San Carlos, Calif.


On an overcast Friday in February, about 100 people gathered behind Tesla Motors Inc. headquarters, awaiting the future of transportation. A truck pulled up with a trailer, which disgorged a sleek black electric sports car that promises to change the world as much as the Model T did a century ago.

The crowd toasted with champagne as Elon Musk, Tesla's chairman, climbed a staircase and made a triumphant speech. "This is the culmination of an enormous amount of work," he said.

What he didn't mention was that Tesla's Roadster had arrived months behind schedule with an improvised transmission that reduced acceleration by 40%. Or that the San Carlos, Calif.-based company's visionary co-founder had been abruptly ousted months before. Or that Tesla plans to make fewer than 1,000 of the cars this year -- and sell them for $100,000 apiece.

Tesla and more than two dozen other start-up companies -- most based in California and backed by piles of venture capital -- are in a feverish race to develop a viable electricity-powered alternative to the internal combustion engine. Electric cars, they argue, offer less pollution and noiseless operation for a fraction of the per-mile cost of traditional automobiles, while weaning drivers off oil.

Yet even environmentalists and investors who want to see these companies succeed question whether they have the know-how or leadership to replace the nation's gasoline fleet with one that runs on electrons. Despite increasing competition from rival technologies such as ethanol and hydrogen fuel cells, many of these companies seem bogged downfighting lawsuits, issuing breathless press releases, pummeling their rivals on blogs and bickering internally.

Last week, California's top air regulator voted to reduce the number of all-electric vehicles it would require large automakers to market in the state in coming years. That, combined with the start-up industry's challenges, could further delay technological advances and shift momentum away from electric cars altogether.

"There are real questions about whether they can do this," said Chelsea Sexton, who worked with General Motors Corp. on electric cars in the 1990s and is now executive director of Plug In America, an advocacy group. "There's a lot of talk, but it's still vaporware."

Even investors have doubts.

"It's very cute for people out of Silicon Valley to want to bolt an electric motor to a chassis," said Ray Lane, managing partner at venture capital firm Kleiner Perkins Caufield & Byers, which has invested in two electric start-ups: Irvine's Fisker Automotive Inc. and Think! of Norway. "But that's a long way from actually making a real car."

Most traditional automakers have programs to develop electric, fuel cell and biofuel cars, and are under government pressure to improve the fuel economy of their fleets, adding to speculation that they may gobble up any start-up that produces a viable electric car.

"Even if these start-ups are successful, I worry their prize will be that they're forced to compete with Toyota and GM," said Silicon Valley venture capitalist Vinod Khosla, who put money in ethanol rather than electric cars. "That's why I never invested."

A closer look at four of these California companies -- Tesla, Phoenix Motorcars Inc., Fisker and Zap -- illustrates the challenges facing start-ups trying to build the car of the future.

Production trouble

Ontario-based Phoenix plans to build an electric vehicle using a Korean Ssanyong pickup powered by a battery that can be charged in as little as 10 minutes.

Faced with production costs that suppliers say are more than double the truck's $47,000 retail price, the company cut ties with its motor supplier and engineering firm last year, leading both to take legal action against Phoenix.

As a result, Phoenix blew its goal of delivering 500 trucks in 2007 (it produced none). That, in turn, threatened its contract with Nevada-based battery supplier Altairnano. Last month, Phoenix said it had severed relations with its co-founder and chief technology officer, Daniel Riegert, after an outside inquiry about his history of convictions for forgery and possession of stolen property. Now, the privately held outfit says it plans to design its own motor and switch from rear-wheel to front-wheel drive, major challenges for a company that didn't develop the technology in its prototype.

"The feeling is that they aren't bringing anything of their own to the table, which is problematic," said Spencer Quong, head of the Union of Concerned Scientists' Clean Vehicle program.

Chief Executive Daniel Elliott said Phoenix hoped to deliver its first trucks by May. "We're heading down the final stretch."