Much has changed since then. With 2012 numbers done and dusted, I figure it’s time to revisit this topic – again, under the light of data. I’ll frame this analysis with the questions I’ve gotten from VCs and entrepreneurs who’ve asked me for an update.

What’s happening to cleantech venture capital?

It’s receding.

• Investment fell 30% in 2012 – and even further at the early stage. The Moneytree survey numbers had cleantech VC investment falling from $4.6 billion in 2011 to $3.3 billion in 2012 – a 28% drop. Further, they showed first-time funding of new start-ups plummeting 58% to just $216 million, and shrinking as the year progressed: By Q4, first-time funding was just 4% of capital invested.
• Limited partners are backing off. VC firms get the money they invest from limited partners (LPs) like foundations and pension funds. Last December Preqin called up 31 LPs that were invested in at least one cleantech-focused fund and asked if they planned to back any new ones in 2013. Only 22% said yes (down from 31% a year before).
• The people are changing. Many VC firms parted ways with their cleantech teams in 2012. While February’s ARPA-E conference had a record number of attendees, venture investors were scarce – replaced by a bumper crop of corporate types.

Why is this happening?

Cleantech VC performance is substantially lagging venture capital as a whole. This wasn’t true in 2011, but things changed fast in 2012.

I arrive at this conclusion by comparing two data sets. On one hand, we have data on the interim performance of 19 cleantech-only VC funds as reported by the California Public Employees’ Retirement System (CalPERS), a big LP. On the other, we have equivalent data for the entire universe of VC funds from the National Venture Capital Association. (The data are expressed as “value to paid-in capital, net to LPs,” which means “the current value of the funds divided by the money put into them, accounting for what VCs pay themselves.”) By comparing cleantech-only fund performance with the full VC universe at the same points in time, we can see whether cleantech is doing better or worse than the asset class.

The answer is that cleantech went sideways in 2012 while VC overall did well. In September 2010, the cleantech VC funds were worth 0.90x the money paid into them while comparable VC funds overall were at 0.96x – roughly the same. Six months later the gap had widened, but both had risen in value and remained within spitting distance. By June of 2012, however (the most recent data available), the cleantech funds had declined slightly while the overall VC universe climbed to 1.23x.

This is why investment is stalling, LPs are hesitating, and cleantech VCs are thinning: Capital invested in other domains is showing a greater near-term return.

If minimal money had gone into cleantech, or if the macro environment were rosier, there might be more willingness to forge ahead. But today, fund managers assess the $25 billion worth of cleantech VC invested since 2003 against a backdrop of shale gas and climate apathy – and tighten the purse strings.

OK, but why is that happening? What’s driving weak cleantech VC performance?

Two factors. First, there have been too few exits.

Let’s consider the gold standard of VC wins – an IPO on a major exchange. When I last did this analysis, cleantech was overperforming on the IPO front: In 2009, 2010, and 2011, cleantech’s share of VC-backed IPOs exceeded its share of VC funding. (Note: One must apply an appropriate time lag applied to the latter – I used five years, which is informed by deal-by-deal fundraising data by cleantech start-ups).

This ended in 2012. Just as in the prior year, three cleantech IPOs took place out of about 50 VC-backed IPOs in total (6%). But cleantech’s corresponding share of VC funding rose to 10% – so cleantech was now underperforming on exits relative to capital invested, instead of overperforming.

(Of course, most VC-backed companies exit through acquisition, not an IPO. But the M&A front looks no better for cleantech. When merchant bank Jane Capital counted up every acquisition of a VC-backed cleantech start-up worth more than $50 million in the last 10 years, it found just 27 of them.)

Second, the winners have disappointed post-IPO. When a start-up goes public, its VC investors rarely get to sell their shares immediately: They have to wait out a lockup period that typically lasts six months. Of the nine VC-backed cleantech start-ups that have done major-market IPOs since 2010 and have been public for more than six months, eight were trading below their IPO price at the 180-day mark.

In four of those cases, the 180-day share price was also lower than the price at the last venture round. That means VCs who bought shares in that round were under water when the lockup expired.

So is the pullback in cleantech VC justified?

