial Officer of subsidiary EnerDel, Melissa Debes, also resigned on October 25, 2011. Departure of the CFO, follows the departure of Ener1′s longtime CEO and director of the Board of Directors, Charles Gassenheimer, who resigned on September 30, 2011.

One of the big problems at Ener1 was its support of electric car maker Think. Ener1 was forced to write down a $59.4 million impairment charge for its investment for the first quarter of this year, after Think headed into bankruptcy. A Russian investor ended up buying up Think’s assets, but that was the third time the company declared bankruptcy over its long history.

Then Ener1 faced some accounting weirdness. The company gave a preliminary restatement of its revenues and net income for 2010, and the first quarter of 2011, and said its net loss for 2010 was $165.32 million, which is almost a $100 million more than its previously stated net loss for 2010 of $68.80 million.

Ener1 is the parent company of EnerDel, which if you remember back to the Summer of 2009, received a $118 million grant from the Department of Energy’s $2.4 billion Electric Drive Battery and Component Manufacturing Initiative. EnerDel received the funds to help it build a factory that would produce batteries for electric vehicles. The DOE told Inside Indiana Business that EnerDel has received $55 million of the grant, and that the DOE is closely watching Ener1 and EnerDel.

On a Monday that also saw the bankruptcy of DOE loan winner Beacon Power, you can bet that House Republicans will closely be watching Ener1 and EnerDel now, too.

Our test drive of the Think City:

And our interview with Ener1 former CEO Gassenheimer:

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Ener1 delayed its second quarter financial reporting on August 9, and then said on August 16 that it needs to restate its earnings for the first quarter of 2011, and the full year 2010, because of a review of its accounting of its Think impairment. Ener1 says in the filing that:

Ener1 is currently in the process of determining whether the Company has sufficient liquidity to fund its operations.

Ener1 has done a preliminary restatement of its revenues and net income for 2010, and the first quarter of 2011, and now says its net loss for 2010 was $165.32 million, which is almost a $100 million more than its previously stated net loss for 2010 of $68.80 million. For the first quarter of 2011, Ener1 says it now has lost $20.48 million, which is actually a smaller net loss than it previously reported for the first quarter of $84.72 million. One of the problems looks like more of the impairment charge was supposed to be recorded in 2010, than in the first quarter of 2011.

We’ll see if Ener1 can continue its operations. Previously when the company announced that it was cutting its losses on Think it said it was moving more toward selling its lithium ion batteries to the power grid market. Ener1′s stock is now down 6.39 percent and trading at 43 cents.

Norwegian electric car maker Think declared bankruptcy at the end of June. About a month later, Think said that Russian investor and entrepreneur Boris Zingarevich had bought the assets of the company, as well as Think North America and Think U.K. Kleiner Perkins investor Ray Lane explained to me its investment in Think North America at the end of this interview (they don’t own anything anymore).

Here’s my video test drive of the Think City:

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A few of the stocks I covered yesterday are still down — like EnerNOC, but that’s due to company-specific issues. Most are slightly up, though many didn’t return to the trading levels pre-market sell-off. Here’s a run down on where the stocks I covered yesterday are at this morning:

Solar

• Solar panel maker SunPower up 3.06 percent.
• Chinese solar panel maker Suntech rises 4.13 percent.
• Thin-film solar maker First Solar is still down .40 percent.

Biofuels

• Biofuel maker Gevo is back up 10.87 percent.
• Algae oil company Solazyme is up 3.07 percent.
• Biofuel maker KiOR is down even more: 3.50 percent.
• Biofuel maker Amyris is up 0.75 percent.

Electric car and batteries

• Lithium ion battery maker A123 Systems is up 11.70 percent.
• Electric car maker Tesla Motors is up 5.67 percent.
• Battery maker Ener1 is up 6.75 percent.

Smart grid

• Smart meter and network maker Itron is up 5.14 percent.
• Demand response company Comverge is down even more, by 1.38 percent.
• Demand response leader EnerNOC crashed even more, by 36.98 percent . (Yesterday’s market crash is combined with EnerNOC’s own weak earnings statement and a downgraded position to hold by a prominent analyst).
• Smart meter and network maker Echelon is back up by 5.51 percent.

Random:

• Car sharing company Zipcar is up 2.75 percent. It hasn’t fully recovered from yesterday.
• Clean Energy Fuels, which makes natural gas infrastructure for gas-powered cars, is still down by 5.80 percent.

Image courtesy of dizznbonn.

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Think didn’t release the price of the deal, but we’ve reached out and are waiting to hear back. Zingarevich was previously an investor in Think and also an early investor in and director at lithium-ion battery maker Ener1, which was also an investor in Think.

Earlier this year Ener1 wrote down a $59.4 million impairment charge for its Think investment and said that it would no longer fund Think. Ener1 said it pulled out of its Think investment partly because Think had stopped production and had run out of money, and also because the market for electric vehicles has been moving more slowly than expected.

In Think’s release this morning, it says both Ener1 and its other partner, Finnish auto engineering company Valmet Automotive, will work with Think on a relaunch of the Think brand and the Think City electric car, though Ener1 and Valmet are in the process of negotiating those stakes in the new company now.

The new company will be called Electric Mobility Solutions, and it will continue to sell the Think brand as well as the Think City car. The new company says it will start production on a refined version of the Think City in the first quarter of 2012.

