Silicon Valley Races to Develop Electric Cars

Like many Silicon Valley engineers, Martin Eberhard loves cars, especially fast ones. But the self-described “closet gearhead” didn’t feel comfortable buying a hot rod that guzzled gas from the Middle East or some other troubled region.

So three years ago, Eberhard and friend Marc Tarpenning launched Tesla Motors Inc. Their goal: to design a sports car that would go as fast as a Ferrari or Porsche, but run on electricity.

With about 80 employees, Tesla just raised $40 million from high-profile investors including Google Inc. founders Larry Page and Sergey Brin. It plans to start selling its first model next year.

“I’m not the only person that would like to buy a car that’s beautiful and fun to drive but also remain on the moral high ground,” said Eberhard, 45, who sold his previous company, electronic book maker NuvoMedia, for $187 million in 2000. “None of the energy that goes into an electric car comes from the Middle East.”

Silicon Valley thinks it can do what Detroit could not -- create a thriving business selling electric cars. In the 1990s, General Motors Corp. and other automakers spent billions to develop battery-powered vehicles, but they flopped because they couldn’t travel more than 100 miles before being recharged.

By tapping the Bay Area’s engineering expertise and culture of innovation, a cluster of entrepreneurs, engineers and venture capitalists here are racing to bring their electric cars to market. Unlike Detroit and Japanese automakers, they’re working on high-performance sports cars for wealthy auto enthusiasts.

At least three Silicon Valley start-ups -- Tesla Motors of San Carlos, Wrightspeed Inc. of Woodside and battery maker Li-on Cells of Menlo Park -- are among a cadre of companies nationwide developing electric cars or components.

Commuter Cars Corp., based in Spokane, Wash., last year started selling its Tango T600, an ultra-narrow, two-seat electric car that claims actor George Clooney among its customers.

AC Propulsion Inc., a San Dimas-based maker of electric car motors and charging systems, is supplying Tesla and Wrightspeed with key components.

As fuel costs rise, technology improves and consumers seek more environmentally friendly vehicles, these companies see potential in a niche largely neglected by the big automakers.

But some industry analysts question whether electric cars could ever become cheap enough or have the battery life to compete in the mainstream auto market.

“To attract consumers en masse, the price has to be low enough where they can see the break-even point,” said Anthony Pratt, an automotive analyst at J.D. Power & Associates.

The success of Toyota Motor Corp.’s Prius and other hybrids, which run on a combination of gasoline and electricity, has shown there’s a market for eco-friendly cars. Page and Brin, Google’s billionaire founders, are known to drive Priuses.

Tesla’s Eberhard thinks the Prius is “terrifically ugly” and believes that other wealthy car enthusiasts feel the same way.

In Tesla’s workshop in San Carlos, Eberhard and Tarpenning offered a glimpse of their first model -- a two-seater that resembles a Lotus Elise -- but would not allow photographs. They plan to unveil it at an event for prospective buyers next month in Santa Monica.

“We’re building a car for people who like to drive,” Eberhard said. “This is not a punishment car.”

Although he was mum on details and pricing, Eberhard said the first Tesla model would be able to drive more than 200 miles on one charge, making it good for commutes but not long road trips. With lithium-ion batteries, the car can be plugged into any electrical outlet.

Named after inventor Nikola Tesla, the company has big ambitions. Tesla executives talk about building a “new kind of car company” and hope to eventually offer several models, starting at the high end and bringing down the price as technology improves. But the company must first undergo government safety and environmental tests -- a rigorous process the founders didn’t anticipate.

“The car business had more challenges than we expected,” Tarpenning said.

Ian Wright, who left Tesla to start Wrightspeed last year, is aiming at the same $3-billion market for high-performance sports cars. The New Zealand-born electrical engineer spent nine months retooling an Ariel Atom race car to run on an electric battery -- a prototype of the car he eventually hopes to sell.

A drive in Wrightspeed’s X1, which has no doors, roof or windshield, feels like a roller coaster ride and can leave passengers wind-beaten and queasy. It accelerates from zero to 60 mph in three seconds, making it one of the world’s fastest production cars. Last year, Wright’s X1 beat a Porsche and a Ferrari in separate races.

“I wouldn’t describe myself as a radical environmentalist,” Wright said. “I think my customers will buy my cars for performance. The energy efficiency is nice to have, but it’s not the reason they will buy the car.”

Wrightspeed is still raising its first round of financing and remains a one-man start-up. Many venture capitalists are “serious car nuts” but are nervous about investing in a car company because they don’t know enough about the industry, Wright said.

Backers of electric cars, powered by batteries charged from an electric outlet, say the country could quickly reduce its dependence on foreign oil -- as well as emissions of greenhouse gases blamed for global warming -- if more drivers went electric.

But so far, efforts to bring electric cars to market have stalled. In the 1990s, the major automakers introduced several thousand electric cars under a California state mandate to develop cars with no tailpipe emissions. The most popular model was General Motors’ EV1, which the company spent more than $1 billion to develop.

Although those cars attracted a devoted following, they didn’t get much traction in the marketplace because of their restricted driving range.

The big automakers lobbied against the mandate until it was overturned in 2003. Most car companies then recalled their electric vehicles and destroyed them, sparking an outcry.

Some enthusiasts say the automakers never gave them a chance. The demise of those vehicles is the subject of a documentary, “Who Killed the Electric Car?” which chronicles the demise of GM’s EV1.

Now Silicon Valley, known for its ability to innovate, sees an opportunity to break Detroit’s grip on the U.S. auto industry.

Developing an electric sports car is a complex engineering challenge that’s well-suited to the region’s techies, said Elon Musk, the co-founder of Internet payment company PayPal Inc. who has provided about half of Tesla’s $60 million in funding.

“The technological challenges don’t play to the strengths of Detroit,” said Musk, who also heads Space Exploration Technologies Corp., an El Segundo developer of commercial rockets. “Nobody in the world is better than Silicon Valley at solving electrical engineering problems. The key technologies are in Silicon Valley, not Detroit.”