Well, it’s certainly expected. The cleantech gold rush of the late 2000s saw hundreds of start-ups funded – many with identical propositions – that greatly exceeded the carrying capacity of their industries: For example, there’s no way that more than a handful of the 219 solar start-ups counted by Greentech Media in 2009 could possibly succeed. This dynamic isn’t unique to cleantech. The Internet VC bubble of the late 90s was the same story, albeit on a much larger scale.

But just as the boom-and-bust in dot com investment didn’t mean this whole Internet thing was a waste, the same is true for energy and environmental technologies. It’s very likely that multiple billion-dollar companies lurk among today’s cleantech VC portfolios. The question is – given the current retrenchment of capital from the field – how many of them will get the fuel to reach the finish line.

In the main, energy and environmental start-ups need outsized time, money, and risk tolerance to reach a big outcome. (That’s not true of IT-meets-energy “cleanweb” companies like Opower or Venrock-backed Nest Labs, but it holds for the deep-tech start-ups that comprise most of the category.) As our case study, let’s take First Solar, the pioneering thin-film solar maker. The company’s first instantiation was founded in 1990; it took 12 years to ship a product, was restarted in 1999, and consumed $150 million of equity investment (all Walton family money) before its 2007 IPO. But at that outcome, First Solar was worth $1.4 billion valuing the Walton stake at 8.4x. Two years later at the peak of the solar boom, it was worth 199x!

If this is what success looks like – that is, if the majority of cleantech start-ups will need more time and money to reach big outcomes compared with VC-backed companies overall – a few conclusions follow:

• Funds focused solely on cleantech will have a longer and deeper “J-curve” of returns compared with VC as a whole. When they reach the same final return multiple, they will take longer to do so (impacting IRR). Midway through the journey, their performance will look like an “L-curve.”
• To the extent that cleantech start-ups’ time to exit will be 10 years or more, it’s too early to call success or failure on the current crop – because most of them were founded in 2007 or later. Check back in five years.
• Because the time frames to an outcome are longer and the amounts of capital required are greater, cleantech investment should be less spikey compared with investment in, say, Internet start-ups. And lo and behold, that’s pretty much what we see:

Cleantech VC now is like Internet VC in 2001: on the downward slope of a bubble, albeit with a more gradual climb and a gentler descent. Note that Facebook was conceived in 2003 – the lowest point for Internet investing post-bust – and that in 2004, Google’s IPO kicked off the renaissance that persists today.

So is the cleantech pullback justified? The data says it’s too early to call. However, it also suggests that the time frame required to reach a conclusion will greatly stretch 10-year closed-ended funds.

(A diligent reader may point out my own numbers showing that when VC-backed cleantech start-ups have gone public, they’ve mostly done so in less than 10 years. My take is that most of these companies were rushed to public markets before they were ready – explaining the awful aftermarket performance.)

What happens now?

Cleantech innovation is about to take a walk in the woods. Justified or not, the established path of VC-backed investment is narrowing for a generation of start-ups. Some of those companies – and some of the investment managers that have backed them – will break off into the wilderness to find a new route.

In this environment, I see opportunities in:

• Selective recaps. About 270 cleantech start-ups can be characterized as “late stage” (they’ve raised Series C rounds or later). Of those, about 150 have demonstrated proof of economics and are focused on scale-up. If capital keeps receding, there won’t be nearly enough money to fund them to exit – enabling savvy late-stage financiers to pick off the best of the bunch in recaps that reap disproportionate returns. In 2011 I thought this capital gap wouldn’t persist, because the likes of VantagePoint and Silver Lake Kraftwerk were out raising huge funds aimed at it; the failure and scale-back of those efforts leaves the opportunity open.
• Cross-border plays. The U.S. dominates cleantech innovation, but China and other overseas nations dominate deployment. New vehicles are mobilizing to provide cleantech equity investment coupled with cross-border JV creation and operational help – including Formation8 and a stealth-mode firm I can’t reveal.
• Strategic investment, rethought. Large corporations in industrials and energy have strategic motivations to foster cleantech start-ups: The likes of GE and General Motors want an innovation pipeline, while utilities want a stream of new equipment to rate-base. Institutions are forming to organize this activity in a merchant banking model, like Broadscale at the late stage and OnRamp Capital at the early.
• Foreign techno-colonialism. While U.S. investors bemoan a lack of capital for cleantech, many foreign institutions are awash in it – and view American assets as being generally cheap. To U.S. start-ups, they will play a role somewhere on a continuum between savior (e.g. Japanese trading houses bankrolling cleantech start-ups to get the inside track on project financing) and reaper (e.g. Wanxiang’s A123Systems deal).
• Philanthropic capital. The cleantech projects that would most change the world – think electrofuels, solar antennae, advanced nuclear power – are also the least likely to be funded, because they combine long time frames with extraordinary risk. There is a case to be made for impact investment in these fields using philanthropic capital as a charitable activity. A new effort called PRIME, backed by four visionary family foundations, is leading this charge.

