ZAP's Silver Linings
By Bill Moore
If nothing else, ZAP is persistent. To quote Stephen Schneider the CEO, the company has had to occasionally duck behind a rock to "reload", but they still seem to come out shooting.
This week they collected orders at the NADA Convention in Las Vegas for 2,300 electric cars. But they've been here before when they took in over $2 Billion -- that's with a "b" -- in orders for the smart car they planned to import from Europe. Those orders enabled the company to secure a $400 million line of credit, only to have the rug pulled out from under them. The litigation on that one may take years to resolve.
Yet here was the little Santa Rosa, California company that started the electric scooter craze with the Zappy back in Las Vegas showing car dealers their Ladybug-like Xebra electric three-wheeler and the stunning Lotus APX that the company announced it is going to offer as an all-electric crossover vehicle with autobahn speeds, 350 miles range and rechargeable in minutes, instead of hours.
How, you ask? Schneider isn't saying just yet, but he did spend a lot of time talking to me about his company's highs and lows over the last decade since the founder, Gary Starr, began offering electric bicycle conversion kits, about the same time EV World began.
Today the company is traded Over The Counter (OTC) as ZAAP and while it still sells a range of electric drive vehicles, its business model has gradually evolved from marketing small, recreational EVs to importing and distributing road-capable electric and alternative fuel vehicles from Brazil to China to the British Midlands.
Selling full-size EVs isn't new to the company or its founder, who in the late 1980s started U.S. Electricar, offering electric conversions of cars and pick-up trucks to fleets and the public. But as Schneider explained to me, it was a tough business given the degree of oversight exercised by a myriad of government regulatory agencies. Curiously, once Schneider assumed control of ZAP, he would see those same agencies and their regulatory 'red tape' as an ally in the company's efforts to stay alive.
Speaking of Gary Starr's early forays into the electric bicycle and scooter market, Schneider said, "he did such a fantastic job at marketing these products and getting them out there that because of no regulation the knock-offs came in droves. That's where I brought the extra two wheels back into the equation, to bring back all the regulators."
The silver lining for having cheap Asian competitors grab both market share and even try to copy the company name was that is raised its visibility beyond ZAP's wildest expectations.
"That part left ZAP in a very good spot, and that's the part where I came in," Schneider explained. He had a company called Voltage Vehicles whose business was acquiring alternative fuel vehicle technologies and distributing it in through auto dealer networks. "The core business of where we're at today still is the core business of Voltage Vehicles under the ZAP name."
The Smart Car 'Money Pit'
One of the more high profile misadventures for the company was the saga of the smart car. Schneider admitted that it wasn't one of the smartest moves the young company made, explaining that they made some serious mistakes in judgment.
As he tells it in the full MP3 audio of our interview, which you can listen to using the players above, the decision to get involved with the smart car wasn't really part of ZAP's core business, but it appeared to present an opportunity to offer a transition for the company while it searched for better electric car technology, a search that would lead it eventually to China and result in the Xebra.
In order to sell the smart car in the U.S., it had to undergo various certification tests and the individual with whom ZAP was dealing appeared to be within two weeks of getting the necessary authorizations. That two weeks would stretch into years and millions of dollars, only to have DaimlerChrysler decide to not sell the car to the middleman with whom ZAP had been dealing. (DaimlerChrysler recently announced it would import the cars through Roger Penske's United Auto for $15,000).
"When we thought we were two weeks away, that two weeks was kind of like the movie, 'The Money Pit' where the plumber says the house will be done in two weeks and it kept moving and moving and moving...
"We weren't involved in the direct process (of certification and retrofitting), we were indirectly involved and paying for the service, so it just kept pushing out and pushing out. Finally in November of 2004 we received EPA approval and we were launching the project in the NADA convention, the one where we are today."
Again the fickled finger of fate cast its voodo spell and ZAP found itself reassigned from a choice 40x40 space to a tiny 10x10 postage stamp "out by the paint guys". Yet despite this, dealers found them and orders began to roll in by the hundreds and then the thousands. Within 90 days, ZAP found itself holding $2.2 billion in purchase orders for the smart car and a line of credit worth $425 million.
