Why Ford & Smith Electric Have Called It Quits on Electric Van Partnership

Well, that didn’t last long. Less than a year after Ford Motor (s F) and Smith Electric Vehicles announced plans to collaborate on an electric version of the Detroit automaker’s Transit Connect commercial van for the U.S. market, the two companies have called it quits on the deal.

Ford and Smith, which have both received multimillion-dollar awards from the Department of Energy to work on electric vehicle projects in recent months, say they “mutually agreed” to part ways on the Connect after realizing that they want to pursue different markets.

Ford reiterated to us today that it aims to release the electric Transit Connect in North America late next year, followed by the electric Focus passenger car in 2011 and three other plug-in vehicles over the next three years. Smith, on the other hand, wants to focus on medium-duty commercial trucks, which it started assembling in a new Kansas City, Mo. facility this month.

According to a release from Smith today, the company decided that that it would be better off putting its resources into the production-ready Smith Newton truck, allowing the company to keep pace with what it calls “swift growth in demand” and gain market traction more quickly. That’s in comparison to working with Ford to enter the market for electric car-derived vans like the Connect — a space that Smith says it’s “concerned” will become increasingly competitive.

“Smith is choosing to put its research, development, manufacturing and marketing resources where we can get the most bang for our buck,” Smith CEO Bryan Hansel said in an announcement yesterday about plans to develop two additional models (Class 3 and 4 trucks) based on the Newton truck platform by year’s end. “The medium-duty truck market is the real sweet spot for electric commercial vehicles.”

Smith’s uptick in demand is partly thanks to the DOE, which the company says has allocated $4.5 million in funding to municipal customers through the Clean Cities program, helping them pay for 65 Smith Newton electric trucks for city fleets. In August, the DOE also awarded $10 million directly to Smith as part of the competitive battery grant program to help the company develop and deploy up to 100 electric vehicles in Kansas City, Mo., and Michigan. (Smith’s UK-based parent company, the Tanfield Group, set up a majority U.S.-owned business for Smith earlier this year, allowing it to qualify for federal and regional funding that the Smith Electric Vehicles UK could not — it’s complicated, so we’ve explained the company’s intercontinental origins more fully here.)

According to Smith, the Transit Connect project with Ford would have limited the amount of capital available for the Newton ramp-up, and at relatively low production volumes, the Connect will not “justify the investment” in the short to medium term.

An 11-year-old company called Azure Dynamics thinks otherwise. Ford — which is still working with the Tanfield Group in Europe — announced this morning that Azure will be stepping into Smith’s old role for the Connect project, integrating its Force Drive battery electric drive train into the Connect platform. While Ford and Smith are parting ways, Ford tells us this morning that it already has some common ground with Azure: The two Michigan-based companies both use lithium-ion cell technology from Johnson Controls-Saft — Azure in its E-450 Balance Hybrid trucks, which are built on a Ford chassis and slated for a 2010 launch, and Ford in its plug-in hybrid Escape demo vehicles.