It’s hard out there for cleantech. The woods are scary and the journey is uncertain. But pioneers are charting a new path through the thicket – blazing trails that others will follow.

Matthew Nordan (@matthewnordan) is an energy VC investor at Venrock, one of the oldest and best-performing VC firms. Earlier, he co-founded and led the energy tech analyst firm Lux Research and forecasted technology futures at Forrester. There’s more where this came from at mnordan.com.

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That’s why we wanted to take the opportunity to highlight some of the rare next-generation battery startups out there that are using nanotechnology, new printing technologies, high-powered computing, and other innovations to produce the future’s batteries. With a little luck, strong leadership, and maybe some government support, these battery startups could change the way the world stores energy. Also make sure to check out an advanced battery report (subscription required) recently published by our research service GigaOM Pro.

1). Ambri: Ambri is one of the most well known battery startups out there. Formerly called Liquid Metal Battery, the company was founded by MIT Professor Don Sadoway, who is probably the only battery startup founder ever to score an interview on The Colbert Report. It’s also got investors Bill Gates, Vinod Khosla, and oil giant Total. Ambri is developing a battery for the power grid using molten salt sandwiched between two layers of liquid metal. The battery is still at least a year and a half from commercialization.

2). Imprint Energy: Using zinc, instead of lithium, and screen printing technology, Imprint Energy has developed a battery that is ultra-thin, energy-dense, flexible, and low cost. Because the battery can be made thin and pliable, the company hopes to target companies making wearables. Imprint Energy is already making small volumes of its batteries for pilot customers, and plans to ramp up to commercial scale manufacturing in a couple years.

3). Alveo Energy: Half-year-old startup Alveo Energy is looking to develop and commercialize a battery made out of water, Prussian blue dye — which is used to color things like blue jeans, crayons and paint — iron and copper. The battery is meant to be ultra low cost and long lasting, and if successful, could help deliver breakthrough energy storage technology for the power grid. The research behind the battery was done by Stanford PhD student turned entrepreneur Colin Wessells, and Stanford Professor Professor Robert Huggins, and the company managed to snag a $4 million grant from the Department of Energy’s high risk early stage program called ARPA-E.

4). Pellion: Pellion went about finding the perfect battery chemistry in a totally disruptive way: the researchers created advanced algorithms and computer models that enabled them to test out 10,000 potential cathode materials to fit with its magnesium anode for its battery. Pellion co-founder, MIT Professor Gerbrand Ceder, also helped develop The Materials Genome Project at MIT, which is a program based on using computer modelling and virtual simulations to deliver innovation in materials. Pellion says its magnesium batteries could have very high energy density — higher than current lithium ion batteries. The startup is backed by the ARPA-E program as well as Khosla Ventures.

5). QuantumScape: QuantumScape is an early stage stealth battery startup that is truly a product of Silicon Valley. The company is commercializing technology from Stanford University, it was founded by Infinera co-founder and CEO Jagdeep Singh, and it’s backed by Kleiner Perkins Caufield & Byers and Khosla Ventures. The company is trying to create a battery — called the all-electron battery — that has the density of fossil fuels. The technology being used is a new method for stacking trace amounts of materials together.

6). Envia: A year ago battery startup Envia unveiled that its lithium ion battery technology could deliver an electric car with a 300-mile range for a cost of around $25,000 to $30,000. Founded in 2007, Envia developed a low-cost cathode and then paired that with a silicon carbon anode, and a high-voltage electroloyte. The company is backed by General Motors, Japanese giant Asahi Kasei, Pangaea Ventures, Redpoint Ventures and the DOE’s ARPA-E program.

7). GELI: Startup GELI isn’t making new types of batteries, but it’s developing an operating system and software for grid batteries. Companies, building owners and utilities can buy GELI-enabled batteries and use the batteries for services like providing energy storage for solar systems, or for storing and discharging energy when the demand for energy becomes out of balance with supply.