"We did a lot of things the world said could never be done," Schneider told me, including having everyone from DaimlerChrysler to the EPA tell them the car could never be brought up to U.S. standards. "We were also told there was no way we could get the financing to put together a deal this size, but we did. And there's no way you could get the orders for this many cars, but we did."
Schneider cut short the rest of the story explaining that he couldn't go into all the details of what happened because of pending litigation.
"The long and the short is, we over-sold the project to a point where there were so many middlemen and so many layers that we couldn't control our own destiny. It wasn't our car... and from the stand point of the way I see it, DaimlerChrysler figured that they probably didn't need us in the middle, and we'd proven the market.... Life goes on," he said stoically.
"We promised the world on these cars and the deal didn't go down as expected. We delivered, I don't know, five, six hundred of them. And we still own the technology to bring the cars to US-compliance, but as a business decision, it didn't serve our purpose to put energy into something that we can't control.
"We're a little older and a little wiser now. We know we only want to have relationships with the manufacturers, no middlemen, and we want to be in control of our own destinies... that we can provide the dealers with exactly what we say and we can minimize the over-promising and under-delivering environment that we did create; though at some level, it really wasn't all of our fault, but we have to take the blame for it."
Comes a Xebra
Having learned an obviously painful lesson from the smart car fiasco, ZAP abandoned its plans for an electric version of the smart and focused its energies instead on its little three-wheeled Chinese import called the Xebra (pronounced like 'zebra'). Schneider said that, to his knowledge, it is the only road-capable (top speed is 40 mph), production electric car that he's aware of and the only one to come in for under $10,000.
Available in a four-passenger sedan and two-passenger pickup, the company imported "several hundred" of them into the U.S. in 2006 and began distributing them to dealerships.
"We faced some challenges as you always do when introducing a new product: little idiosyncrasies you don't think of until the car is on the road... All minor things, but nevertheless that need to be adjusted before you want to deliver larger quantities of the product."
An example of just such an 'idiosyncrasy' was the fact that you couldn't roll down the window unless the door was open.
"We had a shaded windshield in the first few models that was a particular shade that when you were up at a stop light, you couldn't tell if the light was green or red."
Schneider characterized them as "foolish little things" and that it took several generations before the manufacturer in Chengdu Province in China "got it right."
He praised the little pickup version of the Xebra that can be used also a dump truck and flatbed. It even comes standard with leather interior and a CD player. "It's under $10,000 and it's street-legal on any road in America."
That's because it is classified as a motorcycle, which may require, depending on local regulations, the driver and passenger wear motorcycle helmets.
The Xebra is a 72 volt, lead-acid battery vehicle..."for the moment", Schneider noted .. with a 40 mile range, obviously depending on all the usual factors like weight, terrain, temperature, speed, etc. A new dealer in Chicago is telling the press there the range is 25 miles.
The company recently penned an agreement for a new battery management system and is retrofitting one of the trucks with lithium ion batteries that should "theoretically" quadruple the range, though he said the company hasn't tested it yet. The goal is to give the vehicle a top speed of 55 mph even if it eats into the range some, which he estimates would be about 100 miles.
While at the consumer level, the sedan is proving the most popular version, at the fleet level, it's the little truck that is stirring lots of interest. Schneider said he is getting numerous inquiries from cities and has an order in negotiation with a Chicago-based "green fund" that could be the largest order for electric vehicles to date. Other prospects are pizza parlors and large "big box stores" and utilities, "all wanting this little truck." If these all come through, the truck itself could take up all of their supplier's manufacturing capacity.
He observed that not only is the Xebra a socially-responsible motor vehicle, but that it also offers low income families the opportunity to own an affordable vehicle with low operating costs, though naturally, they'll have to budget to replace the batteries after a few years.
"It gets you from point A to point B and using the (Pacific Gas and Electric power).. rate, it's a penny a mile. That's pretty economical transportation."
