Slow DOE Loan Process Risks ProjectsBy John O'Dell February 10, 2011
It's been almost a year since the federal Energy Department awarded the first - and so far only - loan guarantees from the $25-billion Advanced Technology Vehicles Manufacturing Loan Program. Worse, it could be months before another round of awards is announced.
The long delay has made life uncomfortable for a number of small firms that say their ability to move forward has been hampered. One of them is California-based Aptera Motors, whose all-electric, teardrop-shaped Aptera 2e commuter car was greeted with a flurry of interest when the prototype was first unveiled more than two years ago and has since faded into limbo.
Company executives say that when the government announced it would provide loan guarantees to those companies lucky enough to qualify, the private equity market for smaller start-ups dried up. So far, only Ford Motor Co, Tesla Motors and Fisker Automotive have received the federal loan guarantees, totaling just under $9 billion. The irony is that all three have shown that they can continue to raise capital without relying on the government. Fisker, for instance, just closed a $150-million private funding round.
For the rest, the name of the game now is that if the feds don't want to loan them money, why should a private investor risk its funds? That certainly seems to be the case with Aptera. Spokesman Marques McCammon told AutoObserver Green that while executives are confident Aptera can survive and raise funds on its own, the word in the venture capital world is "wait and see what the Energy Department does."
Aptera says it cannot disclose the amount for which it has applied, but we're figuring it is in the neighborhood of $500 million. If the loan guarantee doesn't come through, making it without a federally guaranteed manufacturing loan would be tough, McCammon acknowledges. That would mean Aptera's forward motion would proceed at a much slower place than is presently planned.
In a newsletter recently e-mailed to Aptera supporters, the company said that development and design work on the 2e continues at its small campus in the northern San Diego County community of Palomar but that for actual manufacturing to begin "the government has to make sure they complete their comprehensive evaluation and we have to let the process run its course."
Aptera initially applied for a loan guarantee in December 2008 and was rejected because its streamlined vehicle - which resembles a three-wheeled airplane fuselage - didn't meet the then definition of an automobile. The government said it had to have four wheels. After Aptera and several other manufacturers of three-wheel electric vehicles appealed, the feds changed the rules and in mid-2009 Aptera reapplied. It's been waiting ever since.
McCammon won't criticize the Energy Department for its languid pace. Several members of Congress however, have written the department complaining that U.S.-based developers of advanced tech vehicles could be falling behind overseas competitors while the state of their funding applications remains uncertain.
In its newsletter, Aptera says that without the federally guaranteed loan, it would likely be unable to build vehicles in the volume necessary to achieve reasonable economies of scale. "At a lower investment" -- presumably from private equity funds -- "vehicle manufacture is much more manual in nature, so the cost of every vehicle increases significantly," the newsletter said. "When you purchase components in volume, that cost gets spread out and shared. But when you build only a few, the cost of quality drives up the price."
McCammon said that Aptera executives continue talking with the Energy Department and now are hoping to hear word on their application by mid-year.