Smith Electric Vehicles Wants Investors, Cheaper Batteries
There aren’t very many electric vehicle companies in the world. One of the few was founded way back in 1920. Which makes it older than most cleantech firms by at least eight decades. But like many hip, tech-driven, venture-backed start-ups, Smith Electric Vehicles is planning an IPO.
Smith manufactures medium-duty delivery trucks – often called box trucks – used for delivering stuff. The trucks are much bigger than the kinds of passenger cars that come to mind when someone says “electric vehicle” – they need 20 times the battery power of a Nissan Leaf, for example. But they use similar types of batteries as their tiny cousins.
As President Obama noted in his speech last night at the Democratic National Convention, high tech battery manufacturing has been part of the U.S.’s push into advanced manufacturing. He mentioned “thousands of Americans have jobs today building wind turbines, and long-lasting batteries.” I’m assuming by “long-lasting” he’s talking about the big rechargeable li-ion battery packs meant to power electric vehicles.
In large part to make those jobs possible, several battery manufacturers got significant government support from Recovery Act spending. Factories are indeed manufacturing advanced batteries. But as C&EN reported back in February, the electric passenger car market is moving more slowly.
At the time, Smith’s CEO Bryan Hansel was plenty happy about the glut in big batteries. “It’s tremendous for us that supply is coming up—we’re ahead of the demand curve and so we benefit from oversupply in the short term,” he says. “It drives down cost and helps drive demand for our products, and we can then be a bigger customer.”
But with the IPO coming, business and technology risks in the battery industry cast a bit of a shadow on Smith’s operations. The company is shifting to batteries made by A123 Systems, a pure-play technology firm whose own stock chart looks like a downhill ski slope. And it’s not just A123. I also saw in Smith’s SEC filing that a related risk is “the recent bankruptcy filing by Valence Technology, Inc., or Valence, which produces the battery systems for our U.K.-produced vehicles.”
Also in the filing, Smith explains that it is depending on decreasing the costs of its electric drivetrain in order to make a gross profit on its truck sales. As of now, the company loses money on each sale. If the battery makers cannot be profitable, it will be hard for Smith to be profitable.
But that is not to say anything is hopeless. The value proposition to fleet operators to switch from diesel trucks to all-electric ones is promising. The whole supply chain is going to depend on developing and scaling-up the production of cost-effective batteries.