Good luck — will the third (or fourth) time be the charm?

Here’s our test-drive of the Think City:

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Think has reportedly confirmed that it has filed for bankruptcy, and has also said that while Think North America was not included in the bankruptcy, the Norwegian company will determine what happens to the U.S. arm. Just six months ago, Think launched its Think City electric car in the U.S. market delivering U.S.-made cars, built at its factory in Elkhart, Indiana, to the state of Indiana for a government fleet.

A lot of twists and turns have led up to this dismal state of affairs for the twenty-year old Think. In April, the Norwegian business newspaper, Finansavisen, reported that Think was having financial trouble, had stopped production of its cars in Finland, had laid off 35 employees, and was looking for more funding.

Ener1, which previously held 48 percent of the voting power of Think, announced last month that it had written down a $59.4 million impairment charge for its Think investment and that it would know longer fund Think, partly because Think had stopped production and had run out of money. The market for electric vehicles has been moving more slowly than expected, Ener1 added.

As a result of its impairment charge for Think, Ener1 reported a net loss for the first quarter of $84.71 million, dramatically more than the $15.46 million net loss for the quarter the year earlier. Ener1 also adjusted its 2011 revenue to reflect the halted Think shipments. Ener1′s shares are trading at $1.19.

Ener1 says in its filing from Wednesday that it has a material impairment of $35.4 million from its Think investment, which could be subject to change if Ener1 can recover any money from the Think liquidation. But Ener1 is not optimistic it will recover any money: “we presently believe that any such recovery, to the extent it occurs at all, is not likely to be significant.”

Think had previously planned to start selling the Think City to U.S. consumers in mid-2011, projecting to sell between 2,000 to 3,000 cars via three to five stores. Think had planned to expand its Indiana factory in mid-2011 from 25 local workers to more than 415 by the end of 2013. Think had also been looking for a loan from the DOE’s highly competitive Advanced Technology Vehicles Manufacturing Program, and had formed a U.S. joint venture three years ago with Kleiner Perkins and RockPort Capital Partners.

Given Think Citys may never be driving U.S. roads in any real numbers, you should check out our test drive of the Think City from last year:

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Most standard laptop batteries start losing their ability to fully charge (providing fewer and fewer hours of battery life) after about a year and a half. Anyone who’s a laptop user knows how annoying it is to have a battery that suddenly won’t hold a charge for very long, even though it’s still early in the life of the laptop itself. Leyden Energy says its battery has one of the highest energy densities and run times for a lithium-ion laptop battery on the market, with 440 watt hours per liter and over 1,000 cycles, and the battery can operate at higher temperatures than traditional batteries.

Leyden Energy’s three-year warranty battery will cost a premium over a standard one-year battery, and while Leyden Energy hasn’t yet determined the exact price it will sell the battery for, Leyden Energy CEO and President Aakar Patel told me in an interview that a three-year battery will be less than double the cost of a one-year battery. Leyden Energy will also announce a deal Monday to sell its battery through the Canadian battery retailer Dr. Battery, and interested customers will be able to buy the battery online in a couple of weeks through the retailer.

Leyden Energy was founded in 2007 with a patent acquired from chemical giant Dupont, and a $4.5 million investment from investors at Walden International, Lightspeed Venture Partners and Sigma Partners. Leyden’s secret sauce is an innovation for the electrolyte part of the battery. A battery has a positive and a negative plate and then an electrolyte in between, which is the substance through which electrons transfer back and forth while the battery charges and discharges.

While standard lithium-ion batteries use a salt-based solvent within the electrolyte that starts degrading at a temperature of between 70 to 80 degrees Celsius, Leyden uses a salt-solvent in its electrolyte that doesn’t degrade up to temperatures of 300 degrees Celsius. Leyden Energy holds a patent for this innovation. As Patel explained it to me, when a battery charges and discharges, think of the electrons as rods that move across the electrolyte (between the anode and the cathode) and fill holes on the other side. After a certain point in time, standard electrolytes, particularly at high temperatures, let the rods start to break down and the holes start to fill up, but Leyden’s battery can maintain the integrity of those rods and holes at higher temperatures for a longer period of time.

In the grand scheme of innovations, and with startups trying to change the game with designs for battery-powered cars with hundreds of miles of range, Leyden’s innovation is kind of like baby steps. But if Leyden can manage to get a deal with a major laptop manufacturer to embed the battery directly in a laptop, or market the battery with a popular laptop, then the company could do well. In 2008, Boston Power launched its three-year-lasting lithium-ion battery with laptop maker HP, and is backed by Oak Investment Partners, Venrock, GGV Capital and Gabriel Venture Partners.

Like Boston Power, Leyden Energy has been eying the electric vehicle battery market, too, and is working with Brammo to supply the battery for its electric motorcycle the Empulse, a more powerful version of Brammo’s original e-scooter the Enertia (which I test drove here). Leyden and a vehicle maker partner were also awarded a $2.96 million grant from the California Energy Commission to produce ten electric vehicle batteries per month. Leyden seems like it’s focusing more on batteries for the laptop and consumer electronics markets, instead of electric vehicles, as it seems like the market for electric vehicles is moving slower than some have expected (see A123 Systems , and Ener1 ).

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