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Smith Electric Vehicles Eyes Road to an IPO

If you think of an electric vehicle startup hoping to go public in the near future, Tesla Motors is probably what comes to mind. But another green car venture, Smith Electric Vehicles, also has its eye on an initial public offering that it hopes will help fund a major expansion over the coming years. CEO Bryan Hansel told us in an interview on Friday that the company’s IPO should be expected “sooner rather than later.”

Because Smith develops electric trucks for commercial fleets, in contrast to the eye-catching electric Roadsters, the company tends to fly under the radar. But Smith has big ambitions, and if its scheme succeeds to help fleets switch over some or all of their vehicles to run on electricity, it could play a key role in reducing emissions from the transportation sector.

On Wednesday, Smith announced a conditional offer to buy out its parent company, the UK’s Tanfield Group (s TAN), in a deal that Hansel expects to close by July (Tanfield has agreed not to consider any other bids for 120 days). In addition to buying Tanfield’s 49 percent stake in the Kansas City, Mo.-based company, Smith would also acquire Tanfield’s British electric vehicle unit (Smith Electric Vehicles UK), if the deal — which remains dependent on financing — goes through.

The idea, Hansel explained, is to create one nimble electric truck maker that can reach a global market. The offer includes £37 million ($56.13 million) in cash, plus a £33.3 million ($50.52 million) stake in the new, combined Smith Electric Vehicles if it manages to go public before September 2015, according to the Financial Times.

Hansel said he’s not watching other greentech IPOs or IPO hopefuls particularly closely to gauge the timing of Smith’s own move into public trading because “there’s not a lot of relevance between ourselves and a lot of others.” It’s more a matter of waiting for demand to take off, he said. “If we see a number of markets opening up,” then the company may seek an IPO to fund a rapid expansion.

Current demand warrants a slower pace, said Hansel, commenting that he believes other electric vehicle makers, “haven’t been nearly discerning enough about customers.” Smith needs “advocates, not customers” at this point — fleets that foresee long-term benefits of electric vehicles (lower maintenance costs, stable fuel prices), but realize “there’s a distance to travel to get there.” Hansel said Smith has “said no to a lot of customers that weren’t ready.” If a glitch comes up, he wants the early adopters to help Smith solve the problem rather than saying, “This isn’t a diesel truck, take it back.”

Hansel compares Smith’s approach to that of Southwest Airlines, which uses a point-to-point flight routing system, as opposed to the more common model of routing flights through one main hub with many spokes. Rather than setting up one or a few large-scale manufacturing facilities, Smith’s model calls for decentralized production, with smaller-scale facilities serving each market. “When a market’s ready, we’ll come,” said Hansel.

At this point, Hansel said Smith sees about 20 markets in the U.S. “that justify a facility.” While Smith currently assembles only about eight trucks per month at its Kansas City site, according to the Washington Business Journal, and “plans to double that in coming months,” future projects in Smith’s network are envisioned as 50,000-square foot facilities that produce about 100 trucks per month. That size and run rate, according to Hansel, can be “very profitable” for Smith.

He said the company has identified the top 10 markets for its vehicles, and by the end of April expects to select the top two — based on factors including infrastructure and support from local economic development initiatives and incentives.

For Smith, which scored a $10 million Department of Energy battery grant last year to develop and deploy up to 100 electric vehicles in Kansas City and Michigan, Hansel said 2010 is virtually “behind us. We already know what trucks we’re going to build and who’s buying.” It’s a crucial year for Smith to gather steam and prepare to move beyond the early adopters.

While the financials of some of the most prominent greentech firms aiming for IPOs this year (Tesla, Codexis, Fallbrook) aren’t exactly strong (a fact that could sour the market), Hansel said Smith is on track to become, “a sustainable business without subsidies” by January 2011. By then, Hansel said he wants to be able to “look a fleet in the eye,” and make the case for electric trucks with the simple fact that, “you’re makin’ money, I’m makin’ money.”