Quantum Hedges Bets With Advanced Powertrains

By Danny King July 1, 2011

Clandestine Extended Range Vehicle.jpg

Since the middle of last month, California-based advanced powertrain maker Quantum Fuel Systems Technologies has: received an order from Dow Chemical Corp. to convert a number of Ford pickups to plug-in hybrid electric vehicles (PHEV); shown off its diesel hybrid-electric Army all-terrain vehicle at the Indy 500; and, sold more than $400,000 in on-board storage tanks for compressed natural gas-powered (CNG) dairy trucks. It did all this while preparing itself for Fisker Automotive, the maker of a plug-in hybrid electric sports tourer that uses Quantum powertrains, to start U.S. and European deliveries this month. And that activity doesn't include developing a mail truck with an all-electric Quantum powertrain that's being tested by the U.S. Postal Service.

Such work may illustrate how smaller companies such as Quantum will be required to provide a wide range of advanced-powertrain products in order to survive against larger, better capitalized companies. But Quantum Chief Operating Officer David Mazaika doesn't necessarily see it that way. "We try to leverage common components into a variety of different vehicles," Mazaika told AutoObserver. "They all have very similar components. It's not as diverse as you might think."

As automakers look to meet progressively more stringent fuel-economy standards while cutting foreign-oil dependency by targeting alternative-fuel vehicles to both individuals and government fleet operators, Quantum appears to be trying to straddle the line between utilitarian and indulgence while looking to pick up clients in both the public and private sectors.

Quantum-PHEV.jpgThat effort is typified by its work on plug-in hybrid-electric vehicles. Quantum last month received a $1.37 million grant from the California Energy Commission to further develop plug-in hybrid powertrains for converted Ford F150s, long the best-selling U.S. pickup truck. Two days later, Quantum said it received an order from Dow for more than 100 F-150 PHEVs, which would use Dow Kokam lithium-ion batteries.Additionally, Quantum, which in 2004 delivered a hydrogen fuel-cell electric all-terrain vehicle to the U.S. Army, last month displayed its Clandestine Extended Range Vehicle (CERV) at the Indianapolis 500. That diesel-hybrid, which can go up to 80 miles per hour and can climb 60-percent grades, is about 25 percent more fuel efficient than conventional vehicles. Additionally, Quantum, which as of Jan. 31 had sold about 20,000 fuel systems for alt-fuel vehicles (primarily to Fisker and General Motors), earlier this year reached a $10-million agreement to make hydrogen-storage vessels for GM.

Good Karma?
Meanwhile, Quantum is making powertrains for the Fisker Karma sports sedan. Fisker, which was founded in 2007 by Henrik Fisker, Bernhard Koehler and Quantum, in late March started limited production of the 403-horsepower car in Finland and said it expected deliveries of the four-door model to reach both U.S. and Europe customers by the end of July. The $96,850 car is propelled by a pair of electric motors that use a grid-charged lithium-ion battery pack to deliver up to 50 miles of range before an on-board gasoline engine-generator kicks in to continue sending juice to the motors.

Quantum reached an agreement with Fisker Automotive last year to be Fisker's exclusive supplier of powertrains, on-board chargers and solar roofs. Fisker is paying Quantum $4,100 per vehicle for those components for the first 6,500 vehicles, with the cost dropping to $3,200 per vehicle once 30,000 component sets are ordered, according to SEC filings.

"It seems like there's certainly a lot of potential on the government side for (Quantum)," said Dave Hurst, senior analyst at Pike Research, in an interview with AutoObserver. "But Fisker has to do well if Quantum is to survive the bubble."

Fisker aside, Quantum is part of a group of relatively small companies looking to benefit from the greening of fleet vehicles by producing powertrains that allow for conversions of mass-produced pickup trucks into electric-drive vehicles. Globally, the number of fleet-owned electric-drive trucks, vans and SUVs purchased in 2015 will total about 70,000, up from about 13,000 this year, according to Pike Research. Purchases will be split about evenly between governments and corporations such as utility owners and delivery companies.

Quantum's F150 conversion allows for the truck, which in its regular V-6 version gets 19 miles per gallon in combined city and highway driving, to travel as far as 35 miles in all-electric mode and go as far as 600 miles on a 36-gallon tank of gas while approximating the conventional V-6 when it comes to performance, according to Mazaika. In addition to the Dow purchase, Quantum recently received an order for more than 200 truck conversions from "a major utility company," said Mazaika, who declined to disclose the name of the company.

Stable of Companies
Like Quantum, Azure Dynamics has targeted Ford for vehicle conversions. The Oak Park, Michigan-based company has been working with Ford at converting Transit Connect utility vehicles to all-electric and in April said it reached an agreement with delivery-service giant DHL to supply 30 Transit Connect BEVs as well as to convert 50 Ford E450 trucks to hybrid-electric powertrains for service in Manhattan. DHL is investing almost $4 million in the project.

Meanwhile, Amp Electric Vehicles, which has converted Chevrolet Equinox SUVs to battery-electric vehicles, in April reached an agreement worth more than $100 million to supply 1,000 BEVs to Iceland's Northern Lights Energy over the next five years, and last month presented the first of those vehicles--a retrofitted Mercedes-Benz ML--to the utility company. All three companies are firmly in startup mode. Azure Dynamics' 2010 revenue doubled from a year earlier but, at $21.9 million, is tiny compared to automaker sales. And Amp generated just $141,000 in 2010 sales.

Quantum is showing signs of working itself out of that start-up phase, though. The company on Thursday said revenue for the year ended April 30 more than doubled from a year-earlier to $20.3 million, while its loss narrowed to $11 million from a $46.3 million loss a year earlier. Fiscal fourth-quarter sales more than tripled to $8.22 million as powertrain shipments to Fisker ramped up, the company said in a Securities and Exchange Commission filing.

Regardless of its activity with Fisker, Quantum, which was spun off from compressed-natural-gas fuel systems maker and engine-component manufacturer Impco Technologies in 2002, is hoping to start producing between 1,000 to 2,000 F150 PHEV conversions a year beginning in 2013 while expecting continued growth in both CNG-component and government-vehicle demand.

"We don’t believe there's a single winner here," said Mazaika. "It depends a lot on the application and the location of the applications. There are some places where CNG is 50 cents a gallon-equivalent, and there are other places where electricity is very inexpensive. They're not mutually exclusive."

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