"Success is 90% failure"
-- Soichiro Honda
Electric car battery company hits road bumps - CBS News
Is A123 Electric Battery A Waste of $263 Million in Government Funds? - ForbesThen the luxury electric car Fisker Karma failed. It was powered by a faulty A123 battery. "It's low, it's sleek, it's sensuous... it's also broken! " said Consumer Reports.Electric vehicles fall drastically short of Obama's 1 million goalA123 was forced to launch an expensive recall -- its second in four months. With $621 million in net losses since 2009, the company disclosed in SEC filings last month that there was "substantial doubt" about its "ability to continue."A123 has declined further interview requests. As for that battery breakthrough announced this week, many analysts seemed underwhelmed.
So what is wrong with this picture? There a many good examples of government helping to spur the creation of new industries — with the Defense Advanced Research Projects Administration (DARPA)’s work to create the Internet being among the most compelling.
And the goals of spurring the use of electric vehicles has worthy goals — such a reducing the use of gasoline sourced from politically unstable regions of the world and greenhouse gas production among them.
But the decision to put government money into A123 was missing two fundamental pieces of research that any respectable venture capitalists would do. The most important — by far– is talking to potential customers to determine whether an electric vehicle was a technology in search of a market or the answer to a widely shared and painful unmet need.
Although I have not done this research for electric vehicles, I think it would be worth talking to cross-section of 100 potential customers to ask them whether they see an electric vehicle as a cost-effective means of transportation.
At $40,000 for a car with limited range — given the shortage of charging stations — I would guess that not many people would want to be guinea pigs for these vehicles. In other words, a modest amount of customer research would have thrown cold water on the forecast of a million electronic vehicles sold by 2015.
Meanwhile, I’d guess that the world does not have many people with extensive experience running factories to make them in high volumes. But those who invested in A123 should have anticipated problems resulting from the learning that would be required as production volumes scale.
And a look at what caused the Fisker problems for A123 suggests that its quality control processes leave much to be desired. For example, Crain’s Detroit estimated in April 2012 that A123 was poised to incur nearly $67 million in charges — including a $15 million inventory write-off — due to a Fisker Karma plug-in hybrid fitted with an A123 battery that failed in April during a test byConsumer Reports.