Speculation has swirled around the debut of another entrant into California’s crowded, cutting-edge automotive industry. The company, known as Faraday Future, “has been hunting for a place to build what it says will be a $1 billion manufacturing plant for a new line of cars,” reported the San Francisco Chronicle. “Four states are contenders and the company says to expect an announcement within weeks.”

Contenders for the site included not only California but Georgia, Nevada and Louisiana, Faraday Future Product Development Chief Nick Sampson said, according to the Wall Street Journal. “Mr. Sampson is one of a team of former Tesla executives now leading Faraday Future. Like Tesla, Faraday Future is named after an inventor from the 19th century.”

High hopes, low profile

The company has responded to the media spotlight by cultivating an air of mystery from its Gardena headquarters south of Los Angeles — the former home to Nissan’s sales HQ, noted the Journal. Reporters have had to wade through obscure documents to collect details about Faraday’s origins. “Though it won’t confirm the source of its funds, documents filed in California point to a parent company run by a Chinese billionaire who styles himself after Apple’s late Steve Jobs,” the Chronicle observed.

That billionaire has been identified as Jia Yueting, the chairman of Chinese tech company LeTV, short for Leshi Internet Information & Television — one of the largest online video companies in China. “He recently launched a line of smartphones and acquired a 70 percent stake in Yidao Yongche, an Uber-like car service in China,” reported the Los Angeles Times.

In a press conference late last year, Leshi spokesperson Jiang Dongge said the company has “already organized a research and development team based in Silicon Valley about a year ago, with experts poached from traditional car companies including Tesla Motors, Mercedes-Benz and Ford Motor Company working on the forthcoming model. Leshi is also in touch with Google as well as other technology firms based in Silicon Valley,” he claimed, according to Forbes Asia.

Close competition

Although some Californians may bristle at the thought of a Chinese company pouring billions into competition with homegrown Silicon Valley products, analysts have linked up Faraday’s relative secrecy to its interest in foreign, not American, markets. “A lot of the evidence to support Faraday Future’s backing from the Chinese tech conglomerate is of public record. So why all the dodging from Faraday? It may have something to do with the way the company plans to market its vehicles,” Techcrunch speculated. “According to a source familiar with the matter, Faraday Future needs to be seen as a U.S.-based Tesla rival. ‘Chinese people don’t want to buy Chinese products,'” said the source.

But the dizzying costs of launching a high-end electric car company have ensured that any additional player in the marketplace will squeeze relatively more established firms. And Faraday has already been preceded in California by another Chinese concern. “Karma Automotive, formerly Fisker Automotive, which is based in Southern California, has revived its hopes after China’s Wanxiang Group Corp. bought the failed hybrid-electric supercar maker out of bankruptcy in 2014,” the Journal reported. “The company has secured a manufacturing facility in Southern California and is planning to sell a new car in 2016.”

Cross-border competition

For their part, California officials faced a fresh possibility of losing out to neighboring Nevada on big-ticket electric car construction. “If North Las Vegas lands the factory,” Bloomberg noted of Faraday’s future plant, “it would be the second major coup for Nevada as it attempts to diversify its economy and promote itself as a center of electric-car manufacturing. Tesla is building the world’s largest lithium-ion battery factory east of Reno after Gov. Brian Sandoval last year signed off on tax breaks worth as much as $1.3 billion for a plant on which Tesla expects to spend $10 billion over 15 years.”

Underscoring the disruptive effect of the often libertarian sensibility behind auto innovations, the controversy has pitted Republicans against wealthy coastal elites and Democrats against the automakers pushing the industry toward a zero-emissions future.

Republican populism

The problems started with the handsome benefits granted by the Golden State to buyers of lower-emissions vehicles, whatever their earning power. “Hundreds of Californians with household incomes of $500,000 or more have collected state subsidies for buying electric and hybrid cars under a program that is criticized as a taxpayer handout to the wealthy,” the Los Angeles Times reported:

“State regulators, in response, are restricting the subsidies to Californians who earn less than $250,000 or couples taking in less than $500,000. But that standard is also under fire from some lawmakers and anti-tax activists, who ask why subsidies worth up to $5,000 are given to people who can already afford the cars.”

According to some Republicans, the giveaway reflected the willingness of Democrats to shower privileges on the wealthy if their spending habits reflect liberal ethics.

Burgeoning business

But the electric car industry has also come under fire from the other side of the aisle — for taking advantage of pricey state programs designed to subsidize companies with outsized economic potential.

