While there are a multitude of reasons why greener commercial transportation makes sense, the case of Smith Electric Vehicles proves that there must be adequate cash flow to keep a company alive until the business environment matures and demand grows. Government policy and investment has been instrumental to the success of electric vehicle producers, however, as illustrated by the case of Kansas City based Smith Electric, help sometimes comes from unexpected sources.
In April 2014 Smith Electric Vehicles announced that it had suspended operations and had filed for bankruptcy. One month later there was news that the company had been saved by a Chinese battery producer and one year after that Smith signed a deal with another Chinese firm, electric vehicle maker FDG.
The logic supporting the expected growth of electric transport is compelling if not irrefutable. The combination of no climate change causing emissions, no air pollutants, and lower fuel and maintenance costs are destined to make electric trucks a preferred transportation medium in the future. However, higher up front costs, payload restrictions and range limitations have made it tough for early electric trucks to compete with fossil fuel powered vehicles.
Some early experiments with electric commercial vehicles have produced mixed results. In 2003 FedEx announced its long term commitment to cleaner transport vehicles. They introduced hybrid-electric trucks to their delivery. In 2009 Staples added hybrid and all-electric delivery trucks. Fortune 500 companies, including Pacific Gas and Electric Company, Coca-Cola, Staples, Frito-Lay, AT&T and Kansas City Power & Light bought the Smith Newton, the largest road-going electric truck in North America.
The lithium-Ion battery powered vehicle had a 120 kw electric motor and a payload of up to 7,300kg. Its top speed was 50 mph (80 km), and a range in excess of 100 miles (160 km) on a full charge. It took six hours to recharge. However these limited quantity test purchases were inadequate to generate the needed cash flow.
In April 2014, Smith filed for bankruptcy and in May 2014 they secured a $42 million investment commitment from Hong Kong based Sinopoly Battery Limited, a producer of lithium-ion batteries and other electric-car components. In exchange Sinopoly become a strategic shareholder in Smith and the company’s exclusive supplier of batteries and other components.
In May 2015 Smith Electric signed a joint venture deal with FDG Electric Vehicles. As explained by EV Obsession, “FDG will give Smith exclusive rights to produce its electric van, panel van, minibus, and cab/chassis designs in the U.S., a value of approximately $30 million, as well as injecting $15 million in cash. Smith will contribute its customer and manufacturing base in America, as well as some of its exclusive EV technology.”
The financial troubles of Smith are broadly similar to British electric truck maker Modec Ltd. In 2009 the company. produced about 300 6-ton trucks, powered by lithium-ion batteries. In 2010, the truck maker saw orders double, and they expected to sell about 1,500 unites by 2012. However, they never got there, in 2011 the wheels fell off the cart as the company could not manage a severe cash crunch.
Smith is just one example of many electric startups that have encountered difficulties. Unlike many others they have managed to survive by reinventing itself as an American based Chinese firm.
Despite Smith’s inability to catch on in the US, the market for commercial electric vehicles is ripe. The history of electric trucks proves once again that good ideas are not always successful. Even more importantly it illustrates how those that are first to market are not always the ones who are able to make the most of the opportunity.