Electric Cars Get a Zap!

Some three years after General Motors (GM) pulled the plug on its innovative EV1 car, a small Santa Rosa [Calif.] company, Zap!, has introduced a new electric car: the Xebra, a $10,000 micro-sedan and the first China-made car available in the U.S. Shown at this month's L.A. Auto Show, the Xebra runs quiet and clean, producing 90% fewer emissions than conventionally powered gas engines. And unlike GM's car, the Zap vehicle plugs into a standard power outlet and will cost its owners a mere 3 cents a mile, according to company estimates.

Given its size [about 10 feet long and 5 feet high] and performance specs [it has a range of roughly 40 miles and a top speed of 40 mph], the Xebra is most suitable as a city car and doesn't compete directly with alternative-fuel offerings from Toyota (TM) and Ford (F). Still, the Xebra is turning some heads.

Zap's L.A. Auto Show unveiling of the Xebra -- as well as a flat-bed version aimed at local and municipal governments looking to green their fleets -- reflects the company's new strategy to become a leading source of alt-fuel vehicles, from true flex-fuels to all-electrics to plug-ins to hybrids.

Trading in Green Tech "Our concept," says Steve Schneider, Zap's CEO since 2000, "is to become a portal for all types of advance-technology vehicles. The common denominator will always be Zap, but we may have products from Europe, from China, from anywhere in the world that we feel are marketable and fit into the micro-car niche."

Indeed, on any given test day, Zap's parking lot is a rainbow blur of zippy micro-cars. A zebra-striped, four-door jellybean whizzes by, rolling on three wheels. A Brazilian flex-fuel car looks like a cross between a miniature Mini Cooper and a first-generation iMac. Another three-wheeler, this one a more conventionally painted lipstick red, sports three rounded headlamps as well as a pickup-style flat bed.

Although it's not yet profitable, the company reported $7.3 million in revenues for the first six months of 2006, up 247% from the $2.1 million it made during the same period last year. Year-to-year quarterly revenues this year have shown similarly robust growth.

About 150 Xebras have been sold so far this year, with a backlog of about 100 more on the way. Currently, 33 cities and municipalities are considering deploying fleets of the flatbed truck.

Beyond Smart The L.A. unveiling and brightening financial picture are all good news for a company that made headlines earlier this year when a deal to import DaimlerChrysler's (DCX) Smart car fizzled. Zap had announced the program in February, 2005, to much fanfare, and eager dealers beat a path to Zap's door.

Within 90 days, the company had secured a whopping $2.2 billion worth of contracts for the vehicles, which get about 40 mpg and cost around $25,000. Executives sunk a hefty $10 million into technology to convert the Europe-only car to American safety and emissions standards before the deal fell through, raising questions about the company's survival.

Schneider admits the debacle put Zap in jeopardy, but, he says, not irrevocably: "We overpromised and underdelivered; that's a horrible thing to do in the marketplace. So we had to go to another plan." That plan exploits the growing demand for niche alternative-energy products.

In addition to all-electrics, Zap plans to tap the burgeoning flex-fuel market. Flex-fuel vehicles can burn alternative fuels like ethanol as well as standard gasoline, enabling them to run even when clean, renewable fuels aren't available. Ford and General Motors both offer vehicles that can use E85 fuel, for example.

Brazilian Whiz-Bang That's why Zap bought 20% of Obvio, a Brazilian manufacturer of flex-fuel vehicles. Brazil is considered by many the world leader in renewable ethanol fuel. Together, the companies, with help from the government, have converted a 5 million-square-foot manufacturing facility, a former Alfa Romeo plant, to build the Obvio car for export to the U.S.

That model can burn gasoline, ethanol, or any blend of the two, unlike flex-fuel vehicles available from major manufacturers. It's also more car-like than Zap's electrics. Although it's still ultra compact by American standards, about 5 feet tall and 8 feet long, it has four wheels and an internal combustion engine.

The Obvio has a surplus of whiz-bang. On top of Lamborghini-style scissor doors, a built-in Windows XP computer, GPS, satellite radio, and wireless Internet and Bluetooth connectivity, the $14,000 model due next year sports a peppy 175-horsepower engine and gets about 46 mpg.

Growing Niche Even as a niche, the market for electric and alternative-fuel vehicles is growing. Brian Wynne, president of the Washington [D.C.]-based Electric Drive Transport Assn., says there are about 70,000 electric vehicles on American roads today, up from 56,000 in 2004.

"We've hit the tipping point for alternative fuels," he says. "The volatility of gas prices alone makes them extraordinarily compelling."

Wynne says the growth of mainstream gas-electric hybrids like the Toyota Prius has helped, not hurt, companies like Zap, by stimulating the market. Key electric components and technologies are now less expensive and more readily available.

And recent developments in the auto industry at large may offer more good news for Zap. As the company was showing off its all-electric vehicles, GM CEO Rick Wagoner announced plans to develop plug-in hybrids, marrying the virtues of hybrids like the Toyota Prius with those of all-electric vehicles like the ones sold by Zap.

Schneider admits that Americans aren't likely to trade their SUVs for the speed- and distance-limited electrics any time soon. "Americans do have a love for their cars as they are," he says. Then again, it's hard not to love driving at 3 cents a mile.