Never Mind That Bailout: Venture Funding for Auto Innovation Accelerates As Startups Race to Leave Detroit in its Own Dust

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about getting our company into high-volume production,” Wilbur says. The CEO, who joined Aptera in September after spending most of his career working for the auto industry in Detroit, says most of the U.S. automotive startups are based in California.

“The clustering is clearly in California, the trendsetters are in California,” Wilbur says. But let’s not be too narrow on this one, because it is not just in the U.S. It’s a global trend. There are automotive startups in Korea, China, Israel, Europe, all over the world.”

 

 

Venture Capital Investments in Motor Vehicles and Auto Parts

Year No. of Deals Total Invested (in millions)
2003 5 $8.13
2004 3 $10.6
2005 5 $46.1
2006 9 $96.38
2007 15 $148.47
2008(9 mos) 24 $250.32

Biggest VC Deals in Autos, Parts, in 2008 (Jan. 1-Sept. 30)

Startup No. of Deals Total Invested (in millions)
A123 Systems (Advanced batteries) 1 $102
Fisker Automotive (Hybrid-electric car) 2 $85
Vehicle Production Group (Taxicab maker) 1 $40
Dash Navigation (Web-enabled GPS) 1 $30.2
Segway (Personal transport) 3 $15.5
Miles Electric Vehicles (All-electric cars) 1 $15
Transonic Combustion (Advanced engines) 1 $14
ISE Corp. (Hybrid-electric buses and trucks) 1 $17.5
Brammo (Electric motorcycle) 1 $10
PAX Streamline (Energy-efficient designs) 1 $6
EcoMotors (Advanced diesel engine) 2 $5.24

Source: The MoneyTree Report by the National Venture Capital Association, Pricewaterhouse Coopers, based on data from Thomson Reuters.

*A123 Systems was added by the editors of Xconomy. The MoneyTree Report did not include it as a startup in either motor vehicle or parts category. MoneyTree counted Segway Systems, however, as a deal in the motor vehicles category.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • http://www.teslamotors.com Rachel

    To answer the fundamental question that this article poses: Yes, absolutely, the federal government should provide low-interest loans to R&D-focused automakers that have already demonstrated a commitment to building fuel-efficient vehicles. This will encourage and hasten the time to market of a sophisticated all-electric, zero-emission powertrain for affordable, family cars. If this isn’t in the public interest, what is?

    Just to set the record straight among the good folks in the blogosphere:

    Tesla is not applying for a loan from the Department of Energy to fund anything having to do with the $109,000 Roadster sports car pictured here but rather future generations of more affordable sedans and a powertrain facility to make battery packs and other components for other automakers, which could also use them for affordable sedans and subcompacts.

    To be sure, the Roadster is an important, paradigm-shifting product. Tesla has delivered nearly 100 to customers already and is increasing production starts to 30 per week in 2009. The all-electric, zero-emission Roadster is a viable production vehicle that also serves as an innovative precursor to other, less expensive products in Tesla’s pipeline. Ask the Xconomy guys if they enjoyed their test drive in September in Seattle — it’s a real car with amazing fit and finish, performance and handling to rival much more expensive cars.

    On that note, it’s obvious but critical to emphasize that R&D and early-adopter technology is relatively expensive. Whether it’s the iPhone or photovoltaic panels, the first owners pay the most. But the technology inevitably becomes affordable within several product cycles, whether on the timeframe of Moore’s law or (in the case of battery capacity) at the fair clip of 8 percent per year. Given the Tesla Model S five-passenger sedan (base price expected at $57,500) and the Bluestar project (all-electric, zero-emission subcompact for $30,000), a government loan to Tesla would inevitably help speed delivery of more affordable vehicles that eliminate dependence on foreign oil and reduce drivers’ carbon footprint.

    Finally, let’s discuss the difference between the Detroit Three’s “bailout” and what was originally a progressive and well intentioned program to encourage fuel-efficient vehicles. The loan wouldn’t be used for the Roadster or Tesla’s ongoing operations — and it would go to the company that has arguably done the most to rattle the Detroit status quo when it comes to developing vehicles with far greater well-to-wheel efficiency than a Prius.

    Tesla’s blog clarifying the distinction:
    http://www.teslamotors.com/blog2/?p=66

    FWIW, I’m all for spirited debate about public policy, but it should be based on facts. Blog on!

    Rachel Konrad
    Senior Communications Manager
    Tesla Motors, Inc.

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  • http://www.auto-facts.org/automotive-blog.html Auto mechanic mark

    No bailout needed but venture capital welcomed. My Ideas are not government approved but here they are any way. We will have to save America ourselves. The power of people. Rock stars and celebrities for buying American cars. Angelina and Brad love to help so lets get them to lead with a trade of some venture capital going to their favorite causes. We the people can bailout the big three with a focused effort. If the state and local governments want to help the effort they can reduce the sales tax for each sale in 2009. And how about 0 percent financing backed by the government. If the banks will not help the automotive credit market with the money they where given take some back and start a federal financing program to approved buyers. Stimulate and escalate sales saves the industry without additional tax payer money. But yes we will still need that bridge loan to get there!