8). Sila Nanotechnologies: Sila Nanotechnologies was founded in 2011 by Valley entrepreneurs working with the Georgia Institute of Technology. The company is building a lighter lithium ion battery that has double the capacity of current lithium ion batteries. The company received a $1.73 million grant from the DOE.

9). Boulder Ionics: Boulder Ionics is working on breakthroughs for the electrolyte part of the battery, which is the guts of the battery, where the ions flow across between the anode and the cathode. The company is developing an electrolyte made of ionic liquids that can function at high temperatures and voltages and is lower cost to make than the more standard way to make ionic liquids.

10). Prieto Battery: The brainchild of Colorado State chemistry professor Amy Prieto, Prieto Battery is making a lithium ion battery that it says can charge in five minutes and last for five times longer than the standard lithium ion batteries. The company is leveraging nanotechnology to develop tiny copper nanowires that make up the anode of the battery, and the electrolyte is made of a solid polymer.

11). Sakti3: Sakti3 is a startup in Michigan that is building a lithium ion battery that is entirely solid state, and has a high energy density. Making it from solid polymers means it won’t have those flammable liquids and could be a lot safer for electric cars. The company is backed by Khosla Ventures, GM Ventures and Itochu.

12). Xilectric: Xilectric is re-making the “Edison Battery,” which traditionally has been a rechargeable nickel iron battery. But Xilectric is making it out of aluminum and magnesium, which it says will make it more low cost and with higher performance. The company was awarded a $1.73 million grant from the DOE.

13). Amprius: Based on research from Stanford’s Yi Cui, Amprius is working on lithium ion batteries that use a nanostructured silicon material for the anode. The nanostructured material could shrink the anode fourfold and allow a fourfold increase in energy density. The company has raised at least $25 million from Trident Capital, VantagePoint Venture Partners, IPV Capital, Kleiner Perkins Caufield & Byers, and Eric Schmidt.

Updated: This article was updated on January 14th at 10:30AM to correct the name of the show that Ambri’s founder did an interview on, from The Daily Show to The Colbert Report.

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Cold weather doesn’t make for a happy Volt

One external factor that’s hurting the number of miles we can run on a full battery charge is the winter. Under typical driving and climate conditions, GM says the 2013 Volt should get around 38 miles of travel on a single charge. But like any batteries, those in the Volt are adversely affected by cold temperatures. As a result, we’ve experienced some driving days where we only get 34 or 35 miles on car’s battery and then the gas generator kicks in.

The engine has also turned on sporadically to maintain the battery temperature; even when there’s still plenty of juice in the power pack. I’ve noticed this when the temps drop below 35-degrees or so, which is common right now where we live in Pennsylvania. These few periods when the engine heats things up a bit don’t use up much gas however. The engine might run for two or three minutes at a time.

We’re using more electricity, but still not paying for it

Part of the reason we decided to get a car that runs primarily off of electricity is because we’re creating more electricity than we use on an annual basis. In the last 12 months, our 41 solar panels produced 13.8 MWh of electricity but we only used 7.5 MWh of it. Of course, recharging the Volt’s battery on a daily basis is increasing our electricity consumption. It takes roughly 10.8 kWh to fully charge the Volt, which costs us about $1.18 and takes 10 hours with the standard charger.

Although the month of December isn’t over, I checked our electricity usage to date and found it to be 628 kWh so far this month. A quick peek at our home’s solar energy electricity production show that we’ve only produced 462 kWh of energy, so we’re at a deficit. (Note: Our solar array data is made public in real-time here.) I’m not concerned, however.

We’ve built up enough of a surplus with our energy provider so we’ll simply tap into that reserve instead of paying a bill this month. And the winter months are known for both their shorter days and a lower sun angle, so I’m not surprised that we haven’t created enough electricity to have a surplus. That’s sure to change as the days get longer: Last June our panels produced 1.48 MWh of electricity, or nearly four times that of the current month.

Even though there aren’t too many public charging stations in our area, I have found one at the King of Prussia mall, which is the second largest mall in the country and local to us. Atop one of the parking garages are two spots dedicated to electric vehicles, complete with a pair of 240V charging stations. There’s no cost and we’ve taken advantage of them three times already. By the time we’re done shopping, our Volt battery is fully charged for the ride home.

