# Electric Car Maker Think Falters and Ener1 Cuts Its Losses

Updated: Lithium-ion battery maker Ener1 (s hev) reported earnings on Tuesday, and unveiled a worrisome note about its investment in electric car maker Think. Ener1 says because Think has had a longer than expected delay in restarting production of its electric cars, and because the EV market is moving more slowly than predicted, Ener1 has written down a $59.4 million impairment charge for its Think investment, delivering a total loss on the Think investment at$73.3 million. Ener1 has held a 32-percent stake in Think. Update: Ener1 had actually boosted that 32 percent stake up to holding 48 percent of the outstanding voting power at the time of the impairment charge, according to a filing.

Charles Gassenheimer, Ener1 chairman and CEO, said in the earnings call that last year Ener1 realized Think needed a new management team to analyze “the structural challenges, costs, usage patterns, consumer behavior and distribution for the Think and the EV industry more broadly.” After assessing the market, Ener1 came to the conclusion that electric vehicles are being deployed more slowly than expected, due to the high costs of electric cars and the slow roll-out of electric vehicle charging infrastructure.

As a result, Ener1 is stemming its losses on Think, and Gassenheimer says, “Ener1 will be guided by two principles, no additional funds will be provided to Think by Ener1, and Ener1 will try to avoid consolidating or increasing its equity exposure to Think.” In addition, Ener1 has also returned its shares to Think “in an effort to avoid any possible consolidation issues,” though it will maintain a minority equity position in a newly capitalized entity.

Gassenheimer also notes in the earnings call that Think has been unable to raise additional capital needed to restart production of its cars. The Norwegian business newspaper, Finansavisen, reported last month that Think was having financial trouble, had stopped production of its cars in Finland, had laid off 35 employees, and was looking for more funding.

As a result of its impairment charge for Think, Ener1 reported a net loss for the first quarter of $84.71 million, dramatically more than the$15.46 million net loss for the quarter the year earlier. Ener1 also adjusted its 2011 revenue to reflect the halted Think shipments. Ener1’s stock crashed on the news, dropping 20 percent and trading around $1.96. I’ve reached out to Think to learn more and am waiting to hear back on the status of its production (of lack there of) in Finland and in Indiana. Think had planned to start selling the Think City to U.S. consumers in mid-2011, projecting to sell between 2,000 to 3,000 cars via three to five stores in San Francisco; Southern California; New York City; Washington, D.C.; and Indianapolis. In December, Think said it had delivered its first U.S.-made Think City EVs — built at a factory in Elkhart, Ind. — to the state of Indiana for a government fleet, and Think planned to expand its Indiana factory in mid-2011 from 25 local workers to 100 people by the end of 2011 and more than 415 by the end of 2013. Think had been looking for a loan from the DOE’s highly competitive Advanced Technology Vehicles Manufacturing Program, and Think had been expecting to hear more on the loan by the end of 2010. Think also formed a U.S. joint venture three years ago with Kleiner Perkins and RockPort Capital Partners. The Think City is advertised to cost around$34,000 (before federal and state incentives), and about \$22,000 with both federal and state subsidies. Here’s our test drive of the Think City. Maybe this is the closest it’ll come to hitting the roads in the U.S.: