CODA Automotive has been making industry news for years while it prepared to launch an all-electric vehicle for mass production in the United States. Earlier this month, however, CODA made local news as a possible anchor tenant for the L.A. Cleantech Corridor. Economic and employment stimulus, electric car manufacturer, technology company: CODA’s aspirations reflect the promise of the emerging clean tech market. To detail the technological innovation CODA brings to the market, as well as the economic and employment benefit a company like CODA offers a region like Southern California, VERDEXCHANGE NEWS was pleased to speak with CODA President and CEO Kevin Czinger.
CODA announced May 19 the close of a $58 million Series C investment round, increasing total invested capital to more than $125 million. Funding will be used to support the market entry of CODA’s all-electric sedan and to commercialize production of CODA’s transportation and utility application lithium-ion battery systems within Lio Energy Systems, CODA’s battery system manufacturing joint venture with Lishen Power Battery. (Image courtesy of CODA Automotive.)
VerdeX: CODA Automotive is bringing an all-electric, affordable car to market in 2010. What is the market for EVs?
Czinger: We are not a large car company that is bringing just another model to market. We are looking at it from the perspective of a technology company that is bringing a new technology into the market. New technologies are adopted by introducing to the market something that is useful to early adopters and innovators; and, you do that at sufficient scale—meaning it isn’t just 100 cars or 1,000 cars for some very small niche market. If you have 10,000-plus real, usable cars in a geographic area, it shows that the technology is real, for real people, that it is safe and usable, and that people can use it for all of their daily driving—commuting, picking up kids from school, and daily errands.
Once those thousands of stories get told, a few things happen: users tell those stories, human talent and financial capital comes into the sector very rapidly because you have a real product, and the users drive price down and performance up. The result is a dramatically increasing adoption rate of a new technology. Even if you see just tens of thousands of vehicles being sold into the market in the next couple of years, it could initiate a very rapid transformation over a five year period of time.
VerdeX: Why has CODA Automotive chosen to bring to market a four-door, zero emission, EV sedan?
Czinger: It is an initial vehicle on a clear path to move transportation away from oil dependence. If you have a safe, affordable, all-electric car that doesn’t use an ounce of oil and gets more and more people adopting it, you have a solution. Rather than use microelectronic-formatted computer batteries, which use a lot of energy, we focused our R&D and capital on designing and manufacturing, at the right price performance point, an automotive-grade battery system. That is the key. That safe, affordable, automotive-grade battery system that carries production is the key to catalyzing widespread adoption of all-electric vehicles. All-electric vehicles are the best solution to free us from dependence on oil.
VerdeX: How is California attracting alternative transport companies to its marketplace?
Czinger: California has always been a leader in innovation: technology innovation, adoption of new products, and the openness of the users. If we look at our user group, they are green, willing to adopt new technology, and willing to adopt challenger brands that challenge incumbents. In terms of the green movement, California is ground zero. It is also the eighth largest economy in the world. If you have a new green technology transportation company, this is the place to park it. There is also a legislative framework here that supports the use of green transportation.
VerdeX: You are a Santa Monica-based company, but you have leveraged resources from around the globe, including Lishen’s lithium-ion battery systems from China. Elaborate on how CODA is levering global technologies to design and manufacture its all-electric sedans?
Czinger: First and foremost is the core CODA team. None of this gets built without the American battery and automotive engineering team calling the shots. These are the program managers and architects of the car. These are the people that innovate. This is the core, cross-functional, Skunk-Works-type engineering team. From that team, the key technology is the automotive grade battery system. We design a transportation cell by designing and manufacturing, which we actually do here in North America, all of the software and hardware that monitors and balances the proper temperature range of the battery system. That is the core of the company.
We want to control the manufacturer of the key enabling technology. If you go back three years, when we were looking at buying manufacturing, there was no scale U.S. manufacturing in the battery industry—none. If I had decided that I was only going to do this if I had U.S. battery manufacturing, I would have never had the company; I would have stopped right there. Where was the manufacturing? We looked in Asia.
In Asia we had the benefit of finding a partner, Tianjin Lishen, who said that they would not only be a supplier and manufacturer if our design sold, they also wanted to be manufacturing partners. That meant that we were able to team up, put our capital together—$100 million of equity and $300 million-plus of credit—build very quickly, and get the first state of the art, automotive grade battery cell manufacturing facility up and running by November of 2009. We controlled quality, operations, and R&D within that facility. That leveraged our key enabling technology. That’s where our team put our thought, know-how, and capital.
VerdeX: CODA’s battery joint-venture, Lio Energy Systems, has just secured more than $400 million to expand. How are you deploying this capital?
Czinger: Right now, the total we have pulled down is around $427 million. That is being deployed in the scale-up and R&D of battery cell manufacturing. Our battery system will be used for third party car companies, most likely domestic manufacturers in China for the domestic market in China, and for utility applications like wind power storage. But that is the scale-up of the core enabling technology. That is what we own. That is what our American know-how is built around.
None of that exists unless you can pull a team together with an application that is really going to have a profound and significant impact, for the better, on society. That is how we view the CODA car. If you are going to have safe, affordable, all-electric transportation, it starts and ends with a safe, affordable battery system. This battery system design started with a set of vehicle requirements that would match my earlier technology model: initial, early-adopter innovators are necessary to kick-start the market.
VerdeX: What are the features of the CODA you are bringing to the market this winter?
Czinger: It is a fully safety-certified, mid-size four-passenger sedan. I would say to your readers that whenever they look at an electric car and somebody gives a driving range, ask under what test regime that range was given. Our minimum range of 90-100 miles is under the US06 test—the aggressive driving test. If we use the much less aggressive LA4 city driving test, we get 120-130 miles.
If you look at any of our competitors, we get significantly more range, we have significantly more interior space and significantly more trunk space, and it is a fully safety-certified car with no exemptions from any of the federal motor vehicle safety standards. We are looking to certify the car for delivery to customers in the fourth quarter of this year as an NCAP five-star rated car, the highest new car assessment program rating.
The sticker price with the federal and state subsidies will be in the mid- to low-30s.
VerdeX: GM, Nissan, and BYD are bringing all-electric vehicles to the market within 18 months. Compare and contrast CODA’s all-electric sedan with other vehicles.
Czinger: There will be competitors. If we didn’t have any competitors, then we are probably in the wrong market because no one would see the opportunity that we see. And it is a clear opportunity.
Our greatest advantages are our cross-functional American engineering team, the prices we used, and the way that we think about the car. That allows us to have an initial price performance point and to have an innovation machine that will keep us very competitive.
Our advantages, in general, are that the car is all electric and it comes from a company that only does all-electric technology. We are not manufacturing other cars that more than offset with their pollution what we are putting on the market. We have a total green brand ethos.
For the family that wants a commuting car that fits their children, they will be able to go to games, pick them up, go to school, and do all of those normal day-to-day things. There is plenty of interior space and trunk space. This is an unpretentious, all-electric, usable car for day-to-day driving.
The combination of our ethos, our technology and innovation team, the way we built the company, and our focus on usability—real cars for real people—are our strengths.
VerdeX: What infrastructure is needed in metropolitan areas like Los Angeles to support the EVs and plug-in hybrids coming to market in 2010?
Czinger: We are looking to deliver 14,000-plus cars to customers between the fourth quarter of this year and the end of next year. More than half of those cars are targeted at fleet customers that would use the cars for sustainability programs or one-day rental programs. They will have their own fleet infrastructure in place in terms of charging.
For individual consumers, we are only going to recommend the car to people that can plug it in to their garage at night. That requires the simple installation of a 240-volt, 30-amp outlet. If they purchase the car, they will have an audit done of their house by a certified electrician. The electrician will tell them how much it will cost to run a line from their panel or to upgrade their panel. The actual outlet kit comes with the car, within the price of the car. If they decide to buy it, the equipment will be installed.