Last year, Tesla raked in $15 million in credits — a hefty share of the $150 million in total divided up among 212 companies — “drawing criticism about whether the electric car manufacturer deserved the money,” according to the Sacramento Business Journal. This year, the Journal noted, legislators signed off on $200 million for the so-called California Competes program, which chooses winners based on “employee wages and the industry’s importance to the California economy,” among other factors.

The economic stakes, already high for Tesla and a recovering California, have recently been ratcheted even higher: Tesla competitor Fisker has inked a deal returning the once-bankrupt luxury electric car company to California shores. Bought up last year by the China’s Wanxiang Group, Fisker “signed an 11-year lease worth an estimated $30 million” in Riverside County’s Moreno Valley,” the Times reported, “giving California its second electric car manufacturing plant after Tesla’s Fremont factory.

What’s more, a low-profile new entrant into the electric car market has announced the possibility of a California headquarters of its own. Gardena’s Faraday Future said “it’s scouting several locations for a new factory, fueling speculation about a state tax-credit race similar to last year’s push for Tesla’s gigafactory,” the Journal reported. “The company hopes to announce a location for a manufacturing plant sometime in the third quarter of 2015, and would bring cars to market in late 2017,” according to a spokesman.

Environmental pressure

Adding to the sense of chaos, the big climate change bills headed to the Assembly have activated opposition from lawmakers who find themselves caught in the ideological crossfire — or opportunistically seeking a quick serving of pork for their constituents. “Some moderate Democrats, charging ‘coastal elitism,’ say the bills will harm the middle-class families they represent in the Central Valley,” the San Jose Mercury News observed; “others are trying to shake down legislative leaders for handouts that benefit their districts.”

The legislation, added the Mercury News, would put gasoline-powered vehicles in the crosshairs — “cutting petroleum use by cars and trucks in half over the next 15 years and slashing greenhouse gas emissions to 80 percent below 1990 levels over the next 35 years.”

The electric car companies, of course, have an interest in seeing standards rise. As the Wall Street Journal recently noted, Tesla has pushed to ensure Sacramento’s mileage and emissions regulations could become “even more stringent,” while laboring “to keep other auto makers from loosening regulations in California.”

But this week, when one more federally subsidized green firm went belly-up, it doesn’t even seem to be considered news in California or elsewhere.  The screen grab at right shows zero hits on a Google News search for “Ecototality.”

I only heard about it via New York state professor/blogger Walter Russell Mead, who cited this Sept. 17 Reuters report:

“(Reuters) – Ecotality Inc, a maker of charging stations for electric cars that won a $99.8 million grant from the U.S. Department of Energy four years ago, has filed for bankruptcy protection and said it plans to auction its assets next month.

“The San Francisco-based company is among a growing number of U.S. alternative-energy companies that have struggled or succumbed amid consumer resistance to the high cost and restricted driving range associated with electric vehicles. …

“Citing ‘significant liquidity constraints and the difficulty of obtaining long-term financing,’ Ecotality said an auction is necessary to maximize value for creditors and avoid a ‘fire-sale liquidation.’ …

“Among other U.S. alternative energy companies, green car startup Coda Holdings Inc filed for bankruptcy protection in May after selling just 100 all-electric sedans.

“Meanwhile, the Energy Department on Tuesday said it will in October sell a non-performing loan made to another green car startup, Fisker Automotive.

“Ecotality’s $99.8 million grant was awarded in August 2009 to help develop the EV Project, a network of charging stations for vehicles such as the Chevrolet Volt and Nissan Leaf in major U.S. metropolitan areas.”

Apparently California journos simply don’t find it newsworthy that subsidized green ventures keep failing. It’s the norm, so why bother informing the public about it?

Sheesh.

By John Seiler

I’ve seen a couple of Tesla cars tooling around Orange County. They’re neat, as we said in the 1960s. And they’re made in California. They also survived where other electric car companies, such as Fisker, have crashed.

The problem with the Tesla and all these cars is the short range before recharging. The Tesla Model S is supposed to go 300 miles under ideal conditions. But as the New York Times found out in its test, that means you have to stop for an hour full charge after about 250 miles.

So a 500-mile trip would add another hour to the time. By contrast, filling up a typical sedan takes less than 10 minutes.

