By on April 6, 2013

While Damon Lavrinc at  Wired’s Autopia makes the observation that the revived Detroit Electric company seems to be following the Tesla playbook, launching their company with a car based on an electrified small Lotus, Detroit Electric CEO Albert Lam insists that his team is using a different business model than Tesla and that they have learned from other EV startups’ mistakes. Lam also said there was no comparison between Detroit Electric and Fisker, which appears to be headed to bankruptcy soon, having just furloughed all but 50 employees. Detroit Electric says they are following the model of Apple (on Lam’s CV along with a stints at Lotus and Sun Microsystems) focusing on design and engineering with much of everything else contracted out. Lam pointed out, at a press conference following the reveal of the SP:01 sports car, that buying and equipping a factory to build an original platform, as Tesla is doing, or even contracting out assembly of an original platform, as Fisker has tried to do, both require up front investments of hundreds of millions, perhaps a billion dollars or more, requiring quick success and substantial early sales just to break even. Lam says that Detroit Electric will proceed more slowly that those other two EV startups.

Tesla used a Lotus platform to get their company off the ground with their Roadster but much of Tesla’s focus has been developing the all-original Model S, built in the former NUMMI GM/Toyota plant in California. Detroit Electric will only be selling 1,000 of the $135,000 SP:01 as the startup moves to put a volume model, in sedan and hatchback styles, into production. Those new cars, with a projected sales figure of 10,000 units in 2015, ramping up to perhaps 40,000 in three years, will not have a unique platform like the Tesla Model S or the Fisker Karma. While that 40,000 unit figure seems a bit optimistic, Tesla is producing (and selling, they claim) the Model S at a rate of about 20,000 units a year, Chevy sold 23,400 Volts in North America in 2012 and just shy of 10,000 Nissan Leafs were sold in that market last year. Globally, Nissan sold about 27,000 Leafs, so Detroit Electric could be selling ten to twenty thousand cars a year if they have a competitive product.

They wouldn’t say who will be supplying them with gliders, but Lam said that an announcement of a strategic partner will be made at the upcoming Shanghai auto show. Lam did say that their platform supplier will be in Asia and that the cars will be built with unique Detroit Electric exterior bodies and interiors, as well as the tech features unique to the SP:01, particularly the SAMI smartphone app that controls most of the car’s infotainment. By giving their cars a brand specific look and a competitive interior, perhaps Detroit Electric will avoid the problems that another EV startup, Coda, has faced. Coda also based it’s business model around selling an electric version of an existing platform, but they decided to use a rather generic looking sedan from China’s Changan Hafei that is arguably the most boring looking car on sale in North America. Also, consumers have said that the Coda’s cheap interior plastics look out of place in car that has a list price of over $44,000. Reportedly Coda sold less than 100 cars in 2012 and early this year there were reports that the company had laid off 30% of its workforce. One dealer had slashed prices 40% on the Codas he had in stock.

Detroit Electric did promise that they will be doing final assembly in a Detroit area facility. Lam said that components will come in “CKD” (completely knocked down) form that will then be put together in Michigan. In a sense, that reverses how the big Detroit automakers often shipped CKD kits to foreign subsidiaries where they would be assembled. A similar facility will be operated in Europe for cars sold in Europe and Asia. North American distribution will be done through traditional dealers, most likely a hookup with a large dealer group. European sales will follow a new model, though the only hint they gave us was that it will operated on the model of “don’t call us, we’ll call you”, whatever that means.

One actual similarity with Tesla is that Detroit Electric will be assembling their own battery packs from cells supplied by vendors. That assembly, along with that of the batteries’ air-cooled thermal management system, will be done in the Detroit area. Detroit Electric’s head of engineering, Ben Boycott, said that the company “for commercial reasons” will not be using a single supplier for their cells. That’s a smart move after Fisker’s production was interrupted by battery maker A123’s own bankruptcy.

Korea’s Kokam had already been mentioned as a possible supplier to Detroit Electric. An additional battery maker will be announced as soon as final prices are negotiated. Boycott said that from a technical standpoint both Kokam cells and those supplied by the other company are equivalent. That other company will also be Korean but will not be LG Chem, who supplies the Chevy Volt. If you want to sleuth it out, Lam did say that the unnamed Korean battery supplier already has a facility near Detroit.