Savings are looking good

Even though we’re tapping our personal reserve of electricity, we’ve come out way ahead in this first month. It was a typical driving month for us, in terms of mileage, but didn’t really cost us anything out of pocket for fuel. The prior month, we drove roughly the same miles and spent just over $227 in gasoline costs.

This month we didn’t see an exact savings of that figure, of course, however the first tank of gas in our Volt was provided by the dealer. And, as noted, we won’t pay anything more for the electricity used to charge the Volt. If we can fill up the tank once per month — at a cost of around $35 for the small tank — and produce enough electricity from the sun, we will have drastically cut our costs for fuel.

Fun to drive at the same time

Not only are we saving money, but we’re having fun driving the car. I really enjoy it. It’s almost like a game to me: Getting each ride to be as efficient as possible. We haven’t really been limited by the fact that only four people fit in a Volt but it could be a future inconvenience. We have two kids, so in most cases, we’re fine. If the kids have a friend over and we have to go somewhere, either  my wife or I ends up staying at home. If nothing else, it gives one of us an excuse not to be the kids’ chauffeur.

I still haven’t enabled the OnStar account, so I haven’t yet been able to play with the smartphone apps. I’ll do that over the holidays. I’ve also ended up saving myself $10 a month by cancelling my Rdio music subscription and just using Pandora in the car over Bluetooth. There’s a dedicated Pandora app that displays album art and supports the thumbs up / thumbs down rating activity on the car’s touchscreen.

So far there isn’t much that I don’t like in the Volt, save perhaps the many touch buttons in it. All of them are labeled against a white background — at least in our model — and can sometimes be hard to read. Without a doubt, you really have to look the console to find the right button, which can be a safety issue. My way around that has been to make very good use of the car’s integrated speech recognition system, which works quite well for audio and climate controls.

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That’s what a year-and-a-half-old startup called Boulder Ionics is trying to do, according to a profile in MIT Tech Review. The company is developing an electrolyte made of ionic liquids that can function at high temperatures and voltages and is lower cost to make than the more standard way to make ionic liquids.

Such an electrolyte used in a lithium ion battery — like the kind used for both electric cars, cell phones and gadgets — could potentially create a battery that can store ten times as much energy as a traditional lithium ion battery, says the article. Earlier this year Boulder Ionics raised $4.3 million according to a filing.

Other startups are also working on boosting the capacity of the electrolyte, too. Seeo, a startup out of Lawrence Berkeley National Laboratory and backed by Khosla Ventures, is working on creating a solid-state battery that uses a dry polymer instead of a liquid for the electrolyte. Sakti3, a startup based in Michigan, is also developing battery cells with a solid-state electrolyte, and says their innovation could double the energy density of a battery compared with existing lithium-ion batteries. Sakti3 is backed by Khosla Ventures, General Motors and Japanese conglomerate Itochu.

Daniel Abraham, a scientist at Argonne National Laboratory, told us last year that a variety of researchers are working on additives for liquid electrolytes that could function like vitamins do in our diet, enabling batteries to perform better and live longer by reducing harmful reactions between the electrodes and electrolytes. A startup called Leyden Energy is working on that, and has developed a salt mixture in a liquid electrolyte that has created a high-temperature-tolerant and longer-lasting battery.

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There’s been a lot of attention paid to Facebook’s business model recently, especially with the news that General Motors has killed a $10-million advertising campaign devoted to the giant social network — not exactly a great sign of confidence in advance of the world’s most eagerly anticipated IPO. And GM’s move is only the latest indication of discontent, as other advertisers are also questioning their spending. What all of these moves reinforce is that while Facebook may look like and function like a social network for the majority of its users, on the business side it looks almost exactly like a traditional media company, and that is both good and bad.

Like Twitter, the content within Facebook may be generated entirely by users, but the business model is all about advertising, just like any other media entity. According to the social network’s latest S-1 securities filing, advertising accounted for more than 80 percent of its $1-billion in revenue in the most recent quarter. And while some of that represents experiments with “social advertising” such as Sponsored Stories and other features, much of it is essentially run-of-the-mill banner and display advertising — not all that different from what you would find on a newspaper or magazine website, or any blog network.