Tesla just paid back its government loan nine years early. But the Wall Street Journal also revealed where the money is coming from:

The decade-old Tesla debuted its first product, the Roadster, in 2006. With a base price of $109,000, it was discontinued before it hit 2,500 sales. Tesla introduced its Model S a year ago and had sold an estimated 9,650 at a bargain $70,000 through April. By contrast, Ford sold 168,843 F-series pickup trucks in the first quarter alone.

Tesla wouldn’t have sold even that many cars without the extraordinary help of government. In 2009 the company received a $465 million Obama loan guarantee, supplemented last year by a $10 million grant from the California Energy Commission.

That money has underwritten Tesla’s engineering and manufacturing, but federal and state governments also subsidize the purchase of Tesla products. Any U.S. buyer of a Tesla car qualifies for a $7,500 federal tax credit, while states like Colorado throw in up to $6,000 more in state income-tax credits. Taxpayers pay first so Tesla can build the cars and again to help the wealthy buy them.

These subsidies are important enough to Tesla that its website features an “Incentives” section directing buyers where to look for their states’ electric-vehicle benefits—rebates, free parking, exemptions from state sales tax, use of high-occupancy lanes, and the like. Buyers from states that offer no incentives get this Tesla message: “Want to help make EV [electric vehicle] incentives a reality in your area? Encourage your local or state representative by calling or sending them a letter.”

Tesla’s biggest windfall has been the cash payments it extracts from rival car makers (and their customers), via its sale of zero-emission credits. A number of states including California require that traditional car makers reach certain production quotas of zero-emission vehicles—or to purchase credits if they cannot. Tesla is a main supplier.

A Morgan Stanley MS +0.41% report in April said Tesla made $40.5 million on credits in 2012, and that it could collect $250 million in 2013. Tesla acknowledged in a recent SEC filing that emissions credit sales hit $85 million in 2013’s first quarter alone—15% of its revenue, and the only reason it made a profit.

Take away the credits and Tesla lost $53 million in the first quarter, or $10,000 per car sold. California’s zero-emission credits provided $67.9 million to the company in the first quarter, and the combination of that state’s credits and federal and local incentives can add up to $45,000 per Tesla sold, according to an analysis by the Los Angeles Times.

It’s all just another government scam aiding special interests. Crony capitalism at its worst.

Cost of gas

By the way, gas-powered cars really are not costing more to drive, despite higher gasoline prices. I just saw the 1974 movie “The Sugarland Express,” starring cute Goldie Hawn and directed by Steven Spielberg. It was filmed in 1973. I noticed that gas prices then were 31.9 cents per gallon. The film was made entirely in Texas, including San Antonio.

According to SanAntonioGasPrices.com, you can buy gas there now for $3.19 a gallon — by conicidence, that’s exactly 10 times the price in 1974.

But there’s been a lot of inflation since then. The Labor Department’s CPI Inflation Calculator shows that 31.9 cents in 1973 = $1.67 today. So that’s about half today’s actual price. And cars’ fuel efficiency now is about twice that of 1973.

So the cost of running a gas-powered car is about the same as in 1973.

Some day electric cars, which have been around a century, will be more efficient and make sense without taxpayer subsidies. That day is decades off.

By Chris Reed

The latest Californa-based green energy fiasco took center stage in the House Committee on Oversight & Government Reform on Wednesday. It is Anaheim-based Fisker Automotive. This is from the Washington Post’s Wonkblog:

“It’s time for another round of scrutiny over the Obama administration’s clean-energy programs. On Wednesday, House lawmakers held a fractious hearing over federal loans that had been made to struggling electric-car manufacturer Fisker Automotive.

“There’s no doubt that Fisker is in serious trouble. The Anaheim-based company hasn’t built a vehicle since last summer after running into battery-supply issues and other problems. To date, the company has sold just 2,000 Karmas worldwide — a plug-in hybrid sports sedan that retails for $100,000. The Karma never really found a mass audience beyond Justin Bieber, Leonardo DiCaprio, and a handful of other A-list drivers.

“The Department of Energy finally halted all further loans to the company in June 2011 after having disbursed $192 million of a planned $529 million. (Since then, the government has seized some $21 million from Fisker’s accounts.)”

I love this part. As the kids say, epic fail:

“In the spring of 2012, Consumer Reports gave the Karma a failing grade after it died on the track. ‘This is the first time in memory that we have had a car that is undriveable before it has finished our check-in process,’ said Tom Mutchler.”