Detroit Electric, like Tesla, will also offer the same cars in two different battery capacities, ranges and prices. The entry level, lower range car will be competitively priced to the Nissan Leaf. Lam mentioned a price of $32-$35,000, the cost of a loaded midsize car these days.

Lam stressed how Detroit Electric will be “an American company”, headquartered and operated out of Detroit. Currently, six people work in Detroit Electric’s temporary offices in Detroit’s historic Fisher Bldg, including Don Graundstadt, CEO of North American operations. Once their permanent offices in the building are ready, that will go up to about 20, the same number of people who will initially staff the local assembly facility. An engineering and R&D center employing up to 200, also in the Detroit area, is in their plans. When asked about the company’s financing, Lam said that they have both private and strategic investors, including the company that supplies them with battery packaging equipment. He took pains to emphasize how he had recently been contacted by investment bankers representing a state owned Chinese business looking to invest in Detroit Electric and that he turned them down. He said that they welcomed private equity investors, and specifically mentioned investors in Europe and Hong Kong, but that they did not want any equity investments from governments linked businesses.

On the topic of government money, Detroit Electric received a $50,000 forgivable startup loan from Ann Arbor’s SPARK business incubator which was repaid in full.

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can get a parallax view at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks for reading – RJS

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25 Comments on “Detroit Electric Will Outsource Much But Will Assemble Own Battery Packs...”

  • avatar
    Big Al from Oz

    Here is a fantastic photo journalist exercise on the Lithium Triangle. The countries are Chile, Argentina and Bolivia. Some great shoots with an interesting story.

    Great article. Here’s the link.

  • avatar

    Correction. Detroit Electric will be making 999 SP:01 electric sports cars, not 1,000.

  • avatar

    Let’s build an electric car based on the Elise. It’ll be just like the Tesla Roadster, but we’ll wait until the platform is almost two decades old and Tesla has dropped it. We’ll be the only player in the lucrative electric-powered-Elise market!

    But we’ll call it Detroit Electric! That’s so hip and modern, the coasts will go crazy for it! And exports? They’ll be stellar, since ‘Detroit-based’ is such potent catnip to the European and Asian markets.

    • 0 avatar

      Your comments made my sarcasm meter peg. Cool logo though! Right you are about the Detroit image, in CA we know it for “Devil’s night” and murder-capital of the USA. It will go BK just like it did the first time, the question is how much of our money will Obama spend on it. Awesome track record he has with Solyndra, Fisker (and CODA very soon).

  • avatar

    What a complete and utter waste of time this project is! It’s not even clear who is going to be ripped off besides breathless rich folk, but it takes little brainpower to see it’ll all end in tears. Sell for the same price as a Leaf? How can these dorks say that with a straight face?

    Making an electric car and issuing ridiculous statements is the modern version of the issuance of a false prospectus to the gullible who want to get rich quick. And the incredulous will bite. A man with a very wealthy spouse I know who is otherwise sensible became the Canadian distributor for the magnets around the fuel-line scam. When he boasted about this to me, I informed him where to look on the web to see it was utter bs. We have not spoken since.

    • 0 avatar

      Magnets in the fuel line is bogus.

      Building an electric car isn’t bogus, but EVs do have some tradeoffs that make them undesirable for a lot of people and optimal for a few others. We have lots of cars that aren’t all things to all people on the road already, so one more niche vehicle is very cool to some of us – especially since EVs happen to line up with my situation and values pretty well.

      Tesla is doing pretty well with this business plan. I’m not sure of imitators will be as successful, but it’s probably a better plan than most. There are probably three reasons Tesla abandoned the electric roadster market:
      1) Everyone who wanted one at their price had one? Possibly more true in conjunction with the next two factors.
      2) The roadster would have fallen under different safety rules if they’d sold many more cars, and regulatory compliance would have required a substantial investment in further engineering on a niche car.
      3) They’d already learned what they needed to know to start building the Model S.

      If you put those three together, then abandoning the Roadster market makes sense. And maybe there is enough demand left that Detroit Electric can sell a thousand units. But the demand for $120k electric Roadsters is pretty finite, so they run a much higher risk of running out of customers than Tesla did….

  • avatar

    I cant see how this will succeed. From the get-go, the name, logo and script hark back to an era no one cares for.

    Tesla acknowledged their initial Lotus based car was just a stopgap until they could ramp up their own model.

    Does anyone care for a niche electric Lotus? Twice?

    We dont want Codas but surely theres something in between?

    People will buy a small CUV like electric vehicle. I convinced of that.

