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Myers' Mainstream Electric Vehicle Ambition: Add a Seat

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NMG2_blueThere are two strategies that new electric-vehicle makers commonly use to enter the market with ambitions to go mainstream: start at the high end and move lower, or aim at a niche market that requires less performance and shift to the center. While startups like Tesla Motors and Fisker Automotive have launched their businesses with high-end sports cars (with plans for cheaper vehicles in the works), companies like Myers Motors started with a three-wheeled vehicle that only carries one passenger and has a 30-mile range.

This week, Myers took a step forward in its plan to expand its market by adding another seat and a longer range. On Wednesday, Myers unveiled its second vehicle, a three-wheeled, three-headlight model that seats two, reaches 75 mph and can travel 60 miles on a single charge. The company plans to produce the as-yet-unnamed vehicle, which is technically considered a motorcycle but actually falls somewhere between a motorcycle and a car, in the fourth quarter of 2010. While it hasn’t disclosed its initial volume, Myers spokesperson Kammy Willis told us the company hopes to reach a production volume of 10,000 cars in a couple of years.

Tallmadge, Ohio-based Myers plans to offer the car (as I’ll call it for the sake of convenience) for less than $30,000, and also plans to offer an option to upgrade the range – for an as-yet-undisclosed price – to 100 miles. Myers is calling the car NMG2 for now, as a reference to its first car, NMG, which stands for “no more gas,” and the company is holding a contest to come up with the official new name. The company isn’t taking orders yet, but expects to release more details about the car and about preorders in the next few weeks.

The NMG2 highlights the baby steps startups are taking to bring electric vehicles to the mainstream. Like a number of other electric-vehicle startups, including Vista, Calif.-based Aptera Motors and Snarøya, Norway-based Think, Myers started with a city car meant for short distances and is working its way to a more general-purpose car.

Compared to the opposite approach of starting with high-end sports cars with plans to move down the market to mid-range cars — used by Tesla, Fisker and Venturi Automobiles — the niche market strategy has some advantages. For one thing, it can cost less to produce a lower performance niche vehicle, which is an important factor for startups worried about running out of money. “When you look at what major automakers put into introducing a new model, it’s hundreds of millions of dollars,” Willis said.

Tesla certainly felt that risk when the recession hit as it was trying to raise money. The company suffered layoffs before managing to raise private equity and secure a government loan.

The technology requirements for city cars are also usually lower than for sports cars, which can mean there’s less of a risk of running into some of the issues that delayed the Tesla Roadster. (The car was delayed because its motor produced too much torque for its transmission to handle, and the company had to replace the transmission with a different one.)

Myers thinks its strategy has given it time to establish itself and develop longer-range technology, and to bring prices down. “With the smaller vehicle, we developed confidence in our electric drive system and developed the battery system technology to have lithium-ion batteries for extended range,” Willis said. “Now we’ve proven [our technology] on that level, we’re ready to take the next step of meeting consumer requests for a two-passenger, longer-range vehicle.”

But the strategy also has its downsides. While Tesla has created a reputation as a car for the rich and famous, which it’s hoping will make its more affordable model more desirable – and also will likely persuade businesses to set up chargers to attract those high-end customers – companies like Myers may have a tougher time of persuading mainstream customers that it’s trustworthy. A car is one of most expensive purchases a consumer will make, and mid-range customers are looking for reliability and a full warranty. (Myers provides a one year or 12,000 mile warranty for its NMG.) Thilo Koslowski, lead automotive analyst at Gartner Research, said that green-car startups might not have enough time to build up that trust before major automakers come out with their greener offerings.

And even though Myers has had cars on the road since 2006, raising money has proven challenging. While the company scored $250,000 in seed funding from JumpStart in June, that’s hardly enough to mass produce a line of cars. The company has been funded mainly through its founder, Dana Myers, so far and is looking for more investors now. Myers, previously the president of transformer-maintenance company SD Myers, bought technology from the bankrupt Corbin Sparrow electric-motorcycle company to start Myers Motors in 2004.

In any case, the two strategies illustrate the inherent difficulties involved in making mainstream electric vehicles: Batteries are expensive, so the electric cars tend to be either more costly or lower-range than their gasoline counterparts. That’s why companies start either high (in cost) or low (in range) and move to the middle, giving themselves – and component partners – time to improve the technology and bring down the price. But it’s still unclear if or when they’ll ever get there.

The NMG2, for example, is still far from a mainstream car, Koslowski said, although it’s closer than the NMG. It has two seats, not four, for one thing. And because drivers have “range anxiety,” most of them will probably need a 100-mile range to feel comfortable using an electric car for their daily commutes, he said. Including that 100-mile extender, Koslowski estimates the NG2 would need a price tag “well below $20,000” to attract a mainstream market – especially considering that three-wheeled cars aren’t eligible for the same tax credits as four-wheeled cars. So while Myers and other electric-car companies are cruising in the right direction, they still have a long way to go.