A fiasco for venture capital investors as well

An article on the Gigaom tech news site makes another interesting point. This wasn’t just a debacle for the Obama administration. It was a debacle for Silicon Valley venture capital investors who put tens of millions into Fisker:

“The heart of Fisker’s business model was in that early deal with Quantum. The idea was to design a gorgeous car, and have suppliers like Quantum provide the technology because off-the-shelf parts from suppliers would help keep costs down.

“But there were problems with this strategy: Sometimes, those parts had to be custom-made to fit the design vision, which resulted in higher prices for Fisker. Other times, parts were delivered late or, worse, faulty, but Fisker was locked in to those supplier relationships. Sources close to Fisker have also said that many of the parts were owned by the suppliers themselves, so Fisker didn’t own a lot of the internal technology. …

“Indeed, Fisker’s business model wasn’t the type that funders in the Valley typically like — it’s the polar opposite of the ‘Intel inside’ approach. That so many investors were so eager to back the company has left many in the electric car and tech industries scratching their heads over the years. ‘It would have only taken a couple a phone calls to industry veterans to have prevented all of this,’ says electric car advocate Chelsea Sexton, adding ‘there’s no excuse for not doing homework. It appears none was done.’”

But at least the venture capital investors lost their own money — not taxpayers’.

A California company is held out as a model for the new green economy. It works its political connections in Washington to score a half-billion-dollar taxpayer subsidy from the Obama administration. It fails to deliver its much-hyped “clean energy” product. It shutters its manufacturing plant and kicks its workers to the curb.

I know. You’re thinking of Solyndra, the Freemont solar panel manufacturer that went belly up last fall.

Not.

The latest fiasco involves Fisker Automotive, an Anaheim start-up company that received funding to build plug-in hybrid electric cars though the U.S. Energy Department’s Advanced Technology Vehicles Manufacturing program.

“The story of Fisker,” said Vice President Joe Biden, announcing the federal gift back in April 2010, “is a story of ingenuity of an American company, a commitment to innovation by the U.S. government and the perseverance of the American automobile industry.”

The veep was echoed by Energy Secretary Steven Chu, the former UC Berkeley professor of physics and molecular and cell biology.

“Not only will the Fisker projects contribute to cleaner air and reduced carbon emissions,” said Chu, “they will bring innovative cars to the marketplace while putting American workers back on the job.”

By the time the Anaheim cleantech carmaker reaches full production in 2015, according to the Energy Department, its annual sales would amount to as many as 115,000 plug-in hybrids.

2,000 Workers?

Meanwhile, Fisker executives promised the start-up would employ some 2,000 assembly workers. And “industry experts” expected that that taxpayer giveaway to Fisker would also result in domestic parts suppliers and service providers increasing their employment “substantially,” according to Chu’s Energy Department.

Well, here’s what Fisker did with its taxpayer subsidy:

It brought its first vehicle — the Karma sports car — to market this past December. That was a year later than Fisker promised.

What is particularly troubling is that Fisker delivered a mere 250 of the hybrid sports cars to showrooms and at a shocking sticker price of $103,000. Rumor has it that greenie Hollywood car aficionado Leonardo DiCaprio got the first Karma luxury range-extended EV off Fisker’s assembly line.

Oh, then there’s that assembly line, which was supposed to create some 2,000 green jobs for American workers. As it turns out, Fisker’s Karma, generously subsidized by American taxypayers, was actually assembled at a factory not in Anaheim, not in California, not even in theUnited States, but in Finland of all places.

To mollify critics, Fisker execs promised they would retool a former GM plant in Deleware — Biden’s home state — to produce a second car line, the “affordable,” “family-oriented” NINA, which would carry about half the price tag of the Karma.

Alas, before Fisker could get that plant up and running in Delaware, before it could hire those couple thousand assembly workers, the Energy Department determined that something was amiss and in May last year halted payment on $336 billion of the $529 billion loan it originally awarded  the electric car manufacturer.

In a recent statement, Fisker said it is working with the Energy Department to reach a new agreement to claim the rest of its government loan. It also assured that it is not reliant exclusively on taxpayer largess, but actually has received more than $850 million in private-sector investment.

Well, if Fisker is, as Biden said, “a story of ingenuity,” that will, as Chu said, “bring innovative cars to the marketplace,” if there is sufficient demand for Fisker’s Karma and NINA by the car-buying public, the EV manufacturer should not need a taxpayer handout.

It should be able to raise all the funding it requires from private venture capitalists.

— Joseph Perkins