  • avatar

    I’d venture to guess the $50k incubator load did not even pay for the PR meeting. Where’s the rest of the money coming from. Hopefully, not us tax payers again.

    • 0 avatar

      Oh, but this is such an excellent time to start up anything EV or solar or wind related.

      No doubt the US government is just chomping at the bit to give Detroit Electric a ton of money to help them with their plan.

      Problem is, based on sales of EVs and Hybrids to this point, that market is a very small niche in a very large industry, dominated by conventionally powered ICE vehicles.

      I think that there is a place for EVs and Hybrids, just like there is a place for golf carts. Anyone who wants one should be able to buy one, just not subsidized with taxpayer money.

      No amount of government involvement in funding startups is going to entice real-world buyers to buy EVs and Hybrids, other than fans and idealists. EVs bombed in the US. They won’t catch on until the planet runs out of oil.

      People who currently own an early version of the Prius are beginning to find out how expensive they are to keep running beyond the 7-year mark if they need a battery replacement or major work done, because at that point they function just like an ICE Corolla except with the added dead weight of the battery dragging down the fuel economy.

      EVs are the answer to a question never asked and are reserved for the very few. Not the masses. Detroit Electric will be no different.

      • 0 avatar

        I agree with you on the subsidies. However, every new market starts small. You say that EVs bombed in the US, as though the story already happened, yet EV sales continue to increase.

        EVs do answer this question: How can I commute to work every day and save $100 a month in gas, and virtually nothing in maintenance, while enjoying instantaneous torque and quiet driving?

        But battery replacement cost is a big question mark, especially for delicate lithium ion chemistry. Even Nissan won’t answer the question.

      • 0 avatar

        “People who currently own an early version of the Prius are beginning to find out how expensive they are to keep running beyond the 7-year mark if they need a battery replacement or major work done”

        If that were indeed the case, I suspect most of them would have figured that out a while ago, given that the first gen Prius was first sold in the US in 2000. The 2nd gen came out as a 2004 model, I believe.

        By the way, the federal warranty on the drive train is 8 years/100K. In California (and presumably states that follow CA-emissions, like NY, NJ, MA, PA), this is 10 years/150K. A battery pack is about $2300 for the first gen, I believe, and around $2600 for second gen, plus labor.

        That’s like changing a transmission, no? I’m sure if you go to the Prius forum (never been myself), you’d find that many that have run longer or farther.

        • 0 avatar

          The two Prius owners I have in mind have long since past the 150K miles on their odos, since they use theirs to commute to work every day.

          One commutes ~160 miles roundtrip while the other does ~180 miles roundtrip every day they work, usually five days a week.

          The downside with living out in the boonies, such as the gas&sip where I choose to live, is the distances one has to travel.

          But that is a very small price to pay for the clean air and solitude you get in return for the isolation.

          For an increasing number of people moving here, that appears to be a trade-off they are eager to make, moving here from overcrowded exotic and sophisticated places like NJ, NY and CA.

          It might be of interest to know that these same people who own the Prii I am referring to also own a pickup truck and an SUV each, and each of them has relegated their Prius to secondary commuting duty now, one having purchased a ICE Corolla, and the other an ICE Civic, to replace their Prius as their daily driver.

          They’re not getting rid of the Prius just yet, they’re just not putting any more money into them. They have kids and grand kids that can use them for short hops or grocery-getting.

          With the Prius, the gas engine comes on at ~15mph, so in this part of the country where one rarely gets to drive at <15mph, the gas engine does most of the work. The battery is underutilized but degrades over time just the same.

        • 0 avatar

          My 2nd generation Prius has 150k and over 8 years on it. Its going strong.

          The big battery is pretty comparable to an automatic transmission as far as replacement cost and longevity go. $1500 for a rebuild, $3k-fish from Toyota. Enthusiasts seem to be getting 250k+ miles from the 2nd gen packs.

          The first generation (sedan) Prius batteries didn’t fare quite as well and many of those packs have been replaced, but the lessons learned were applied to the 2nd and 3rd generation Prius. If it looks like a Prius, it’s going to be a very reliable car. And very efficient. Its a great little passenger car. Certainly not all things to all people, but it’s going to beat the Honda Civic at the AtoB appliance game in the long run.

          On the other hand, if a Honda Civic isn’t well suited to what you do with a car, then a Prius probably wouldn’t fit your needs any better.