In some ways, Facebook ads are actually worse than regular ads

That helps explain why Facebook’s advertising isn’t exactly setting the ad world on fire: in fact, according to at least one study, clickthrough rates for ads on the social network are actually lower than the already abysmal clickthrough rates for regular Web advertising (for what it’s worth, Ford says that it is more than happy with its spending on Facebook, unlike General Motors).

Facebook actually has an even bigger mountain to climb than newspapers or other media entities do when it comes to advertising, since the social nature of the network could actually interfere with the effectiveness of traditional ads. Sir Martin Sorrell, chairman of WPP Group, has said that he isn’t even sure advertising can work within an environment like Facebook, which is inherently about social connections and conversation. As angel investor and blogger Chris Dixon notes, ads on Facebook are like putting billboards in a park:

When people use Facebook, they are generally socializing with friends. You can put billboards all over a park, and maybe sometimes you’ll happen to convert people from non-purchasing to purchasing intents. But you end up with a cluttered park, and not very effective advertising.

As Dixon points out, what made advertising such a spectacular business for Google was that people who are searching for things are already part-way down the road toward wanting to buy something — in other words, they are further along the spectrum of “purchasing intent.” And at least the readers of newspaper websites and other media entities are theoretically interested in information about the world, current affairs, even entertainment. Many Facebook users are simply there to socialize, share photos, etc. How does that translate into a receptive environment for advertising?

Facebook needs to start diversifying its revenue sources

Facebook is also hamstrung to some extent when it comes to the options that other media companies are experimenting with, such as subscriptions or paywalls. Not only has Mark Zuckerberg promised repeatedly that Facebook would always remain free, but it’s not clear that users would pay anyway — although the network is reportedly experimenting with a new feature that would allow users to promote their posts.

Those are the downsides of Facebook as a media company. But despite incidents like the GM announcement, investors are likely to focus more on the upside, and there is arguably plenty of it: for one thing, Facebook has close to a billion active users, and even in an age where advertisers want to target specific segments or groups as much as possible, scale still matters — particularly for major brands. So a lot of advertisers are probably going to stick with Facebook simply because it is one of the biggest games in town.

Not only that, but as Jon Steinberg of BuzzFeed pointed out on Twitter, what other option do advertisers have — to go back to video pre-rolls and banner ads? If the future of advertising is social, then hitching your wagon to the largest social player in the world is probably a better bet than trying to figure it all out on your own. And there is at least the potential for Facebook to disrupt the ad market in some interesting ways, such as an “open graph”-powered ad network that could extend its reach throughout all the millions of sites that use Facebook’s platform.

As Dixon notes, Facebook also has a number of other emerging business models, such as an e-commerce platform driven by Facebook Credits. These are embryonic at best, however, and so for the moment Facebook is still overwhelmingly reliant on advertising — and as every other media company is painfully aware, that sword cuts both ways.

Post and thumbnail images courtesy of Flickr user Olaf Gradin

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Founded in 2006, VPG is re-entering the spotlight lately partly because it was among the lucky five that were able to clinch loans from the DOE’s Advanced Vehicle Technology Manufacturing program before the bankruptcy of Solyndra last fall led to a political backlash that seems to have made the DOE less willing to approve more loans. Three companies, including startup Bright Automotive, which wanted to build a plug-in hybrid delivery van, withdrew their applications for a vehicle loan recently, citing the changing and increasingly stringent terms demanded from the DOE. Bright Automotive now plans to shut down.

VPG closed the $50 million loan in March 2011 and was required to raise $10 million in equity before it started drawing down the loan and then another $5 million before it took out the last piece of the loan, said Joe Vecchiolla, VPG’s chief financial officer. The company had raised over $205 million by the time it received its first loan installment, he added. Overall, the startup has raised about $300 million since its inception.

VPG — backed by Perseus, Three Seasons Capital (led by Drasner), T. Boone Pickens and Pickens’ Clean Energy Fuel Corp. — is rolling out its inaugural model, called MV-1, at a time when there is a renewed interest in natural gas vehicles. President Obama is keen on promoting natural gas, which the U.S. can produce in abundance domestically, for producing electricity and powering cars. Last week, General Motors and Chrysler said they will roll out heavy-duty pickup trucks that can run on both gasoline and compressed natural gas.

