As Loan Funds Shrink, Green-Car Startups Scramble

In lieu of low-interest Energy Dept. ATVM money, such startups as Fisker Automotive, Think, Aptera, V-Vehicle, and Bright Automotive must look to Plan B

By Josie Garthwaite

The flood of funding from the Energy Dept.'s $25 billion Advanced Technology Vehicles Manufacturing loan program—$8 billion for Tesla Motors, Nissan (NSANY:US), and Ford (F) in June—has slowed to a trickle in recent months, adding up to just two awards totaling some $552 million. The remaining $16 billion or so in low-interest loans slated to go out under the program's current budget won't be enough to cover the more-than 90 projects that have reportedly requested funding. As they wait on a final yea or nay from the DOE, many applicants face a potential cash crunch over their manufacturing plans.

Startups in particular may face pressure to come up with matching funds for conditional commitments from other investors. We've already cruised past the dates when applicants such as V-Vehicle and Bright Automotive had said they expected final word on their loan requests (for $250 million and $450 million, respectively). For applicants that don't already have a realistic Plan B on hand, this is the time to develop one.

The backup plans that have emerged so far include outsourcing manufacturing, pursuing more private equity investment, and establishing less-capital-intensive sources of revenue. We may start to see more strategic alliances and partnerships taking shape among green-car startups and manufacturers as well.

Aptera's long-shot ATVM loan request

Fisker Automotive and Think, for example, have both contracted Finland's Valmet Automotive to manufacture their plug-in vehicles. Fisker won a nearly $529 million ATVM loan this fall, which will help it set up its own manufacturing stateside, but the startup plans to meet the 2010 launch target for its first model through the Valmet deal. And while Think hopes to set up manufacturing in the U.S. with DOE funding, the automaker's Think City started rolling off the assembly lines Thursday at Valmet—an investor and strategic industrial partner that helped rescue Think from the financial brink after the Norwegian government initially rejected Think's request for aid. (A Norwegian government-backed investment fund ended up stepping in, along with Valmet, battery maker Ener1 (HEV) and other private investors.)

Three-wheeled vehicle developer Aptera Motors, meanwhile, has just scored eligibility for the ATVM program—until this fall, open only to four-wheeled models—just as its venture capital funding is running out. But according to Lux Research senior analyst Jacob Grose, an ATVM loan for Aptera—it has requested $75 million—is a long shot. "I would imagine that four-wheeled vehicles will continue to get the nod, given that, unlike Asia, to date there has been no appetite in the U.S. for electric vehicles with less than four wheels," says Grose.

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