Not So Fast

The San Jose Mercury News has a good piece, looking at the difficulties of creating an electric-car business. It manages to avoid the hype of some alternative-energy stores and gives us some context about the auto industry..

How Silicon Valley could become the Detroit of electric cars
DAUNTING CHALLENGES FACE FIRMS ENVISIONING LIFE AFTER GASOLINE
By Matt Nauman
Mercury News
The valley's electric car industry
Silicon Valley is already the capital of the world's high-tech industry. Is it also becoming the Detroit of the electric car industry?

Last week's announcement by Shai Agassi, a former SAP executive based in Palo Alto, that he's raised $200 million for a company that will try to revolutionize the electric car industry is the latest sign of this region's growing role in one of the hottest sectors of the automotive industry.

That's no surprise considering California's mandate for cleaner cars, the local enthusiasm for plug-in hybrids, the Silicon Valley fascination with new technology and the number of Bay Area venture firms investing in this industry.

Agassi, who spent months studying his venture, makes an interesting observation about the valley and the Motor City. "Detroit is a car manufacturing center. I think what we're looking at is not something that can be done in a normal way. . . . It needs an Internet approach, a Google approach."

And, he said, this region is well-suited to do that. "In the valley, we know how to do technology disruption. We know how to do business models, how to develop proof of concept and get it adopted around the world," he said.

Others, even those enthusiastic about the potential of electric cars, are uncertain about how much success start-ups such as Agassi's Better Place and Tesla Motors of San Carlos can have against the huge global auto industry. General Motors and Toyota, for instance, each produced more than 9 million vehicles in 2006.
"It's not simple or cheap stuff to do," said Neal Dikeman, partner with Jane Capital Partners, a San Francisco merchant bank focusing on cleantech and energy technologies. "$100 million is the ante up to play the game," Dikeman said.

"People are waking up to the fact that this is not like software start-ups that raise $40 or $50 million, and then have IPOs," said Darryl Siry, Tesla's vice president of sales, marketing and service. "This business is capital intensive."