The company is selling a gasoline version and a compressed natural gas version of the MV-1, and the $50 million loan went to create the latter. Like many car startups, such as Tesla Motors and Fisker Automotive, VPG set out to target a niche market initially: it created the MV-1 to be wheel-chair accessible and is targeting fleet managers, such as taxi companies.

The company designed the six-passenger van to comply with the Americans with Disability Act, and its features include a door that can open 36 inches wide and an interior height of nearly 60 inches. VPG can customize the MV-1, and Drasner said one design that is gaining interest in California comes with a bike rack to fit three bicycles.

Finding the right niche market

The aging population of Baby Boomers, a growing interest in adding wheelchair-accessible taxis in places such as New York City, and the federal government’s support for domestic natural gas production will help grow VPG’s business, said Drasner, who noted that natural gas currently retails at about $2 per gallon cheaper than gasoline.

VPG is targeting primarily fleet managers partly because there isn’t an extensive natural gas fueling network in the country just yet. Fleet operators often set up their own fueling stations. VPG is offering any customer who buys a minimum of 25 vehicles an installation of fueling stations at no upfront cost. Clean Energy, a California-based natural gas supplier and fuel station builder, will do the work.

Natural gas vehicles aren’t new to the market, but many of them are created in after-market conversion shops. Only Honda is selling a factory-built natural gas passenger car that is a version of its Civic. VPG contracts with AM General to assemble MV-1 in Mishawaka, Ind.

VPG is using a Ford 4.6L V8 engine and installing three compressed natural gas tanks that collectively can last 290 miles per fueling, VPG said. The base model that runs on gasoline starts at $39,000, and the natural gas version is around $48,000, Drasner said.

The natural gas version is more expensive primarily because of its heavy fuel tank, Drasner said. Unlike a gasoline car tank, which Drasner referred to as a “tin can,” a natural gas car tank needs to be extra beefy to hold the highly pressurized fuel. Prices also will be higher for the Chrysler Ram that will launch in July and be able to run on both gasoline and natural gas. This new Ram will start at $47,500, which is about a third more than the gasoline-only model.

The DOE recently called for research-and-development proposals that would lead to lighter and cheaper tanks for compressed natural gas passenger cars.

Scale up production

VPG has sold about 1,100 MV-1s (for both types of fuels) in 30 states since last fall, when it started to roll them out of the factory, and about 35 percent of them are the natural gas version, Drasner said. The company plans to deliver around 6,800 cars in 2012 and 18,000 in 2013, and it expects the natural gas version to make up 40-50 percent of the total delivered, he added.

The startup has no plan to roll out passenger cars such as a four-door sedan soon, however, because it doesn’t see an advantage in competing with the hundreds of available models. Nudging consumers to pay a hefty upfront price in order to reap long-term savings hasn’t worked for electric vehicles so far. “Our focus is on niche markets where we have a unique marketing proposition instead of competing on a broader scale,” Drasner said.

For its next model, VPG is looking at delivery vans that are similar to what cable companies or UPS use now, he said. The model would use the same chassis and be designed for urban use. The company would start to roll out this new model “as soon as I find a big customer,” Drasner said.

That will also be the job of the new CEO, John Walsh, who was CEO of National Bus Sales & Leasing. VPG is moving into the Canadian market and is eying Brazil, Mexico, Saudi Arabia and Abu Dhabi as potential markets.

Photos courtesy of the Vehicle Production Group.

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The line between your car and home entertainment center is getting blurrier by the minute as electronics makers and car companies take to the Consumer Electronics Show 2012 and the concurrent Detroit Auto Show to strut their stuff. Amid the flurry of announcements, one thing is clear: Car makers and their partners think drivers want entertainment at their fingertips. Or better yet, at their spoken command.

The trend caused one pundit to call CES, typically the venue for showcasing the latest smartphones and tablets,  the unlikeliest car show. This week’s dueling events illustrate how web-based software companies are trying to bridge the gap between their fast pace and the more glacial mode of the automotive world. Microsoft, Google and other tech companies are all trying to embed themselves more into the in-vehicle infotainment (IVI) business going forward. In that battle they will not only contend with each other but powerful incumbents like Bosch.