Our car, in addition to charging at 240 volts, will also charge at 110 volts. You can charge it at any outlet. People will come home and plug the car in, benefiting from cheap overnight electricity. After traveling 40-50 miles, it takes about two hours to charge the car. Users will wake up, unplug the car, go to work, run errands, come home, and plug the car back in. That is phase one of electric vehicle use.
VerdeX: CODA has a talented corporate board that includes John Bryson, the former CEO of Edison. How should utilities anticipate the support of the EV market?
Czinger: The combination of electric cars and local electric power generation—particularly green power generation—fits together very well.
In 1950 the United States was the Saudi Arabia of the world. We exported oil; we didn’t need foreign oil. Obviously that has vastly changed. If you look today at the value chain of a car—and there is about $20,000 of average margin in a car, over $14,000 of it goes to oil, and the majority of that goes outside of the United States. Driving a car pumps the wealth of the United States outside of the country.
Clean cars are built, increasingly, locally. Although CODA’s EVs are very much supported by our Chinese partners, we are looking to build battery manufacturing in the United States. When you get that kind of manufacturing—local manufacturing coupled with local clean power generation—you recapture all of that $14,000. You recapture it for the local community, the local power generator, and the local manufacturers, and instead of having a broken economic ecosystem that is spewing money out of the country, you create an economic ecosystem where the creation of wealth gets re-circulated in the community and continues to build wealth, prosperity, and jobs for the community.
VerdeX: BYD is coming to the U.S. from China and has been courted by the city of L.A. with extraordinary promises and inducements. What like incentives would retain CODA Automotive in metropolitan L. A.?
Czinger: This is our community. We want to be strong, positive participants in our community. Obviously, if we can expand and increase jobs here, while getting support from the community, it would be a win-win. We have been courted in extraordinary ways by Ohio and North Carolina, and we wish California would take similar measures. We just closed Series C financing of almost $60 million, which was completely over-subscribed. We are on our way to deliver production of fully safety-certified cars to the California market in the fourth quarter of this year.
VerdeX: If the Los Angeles County Economic Development Corporation came to you and asked, “What do transport manufacturing companies like CODA need to induce them to invest and grow in Metropolitan Los Angeles?”, what would you suggest?
Czinger: I would say, “Provide me with a counterpart who has real authority to work with me and make decisions to implement a game plan to help us grow our company.” Make that a real counterparty. When I put in time, they put in time. When I make promises, they make promises. It is clear and transparent, and dialogue takes place on real time with real action. That is all I ask for.
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VerdeX: You are no doubt familiar with Frances Ford Coppola’s “Tucker—the Man and His Dream”. You, like Tucker, are the CEO of a new, independent, trans-global car company; what gives you hope that the CODA EV will be more successful than the “Tucker”?
Czinger: We fundamentally differ from previous stories in that we are a technology company. Our first principle is to under-promise and over-deliver. Our story should be one of American garage innovation, of Americans coming together with technical skills and belief in work in the trenches. If there is a story line that I would like to have told in the future—and obviously we won’t know for five or ten years—it would be that we were “roll-up-your-sleeves people” in battery and automotive engineering and people that worked their tails off.
VerdeX: Lastly, at the Milken Conference this year there was a panel on which CODA participated called Cars 2.0. One of the points made was that cars will be more like consumer electronics than the vehicles historically produced by General Motors, Ford, and Chrysler. Is CODA more a consumer electronics company than a 20th Century Detroit car manufacturer?
Czinger: Yes. Technology change will allow us to develop cars much more rapidly, with agile manufacturing and structured with many fewer stamp parts. These cars will be clean network appliances that keep people plugged in and have features to allow those products to do everything in a safe, sane way, and also in a way that does not destroy the United States economically, does not destroy the health of our children and environment, and creates jobs for people here and elsewhere. •••