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Electric car maker Bright Automotive to shut down

Another electric car startup, which waited years for a Department of Energy loan, plans to call it quits. According to local media in Indiana (and Green Car Reports) Bright Automotive, which was a spinoff from the not-for-profit think tank Rocky Mountain Institute, and which had been developing a plug-in hybrid car called the IDEA for commercial fleets, plans to close shop.

Despite that Bright Automotive was the first official investment from General Motor’s venture arm, the company had been developing its business around getting a DOE advanced technology vehicle manufacturing loan of $450 million. According to a letter sent to the media, Bright Automotive slams the DOE for leading it down a road where it spent three years and $15 million on pursuing a loan that never was delivered.

Bright Automotive isn’t the only electric automaker that felt confident it had a DOE loan in the bag, yet ultimately never got that loan. In December, electric car startup Aptera also announced that it would shut down after failing to bring in private investment, which was one of the final criteria to secure a DOE loan. Electric car company Coda Automotive had also long said it was waiting for a DOE loan, but has yet to receive one. Norwegian car company Think Automotive also was hoping for a loan to build electric cars in Indiana, but never received it, and went bankrupt last year.

Fisker Automotive did receive a DOE loan award, but after drawing down on part of the loan, was then unable to secure the rest after facing delays for its inaugural car. Battery suppliers to these electric car companies have also struggled as a result of the EV makers struggling — Ener1 went bankrupt after Think went bankrupt and A123 Systems’ stock has dropped dramatically after Fisker’s problems were revealed.

Bright Automotive execs said in a letter published by various outlets that: “Last week, we received the fourth ‘near final’ Conditional Commitment Letter since September 2010. Each new letter arrived with more onerous terms than the last. . . .The first three were workable for us, but the last was so outlandish that the most rational and objective persons would likely conclude that your team was negotiating in bad faith.”

Other companies and investors have pointed out the difficult terms of the DOE loans before, including Solyndra investors (after the company went bankrupt) and Beacon Power (after that company suspended operations and was sold to a private equity firm). The DOE seemingly became far stricter in its terms after the solar company Solyndra went bankrupt, taking with it an over $500 million loan.

7 Responses to “Electric car maker Bright Automotive to shut down”

  1. What’s really too bad is that Bright had some great people behind, mostly engineers from different fields who had worked with different car makers, at one point or another. If anybody was going to pull it off in the long run, these guys would have.

    This is a bitter disappointment. I hope to see them back one way or another.

  2. Put a pencil to paper and you’ll understand why a big loan like $450 million, even if fed out as a line of credit to keep interest payments to a minimum, is not a doable proposition when going from a scale of 100 vehicles to a production level of 20,000 vehicles per year. Using a 15 year repayment schedule (even a 15/1 5% balloon, interest-only) and tapping $100MM of the line per year, operating Earnings has to reach $20MM by Year Four. That requires 20K vehicles have to be priced AND sold at about $3000 above cost (to pay for salaries materials, and fixed costs), no fleet rates, thank you, just to pay the interest, and no substantial bugs like Toyota and Nissan periodically encounter to eat into those bottom-line revenues, (and they are the Masters of Quality, no sarcasm here). What defect rate can a startup afford? What is the market that can support a 20K per year production rate by this manufacturer in the face of the Big Three offering competing products when most small businesses buy the lowest cost-per-mile vehicle (used) so that they in turn can be profitable enough to plow earnings into their own growth? It’s the classic min-max game where buyer and seller make the deal that is best possible for both. Cutting edge belongs not to the small business, but to the high-growth companies or the cash cows who want to try something new. It’s a matter of scale at that point. THe smaller car companies like Studebaker failed during the time when GM and Ford (and to a point, Chrysler, too) acquired the leverage of scale to meet the individual customer at the large-scale min-max sale point. The smaller vendors just can’t get to that spot if they are also bearing the burden of money that has to be repaid. Too many folks forgot this truth during the last decade of low interest rates and especially in the most recent years where the word “trillion” became trite. Loans on the order of $30MM are the right size for a manufacturing company startup. They can grow at reasonable rates and afford the loan payments, but they have to be satisfied with growth rates in the 4-5% range. These are just basic laws of capital that are bent at the user’s and investor’s peril.

  3. Nick Prudent

    Sad but I think we’ve reached a point in EV auto startups where the winners have already been chosen and established automakers (Nissan, GM, Ford, Toyota) are cautiously filling the void with new products. The window for the creation of new US automakers has been shut and sealed. Its obviously not fair to Bright and others but the government has already placed its bet & won’t be going further.

    If that’s any consolation, western general aviation has had similar problems and two of the top selling firms (Diamond & Cirrus) have been acquired by Chinese and middle eastern investors in 2011. They just couldn’t get financing from the private sector — and that’s with over 200$M in annual sales.

    The western world doesn’t value manufacturing anymore.

  4. In the the 20th century many makers of gasoline cars disappeared, too. Packard, Studebaker, Nash, and Crosley are no longer around, either. It’s probably the nature of the car business.