Schneider responded to my question about monitoring quality control (QC) on a complex product made in a distant land which hasn't been known for consistently building that kind of product by saying that ZAP now has a full-time QC specialist who speaks Mandarin on site on a daily basis to oversee production. He has also hired engineers in California to go over all of the initial order of vehicles as they came in.
"We have a whole QC team," he said, while candidly, if reluctantly, admitting that it's taken time to get the all of the vehicles up to an acceptable standard. "They have not all come in to a quality that we've found acceptable, but they have gotten better and better and better with each shipment, and now we are very pleased with what we think is the final product."
Of course, buying an $8,900 electric car does come with a price, starting with the fact that ZAP is only offering -- for now -- a 90 day warranty, though the batteries are warranted for one year. The company is also working with dealers and customers to understand that this is a pioneering effort for everyone and that it is working on resolving any outstanding QC issues.
The Cars From Brazil
As part of his strategy to offer a portfolio of different alternative fuel vehicles, Schneider found a small company in Brazil that makes a flexible fuel car comparable in size to the smart, called the Obvio. That company is currently working with Lotus Engineering in the UK on homologation for the US market.
"There will be four vehicles that will be produced from Obvio: two ethanol vehicles that are the first 100 percent pure ethanol vehicles, but flex fuel. They can use ethanol and gasoline... And then the same body platforms are being engineered to be full battery electric."
ZAP hopes to sell the 828 ethanol version for an MSRP of $14,000. It boasts a 175 hp engine compared to the smart's 61 hp.
"It's kind of where 'green car' meets muscle car," Schneider told me. "It's got a zero-to-sixty in something like 4.5 seconds." The car is also tricked out with lots of computer gadgetry, as well as seating three, instead of the smart's two. He added that the public has reacted favorably to the Brazilian flare expressed in the the design and many of its innovative features. He estimates it should be available sometime in 2008.
The new centerpiece of ZAP's future is the Lotus-designed APX, pictured above, that ZAP plans to offer in an all-electric model with performance that will not only rival Tesla, but exceed it.
The 'silver lining' of the smart car fiasco was that it put ZAP on the radar of a lot of designers and auto engineering firms that wanted to be "in this space," as Schneider put it. One of those companies was Lotus Engineering, who developed the Tesla Roadster. He characterized Lotus as being the right company at the right time, one that is able to "bend in the wind", meaning it's small enough to be flexible -- "it doesn't require an act of Congress to change" -- but large enough to actually do something.
Lotus' APX crossover platform seemed ideal for creating what Schneider calls "the most advanced electric vehicle in history."
The APX's all aluminum, "versatile vehicle" architecture, which allows it to be more easily stretched and widened as needed, is the ideal platform on which to base an all-electric vehicle. Because it was so "super-light," Lotus and ZAP could put more batteries in it, giving it longer range.
The two companies plan to accomplish this by using hub motors on all four wheels, which opens up the engine compartment for more battery space.
"It allows us to have 644 horsepower, four-wheel drive, zero-to-sixty in 4.8 seconds, 155 mph top speed, 350 mile range, and rapid recharge capacity."
Of course, much of this depends on advanced battery technology and for the moment Schneider isn't revealing all his cards, though he promised EV World more details in a follow-on interview. As to when the car might be available, he cautioned that he didn't want to repeat the mistakes of the smart car and "over-promise and under-deliver."
To hear how ZAP plans to finance this project, as well as handle technical questions about the "unsprung mass" of hub motors, etc., be sure to take 40 minutes to listen to our complete discussion with Stephen Schneider using either of the two MP3 players at the head of the article or by downloading it to your computer for transfer and playback on your favorite MP3 device. Here's the URL: http://www.evworld.com/evworld_audio/zap_sschneider.mp3.
Finally I asked Schneider if he was concerned GM's recent announcement that it would offer an electric, plug-in vehicle in the 2010-2012 time frame might impact ZAP's plans for the ZAP-X. He confidently responded, "I don't think it's a matter of the big one catching the little one, but the fast one catching the slow one that might win the race here."