An article published on January
26, 2009 in Wall Street Journal reported a story on Think Global AS. The
Norwegian start-up Think Global AS was one of the front-runners in getting
electric cars to the market. It snagged big-name venture-capital backing and in
2008 manufactured about 350 of its latest model, a two-seater, plug-in city
car. It planned to ramp up production to 10,000 units this year. Then the financial crisis hit. As Think began
its expansion, overall demand for cars fell, and the company wasn't able to
raise the $60 million to $100 million it needed to finance the growth. The
credit crunch prompted suppliers to demand faster payments. In mid-December,
Think became one of the green technology world's first major casualties, filing
for bankruptcy protection.
The two-seater, plug-in TH!NK
city, a car with zero carbon-dioxide emissions, sold for around $30,000 in
Norway. The credit crisis thwarted its manufacturer's plans to ramp up
production to 10,000 units this year.
"We were so close to break-even and being cash-flow positive,"
said Think Chief Executive Richard Canny. "It doesn't seem right that the
traditional auto companies are getting massive public money to stave off their
decline, while newcomers in the electric-car space are being starved of
capital."
Think's travails show how the
financial crisis could delay new green technologies by starving innovative
start-up companies of capital. They are also a sign of how venture capitalists,
who have been pouring money into "clean technology" from wind power
to biofuels, could start to see some of those bets go sour. Venture capitalists
put $22.8 billion into green firms around the world in the past two years,
according to market-research firm New Energy Finance in London.
India-based REVA Electric Car Co.
makes cheap minicars that aren't crash-tested, and is backed by U.S. venture
firm Draper Fisher Jurvetson. Making higher-end sports cars that cost over
$100,000 are Fisker Automotive Inc., backed by venture firm Kleiner Perkins
Caufield & Byers, and Tesla Motors Inc., funded by PayPal founder Elon
Musk.
But the start-ups might end up
being crushed by the big car makers. At the auto show in Detroit, Ford Motor
Co., General Motors Corp. and Chrysler LLC showed prototypes of electric cars.
Toyota Motor Corp. and Renault SA are also investing heavily to bring out
mass-market plug-in cars as early as 2011.
"Cars are really difficult to build, the supply chain is long and
complicated, and it requires tons of capital," said Christian Reitberger,
a venture capital investor at Wellington Partners. "It's not an easy
business for venture-capital-backed firms to succeed in." Mr. Reitberger
prefers to focus his firm's green investments on companies in proven markets
such as wind and solar power. However, the downturn could also claim victims in
more established green industries. Finance for long-term, capital-heavy
projects such as offshore wind farms, solar parks and waste-recycling plants
was up 15% to $97 billion last year, said New Energy Finance but activity was
slower in late 2008.
Source: Abboud, Leila, “Faded Green: A Car Maker’s Woes,” Wall Street Journal, January 26, 2009.