Zap Electric Vehicles: We Won't Get Fooled Again

Jim McGreen wanted to make some money in a green business. A craftsman-like mechanic, he had success making and selling electric bicycle kits out of his Alameda garage. Like so many others, he thought electric vehicles (EVs) were the obvious answer to pollution and expensive fossil fuels. In 1992, McGreen founded ZAP (Zero Air Pollution) Power Systems. But he needed more capital.

Gary Starr had started an EV division at Solar Electric Engineering, a struggling solar cell firm later renamed US Electricar. In 1994, Electricar sent Starr packing, but not without plenty of cash to invest. Starr soon found McGreen. ZAP incorporated with McGreen, Starr and their wives as the board of directors.

Two years later, ZAP went public, clearing over $2m. McGreen invented the Zappy upright scooter in 1997. The $650 15 mph two-wheeler caught on with celebrities and public alike. Kevin Spacey rode his on Letterman, and Edward Norton called ZAP, asking them to make his go faster (than Spacey's).

ZAP sold over 2k Zappy scooters in 1998. But even $1.4m in sales wasn't enough to turn a profit. Starr argued that ZAP could cut costs by outsourcing production to Asia. McGreen was committed to quality. Starr, however, had masterminded adding three directors to ZAP's board. Late in 1999, Starr, his wife and his three new board members voted Jim McGreen out as president and CEO, putting Gary Starr in charge.

Under Starr, ZAP attempted to replace McGreen’s production expertise by purchasing Global Electric Motorcars (GEM), successful builders of low speed EVs. Failing there and elsewhere, ZAP's share price plummeted from a peak of $13 to $5.50 by April 2000.

Starr brought in John Dabels, former Marketing Director for the GM EV Program, to manage operations. As President, Dabels managed to double sales, raising annual revenue to $12m, but also resisted outsourcing to Asia. Dabel soon tired of butting heads with Starr and resigned in January 2001. (He later was a suspect in Who Killed the Electric Car?)

Zappy knockoffs drove stock prices under 50 cents a share. So Starr axed 80 of ZAP’s 100 California workers and outsourced to Taiwan. Almost immediately, cheap Asian copies– selling for a quarter of the “real thing”– flooded the market. With annual revenue falling below $5m, ZAP filed for Chapter 11 with a suspended Nasdaq share price of 21 cents.

Somehow, Starr emerged from Chapter 11 as board chairman. He brought in used-car dealer Steve Schneider. Between them, they gained controlling interest of Zap. Issuing stock as payment, ZAP went on a buying spree and learned the power of the press release to impress new investors.

Announcing the $99k fuel-cell Worldcar for 2003 pushed the stock price to $1.85 a share. Announcing their rights to sell smart cars– though later debunked by Daimler– drove it to $2.60. By 2005, ZAP's stock price was back down to 26 cents. A sympathetic USA Today article in 2006 raised ZAP's stock up to $1.23. Eventually, both the Worldcar and the flex-fuel, Italian-built Obvio (announced for 2005) faded into the ether.

ZAP has actually sold an EV: the Xebra, a three-wheeled Chinese EV with a Daktari paint option. As reviewed on TTAC, its lethargic top speed, limited range and cheesy detailing does not impress. The Xebra’s poor reliability also turned out to be the bane of unwary dealers that sank hundreds of thousands of dollars into Starr and Schneider’s promises– only to find themselves selling cheap EVs that had to be repeatedly towed back to the dealership.

And yet ZAP is still attracting investors on the vapors of green PR, promising two "fast, sexy and affordable" EVs within only two years.

For their $32,500 three-wheeled Alias sports EV, ZAP claims 321hp and 156 mph. Albert Lam, chairman of ZAP's joint venture with Chinese coach-builder Youngman said, "I believe we can go into production by the second quarter of 2009."

For the $60K Zap-X CUV EV, ZAP claims 644 hp, 0- 60 in 4.8 seconds and 155 mph, performance comparable to a Porsche Cayenne Turbo. Even less believably, ZAP claims a 350 mile range and a ten-minute recharge.

"This is vaporware," responds auto industry analyst Aaron Bragman, of Global Insight. "The claims they've made just don't jive with the current state of technology."

Despite the long development times seen with the Tesla Roadster and Chevy Volt, Youngman promised China Daily last October that, "the sample vehicles will be finished at the end of this year (2007) or next January" and "two or three months after testing, the electric powered sedan under the Lotus brand (Zap-X) will be the first to go into mass production."

But even the $40m Youngman has invested isn't nearly enough to actually deliver radical new EVs in that time frame. At least we'll know who killed this electric car.