    • 0 avatar

      “loan” not “load” — can’t type today.

  • avatar

    “The entry level, lower range car will be competitively priced to the Nissan Leaf.”

    That’s not good enough. Without a compelling price, performance, or utility improvement, why would anyone buy a Detroit Electric EV when I can get one from a company with the pedigree of Nissan?

    Tesla, on the other hand, can sell performance as their distinguishing factor, even if they’re more expensive.

  • avatar

    Interesting in that Tesla is using the 18650 sized Panasonic batteries to the tune of about 7,000 cells in each car, whereas this Detroit Electric company will be using Dow Kokam cells that are prismatic lithium cells instead.

    A quick search on Dow Kokam shows that they’ve receieved a $161 million grant from the Department Of Energy to build their factory, which cost $340 million to build, and they’re already laying people off due to a glut of lithium battery producers.

    These electric car startups are just plain stupid. If you want to bilk the government out of money for making an electric vehicle you’re much better off making electric mobility scooters and bilking Medicare.

    This whole project is doomed from the beginning.

    • 0 avatar

      If there’s a glut of cells, then building EVs makes *more* sense.

      Excess supply of cells means lower price for the most expensive part of the EV.

      My guess is that the market will equalize all of this. Once we build the market. And that is the chicken and egg problem that can be solved by having the government throw money at it.

      (Note that I’m trying not to make a value judgement here, just explore the economics and the economics of new technologies. If you feel that using government money to build a profitable market where none existed before is an overreach and something that you don’t approve of, that’s a respectable position. But the Chinese will do it of we don’t, and guys like me will would buying Chinese cars. So how does the free market system stack up against technological leadership and the potential for waste? I know how these things balance out in my mind, but how do you reconcile these things?)

  • avatar

    EV’s won’t become ‘mainstream’ until a charging infrastructure is in place,and that cost’s big money.People who live in apartments very seldom have a place to charge up.The same goes for the commute into the city,where to charge back up? Hybrids have a much better shot as it stands right now…

    • 0 avatar

      You have an outlet at your house, and you leave the house with a full battery.

      I see why you wouldn’t have an EV as your only car, especially of you’re a traveling salesman. But, it seems to be pretty sensible as a second commuter car that shares a driveway with a minivan.

  • avatar

    With so much fracking in place and oel price will be stable so whats the big incentive to buy EV.
    Some of u folks are enjoying cheap electricity bills for now we all know when more people jump into the band wagon, things will suddenly change.
    How our govt will replace the tax benefits from benzene and dieselene sales?
    Every litre of gas /dsl sold in Canada were taxed at ~80-90% rate.
    And is not that much different than in USA Europe or rest of the globe.
    So suddenly u cut off their income? How is it going to add up.
    Or same as bring back Prohibition tomollo, so Govt won’t be able to tax hooch u can bet what is going to happen?

    • 0 avatar

      Electricity is much cheaper than gasoline per-mile.

      EVs still carry a price premium, so a Yaris or a used car is still cheaper overall. But, if whatever you were cross shopping is comparable to the LEAF in terms of price, then it’s a win.

      Right now, EVs are very attractive to well off environmentally minded geeks. That’s where the Prius was a 13 years ago, and now its the new Honda Civic (at least in the college town where I live). Not everyone drives a Prius now, but it is one of Toyota’s top sellers and a key part of their lineup – which makes it success by any measure. It seems pretty likely that EVs will follow then same trajectory.

  • avatar
    el scotto

    Oh were to begin. They primly say they won’t take money from a Chinese bank but are looking at investors from Hong Kong. Uh, it’s the same country. How do the Chinese and South Koreans deal with people that embezzle (steal) from them? Hopefully there are direct flights from Detroit to the Cayman Islands.

    • 0 avatar

      Lam said that while they welcome private investors in Europe and Asia, he stressed how they do not want equity investment from state controlled businesses. You can hear what he said in the press conference videos.

      Since he specifically mentioned an investment bank representing a Chinese state owned company, I don’t know if he meant just Chinese companies or any company that’s state controlled. I assume companies where governments own minority equity stakes, like GM or PSA wouldn’t count.

  • avatar

    It would be grand if they would produce this car in the Boxwood plant near Wilmington Delaware. Fisker screwed us over on that deal and we the people spend 1 mil a month keeping it lit and heated.

  • avatar

    These folks are trying to tie 2 rocks together to hope that they can float!

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