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ALTe: Former Tesla Team Eyes Old Company Cars

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While Tesla (s TSLA) CEO Elon Musk is betting the farm on an electric vehicle for mainstream consumers, many other EV startups are finding company and public fleets a much safer gamble for the near term. Take ALTe, a startup founded by a trio of former Tesla execs in late 2008, which is taking old gas and diesel-guzzlers in public and private fleets and giving them new guts to run as extended range electric vehicles.

As ALTe sales and marketing chief Brian Polowniak explained in an interview with us last week, the startup plans to remove the engine, powertrain, exhaust system and gas tank from fleet vehicles after their warranty expires, and put in a new engine, electric motors, motor controls, a generator, inverter, lithium-ion battery pack and a very small gas tank. It’s a full makeover, EV-style.

While still developing demo vehicles at its facility in Auburn Hills, Mich. (a 185,000-square-foot plant formerly occupied by Lear Corp. (s LEA)), ALTe expects to begin commercial production in the last three months of 2011 and has the aggressive goal of cranking out 90,000 powertrains per year by 2013, said Polowniak.

Tesla University

ALTe’s three co-founders — CEO John Thomas, CTO Jeffrey DeFrank and VP of Programs Nam Thai-Tang — worked in Tesla’s now-shuttered Michigan Tech Center, a vehicle development and assembly project. Thomas led the group for three years, while DeFrank headed up vehicle engineering and Thai-Tang led the Model S Sedan team (previously they had spent time at Magna Steyr and Ford (s F), among other auto firms).

According to Polowniak, their time at Tesla left the ALTe co-founders with a “very clear picture” of an unmet need for supplying extended-range electric systems for light- and medium-duty trucks and vans in public and private fleets. The ALTe crew is just one example of several former Tesla employees who have gone on to launch startups — others include Tesla founding team member Ian Wright, who launched high-performance EV startup Wrightspeed, and battery tech startup Atieva, which culled almost a third of the founding team (and about a fifth of the current one) from Tesla.

How ALTe Works

A fleet operator who’s ready to scrap or sell a vehicle that’s, say four years old and has just gone out of warranty, has a couple of options. One would be to buy a new, conventional model for $25,000-$30,000. Alternatively, they could pay $26,500 for the baseline ALTe conversion, which will take 13 man-hours, come with a warranty on the powertrain for at least five years or 50,000 miles, and could extend the life of the vehicle for about seven years, according to Polowniak.

Savings would come mostly from operating costs, said Polowniak. Converting a Ford F-150 pickup, for example, would take a truck that typically gets only about 12 MPG and give it 40 miles of all electric range and fuel efficiency of around 32 MPG after the small gas engine kicks in. After 5-7 years, he said the fleet operator could save up to $25,000 on operating costs for the vehicle.

According to Polowniak, ALTe has lined up a “large automotive retail center” as a partner to perform the conversions at 871 shops around the country, and will announce that agreement in mid-September. He said the price of a conversion, starting at $26,500 will include a cut for ALTe and a portion for the shop.

For each of the component parts in ALTe’s system, the company has lined up three tiers of suppliers — with one big exception: the battery, which is typically the most expensive chunk of an electric vehicle. Talks are ongoing with battery suppliers including A123 Systems (s AONE), Dow Kokam, Electrovaya and Johnson Controls, said Polowniak, and ALTe is now “very close” to naming its primary battery supplier.

The Road to Commercialization

ALTe, however, is just one competitor in an increasingly crowded field of startups hoping to supply powertrain tech as major automakers get into the plug-in game and fleet operators face new mandates to green their fleets.

Eaton, Raser (s RZ), Wrightspeed, REV and Azure are some of the competitors ALTe may have to contend with after launching commercially. But while ALTe aims to supply a range of platforms — from pickup trucks to shuttle buses to taxi cabs — Polowniak emphasized that Eaton has focused on heavy duty models. Raser, he said, is working with a similar type of powertrain, but for new vehicles. Azure, meanwhile, has launched only a handful of vehicles for this market, said Polowniak.

Like many green car startups these days, ALTe hopes Uncle Sam will foot some of the bill for rapid growth. Polowniak said the company has requested $100 million through the Department of Energy’s Advanced Technology Vehicles Manufacturing, or ATVM, loan program, to finance the buildout of a plant, prototyping and buying equipment for a pair of assembly lines.

Polowniak said the company has undergone three rounds of audits as part of the ATVM evaluation process, and expects to receive a final answer from the DOE by the end of this month. As we’ve seen with startups like Fisker Automotive, Tesla Motors and V-Vehicle, however, the process often takes longer than applicants expect.

If federal loans don’t come through for ALTe, the company’s backup plan calls for raising $100 million from private investors. Already the startup has raised $9 million in private equity and scored an $8.4 million tax credit from Michigan. ALTe expects to bring that up to a total of $20 million by the end of August.

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Image courtesy of ALTe

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