New data shows the trend towards more integrated infotainment electronics in cars will continue.  In a statement, Marcello Tamietti, managing director of Accenture’s Connected Vehicle group, speaking about Accenture research on this topic said:

In-vehicle infotainment systems are quickly becoming part of mass-market car-buying as the latest IVI technologies inside today’s connected vehicle are increasingly as much a determinant of sales as design, fuel efficiency and performance. As consumer desire for IVI capabilities grows, it will be important for automotive manufacturers to seek partnerships that can offer a sustained, seamless IVI experience.”

Read on for a sampling of automotive-gadget news coming out of CES and/or the North American International Automobile show (aka the Detroit Auto Show) on Monday.

OnStar opens up (a bit)

General Motors’ OnStar unit is giving select developers access to its proprietary application programming interface (API) and its Advanced Telematics Operating System (ATOM) in a bid to bring more infotainment to the on-board unit. GM claims six million users of its satellite-connected on-board units which are primarily used to summon help in the case of an accident or other emergency. GM offers the service to car buyers free for a few months to try out before initiating a monthly fee. Clearly, the company feels that adding entertainment value is one way to retain more of those tire kickers as paying customers.

The question is whether these partnerships will give GM buyers enough value for subscription costs since many of these capabilities will be available for less money from other sources. After the trial period, OnStar now costs $200 to $300 per year.

Aha wins over Subaru, Honda

Aha Radio, which aggregates audio channels for mobile consumers, said at CES that its service will be offered with select  2013 Subaru and Honda vehicles.  Currently, the Aha service requires an iPhone cell connection but an Android client is slated for release in the first quarter of this year. Aha also said it has added MOG, Rhapsody and AOL Shoutcast streaming audio to its play list as well as CBS Radio and a selection of audio books. Kenwood will integrate Aha in its next-generation head units. Aha already partners with Pioneer.

Telenav Scout navigates from phone, car, computer

Telenav said its new Scout personal navigator will help you find your destination from your iPhone or in-car system or PC.  Available now for free from the Apple App Store,  Users connect their Scout-equipped iPhone to a compatible vehicle for an experience that mimics a built-in navigation system, the company said. Scout opens to a customizable “My Dashboard” screen that will give them personalized real-time commute times, for example, the company claims.

TI shows off infotainment processors

As expected, Texas Instruments is using the show to preview the TI C6000 Jacinto processors and OMAP mobile processors both targeting automotive infotainment applications. The processors claim dedicated 3D graphics accelerators and video co-processors to support HD video playback and streaming. Both chipsets support HTML 5.

QNX shows concept Porsche

Embedded operating system specialist  QNX will show how it uses Bluetooth and Near Field Communications (NFC) technologies to  ease smartphone integration in a concept car  (a Porsche Carerra no less) and enable voice recognition to control the vehicle’s infotainment system.

Pandora adds Acura, Kia to its automotive BFFs

Streaming audio power Pandora added Acura, Kia and aftermarket stereo maker AudioVox to its list of partners in the automotive arena, bringing its total there to 16 companies. Pandora claims 125 million registered users of its service overall and as, GigaOM reported previously, is relying on automotive market to bolster revenue.

Canonical makes car bid for Ubuntu

Canonical is trying push its Ubuntu Linux for the IVI and TV markets. At CES, the company will demonstrate Ubuntu “inside” a variety of devices including cars, TVs, tablets and smartphones. Some of the products will use Ubuntu’s cloud synchronization and collaboration service, Ubuntu One, to access to digital content stored on a user’s Linux desktop. Company officials say Ubuntu One is a way to bridge different platforms to get your content wherever you are. This is Canonical’s latest attempt to push Ubuntu Linux beyond the desktop and server markets: Canonical founder Mark Shuttleworth this fall said the company would try to entrench Ubuntu in smart phones.

Infotainment is OK, but safety first

Given all this hoopla, it’s interesting that the Accenture study, which surveyed 7,000 people in seven countries, found that while drivers definitely want better communications and infotainment at their disposal, safety was their primary concern. That points out the inherent challenge of in-vehicle entertainment. How safe is it really to update your Facebook status while driving?

A whopping 91 percent of respondents said they would love to see a lane-change, blind-spot warning system in their cars. And, 83 percent said they would like in-vehicle technologies that would automatically call a tow truck when the car breaks down. Nearly three-quarters said theyd’ like technology that would stop their car if the driver suffers a heart attack or other sudden illness. That’s about as far from Angry Birds as you can get.

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