Coda rebuts dim profit forecast for all-electrics

Sep 26 - McClatchy-Tribune Regional News - Dan Gearino The Columbus Dispatch, Ohio

While the federal government invests billions of dollars in electric cars, the former top adviser to President Barack Obama on auto issues is saying he doubts that an all-electric car company can succeed.

Central Ohio has a vested interest in the prediction, as Coda Automotive considers a battery plant in the region that would employ 1,000 workers.

Steven Rattner, the onetime "car czar" who led the panel that managed the government aid to General Motors and Chrysler during the automakers' restructuring, made the comments in his new book, Overhaul, and in recent interviews.

"Electric cars are going to be a very, very important part of our future, but we should not assume (they) will be an important part of the car companies' profits," he told the website talkingpointsmemo.com.

When will the cars be profitable?

"Probably not in my lifetime," Rattner said.

His comments have drawn nods of agreement from auto analysts and criticism from bloggers and others who specialize in advanced-technology vehicles.

Meanwhile, the entrepreneurs behind companies such as Coda say they have a workable plan to bring all-electric cars to the mainstream.

"Accelerating the adoption of the all-electric vehicle will require a 'hybrid' approach that leverages city-state tax incentives to decrease the financial burden on consumers while also accessing loans and grants from the federal government," said Forrest Beanum, Coda's vice president for public affairs, in a statement. "These are absolutely critical for American start-up companies like ours that strive to do business in a competitive marketplace."

In response to Rattner, Beanum noted that Coda will make electric cars and batteries for other uses, so it would not be completely dependent on the auto market.

Coda is seeking a loan of about $400 million from the Department of Energy to develop the Columbus plant. The money would come from a fund that already has given aid to two other start-up automakers, Fisker and Tesla.

Unlike traditional automakers, Coda plans a retail model that is more like an Apple Store than a car dealer. To start, the company will have one retail location in the Los Angeles area. Key functions, such as warranty service, would be handled on a contract basis by outside shops.

Many auto analysts share Rattner's skepticism about prospects for the market sector and wonder whether the government's money is well-spent.

"The business case for electric cars doesn't make sense until you see fuel prices start to skyrocket to $4 and $5 per gallon," said Aaron Bragman, analyst for IHS Automotive, the research group formerly known as IHS Global Insight.

At the same time, Bragman is impressed with Coda's plans for a stripped-down retail structure and other cost savings, something he said is "really not a bad idea."

But he wonders how, and when, an all-electric automaker will sell enough vehicles to make a profit.

"There's a big difference between creating a prototype that has cool technology and selling hundreds of thousands of vehicles," he said.

dgearino@dispatch.com