Will Recycling Be A Selling Point For An Electric Car?

A small California town best known for growing much of the world’s lettuce and being the birthplace of John Steinbeck may soon be the home of a manufacturing operation meant to be among the auto industry’s most sustainable. That is, if all goes according to plan for ambitious startup Green Vehicles Inc.

Last week the California Energy Commission proposed to award Green Vehicles a $2.05 million grant to help set up a pilot plant in Salinas, Calif. for building small three-wheeled electric vehicles designed for easy disassembly and recycling. The company earned the highest score among 11 companies listed for awards (another dozen didn’t make the cut).

With the proposed CEC grant — and additional equity investment that Green Vehicles is still working to drum up — the company plans to start cranking out up to 2,000 units per year of what Mike Ryan, Green Vehicles’ co-founder and President, describes as Triac 2.0, within 16 months. This will be the second-generation version of the company’s Triac model, a three-wheeler classified as a motorcycle that Ryan said seats two people, carries a 23 kWh, 500-pound lithium-ion battery pack, has a 100-mile range, can go up to 80 MPH, and sells for $24,995. The car weighs about 800 pounds less than the 3,500-pound Nissan LEAF largely due to that absent fourth wheel, said Ryan.

Triac 2.0 will carry the same price tag and have the same basic specs as the company’s first model, although the battery pack may come down to 21 kWh if the company can boost efficiency enough to still eke out a 100-mile range, said Ryan. The company is doing all battery pack and firmware development in-house, and it’s sourcing cells from a California supplier that will be announced within the next 4-6 weeks, according to Ryan.

Clearly these are not mass market vehicles. Ryan said the company is aiming for Americans who identify themselves as “deep greeners,” or as he put it, “the one percenter category.” Green Vehicles is focusing on trying to set the bar for sustainable design in auto manufacturing, taking practices advocated by shareholder groups like Ceres, said Ryan, and “infusing” them into the auto industry. Currently Green Vehicles uses a fiberglass body, but the company “wants to go to something more recyclable. We don’t want vehicles to be crushed and sent to a landfill,” said Ryan.

Green Vehicles got its start back in 2007, when co-founder and CEO Ehab Youssef (an intellectual property lawyer and former VP of legal operations for semiconductor giant ARM) bought a franchise territory for selling vehicles from ZAP. According to Ryan, who has a background in electrical engineering, Youssef was “not happy” with the quality of ZAP’s products, and the pair started talking about forming a new company. (For the whole sordid tale of how Youssef’s relationship with ZAP went south, read Wired Magazine’s 2008 skewering of the company: “Hype Machine: Searching for ZAP’s Fleet of No-Show Green Cars.”)

What Green Vehicles has come up with — initially working with a supply chain in China and increasingly trying to shift that to California — looks a lot like ZAP’s three-wheeled models, but Ryan declined to compare the companies’ offerings. Instead, he offered the diplomatic comment that “ZAP has paved the way for three-wheelers.” Green Vehicles sees three-wheeled electric vehicle developer Aptera, meanwhile, as a direct competitor, but one that they’re happy to have. “We don’t want to be the only company talking about this,” said Ryan.

So far, Green Vehicles has produced just 20-25 vehicles and sold only about a dozen to eager early customers in California, as well as Seattle, Wash., Portland, Oreg., and Ohio. In addition to the Triac, the company has a model dubbed the Moose, which Ryan described as a “fleet-oriented minivan.” Deliveries of those gen-1 models began in November 2009 and required a 10 percent deposit to get on the waiting list. But the gen-2 models, slated to begin deliveries in December, require only a $500 fully refundable deposit that’s held in escrow and which can be applied toward the purchase of the vehicle, according to the company’s website.

Green Vehicles has financed development so far through an angel investor and the founders’ own resources. About two years from now Ryan said the company will likely pursue debt financing, possibly through a Department of Energy loan program like the one that has awarded hundreds of millions of dollars to Tesla Motors (s TSLA) and Fisker Automotive. As Lux Research senior analyst Jacob Grose has told us, however, funding looks like a long shot for three-wheeled vehicle makers seeking funds from the DOE. He said, “I would imagine that four-wheeled vehicles will continue to get the nod given that…to date there has been no appetite in the U.S. for electric vehicles with less than four wheels.”

With the CEC program, Green Vehicles aims to make some engineering and design tweaks to help streamline manufacturing (slashing the number of man-hours needed to produce each car by about 75 percent) and reduce costs. As Ryan put it in an interview, part of the idea is to “increase our margins from almost nothing to something reasonable.”

That said, cost cutting isn’t the top priority for Green Vehicles. Using robotic assembly lines in China might cost less than what the company has planned for Salinas, said Ryan, “but that’s not in line with our goals for being sustainable.” And by appealing to that slice of the market that wants an uber green machine, he believes the company “will more than make up for [higher manufacturing costs] by being on the cutting edge,” both in terms of green materials and the brains of the vehicle, including a proprietary battery management system and tools for calculating range based on battery charge.

Long term, the company has the ambitious dream — like so many other startups in the green vehicle market — of licensing its core technology to other automakers.

The larger goal with Green Vehicles’ Salinas project is to “demonstrate that the idea of a commuter vehicle makes sense,” and begin making a name for itself as a green manufacturer looking to clean up more than the tailpipe. For many consumers, a three-wheeled, two-seat electric vehicle that costs more than a Prius might only make sense as a second vehicle — if then. But it doesn’t have to be that way, said Ryan.

Consumers have a growing number of options — such as car sharing provider Zipcar (s ZIP) or a ridesharing service like Carticipate — to help fill any gaps left by a vehicle with limited range and cargo capacity. In a time when consumers itching to buy an electric vehicle can turn to roomier, more conventional-looking models from established automakers, however, Green Vehicles faces a long slog to build a business that’s sustainable, in all senses of the word.

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