US carmakers shift west, and go green

While the recession wrecked the east's century-old automotive industry, new companies in California are innovating for the next one.

As the sun sets on Detroit, it is rising in California. The state is fast becoming the centre of a new kind of American car industry - electric vehicles, such as this Tesla Roadster.

If California had a national car, it would be this bright orange Tesla Roadster. It was conceived, funded, designed and engineered in the west coast state; the body might be built by Lotus in England but its electric powertrain is made and installed here. Though it looks sensational in the fierce Californian sun, it's far from perfect; the hard ride sets the nose bobbing over the joins on the concrete freeway, and its diminutive dimensions leave you feeling dangerously exposed to the towering Hummers and Suburbans that canyon you on either side. But the Tesla Roadster makes those crass SUVs look - literally and metaphorically - like dinosaurs whose time has long since passed.

"Is that an Italian car?" one driver yells to us at a set of lights near Tesla's Los Angeles base. "No," I'm pleased to answer. "It's from about five blocks back that way." The recession, coupled with decades of inefficiencies and substandard cars, nearly killed the old Detroit. The Tesla Roadster is the first production car from a bunch of new Californian car makers, technology companies and investors that think they can do things better. Tesla's headquarters are in San Francisco but its R&D base is in Los Angeles. Fisker - founded by former Aston Martin designer Henrik Fisker and planning to put its 400hp, US$87,900 (Dh 322,865) Karma plug-in hybrid on sale later this year - is also here in LA, as are AC Propulsion and Quantum Technologies, who provide the electric and plug-in hybrid drivetrains that underpin the Tesla and Fisker. From San Francisco, Better Place is building electric-car infrastructures around the world. And the Silicon Valley venture capital firms like Kleiner Perkins and Draper Fisher Jurvetson that made their money with start-ups like Google are now putting their billions behind these new, clean-tech car companies.

So is California the new Detroit? Will the next great technological leaps come from these firms, and not the old-world industrial giants back east? And could one of these companies go supernova, Google-style, and become the next General Motors? It's easy to dismiss the idea when only Tesla has actually put any cars on the road yet, and then only a 1,000 of its $100,000 (Dh367,000) sports cars. But technology start-ups don't follow normal growth patterns. The recession that nearly did in Detroit has only helped Tesla and Fisker. Each has received approval for loans of around $500m from the $25bn Advanced Technology Manufacturing Loan Program announced by Congress in November 2008. Tesla will use the cash to build a new factory in California for its $50,000 (Dh 183,655) Model S; by 2012 it says it will be making 20,000 cars each year. Fisker has bought a former GM plant in Delaware and plans to build at least 100,000 of its new, $40,000 (Dh146,924) Project Nina plug-in hybrids there by the same date.

San Dimas is a quiet residential suburb of LA and home to AC Propulsion. It occupies three utterly anonymous, square buildings on an industrial estate. We pull up, plug the Tesla into one of the charging points on the wall and go in. The firm was founded in 1992 by Alan Cocconi, the engineer behind the GM Impact and EV1 electric cars of the early 1990s. ACP's biggest contribution has been the t-zero all-electric drivetrain, which it licensed to Tesla and which underpins the 500-strong fleet of Mini Es.

Though its product is vital to this new car industry, the company doesn't have the sex appeal of Tesla or Fisker. "They lacked the entrepreneurial vision to see how big an idea this would become, and the means to achieve it,'" wrote former Tesla executive Darryl Siry. "You're not likely to see them in the media." Tom Gage, the firm's lanky, laid-back CEO laughs at that. "We're a bunch of engineers here; we're not venture capitalists. Sure it's possible that we don't end up making the big money, but we're the only company in this business making any money at all right now. Tesla and Fisker have huge investments in them. It will be a long time before they see black ink."

His premises look like the lair of a mad inventor; the area where the batteries, electric motors and power electronics are stored and assembled is surgically clean but the main workshop is, frankly, a bit of a mess and appealingly low-tech, full of greasy, grimy drills, mills and lathes. Tellingly, out the back there's a pile of discarded gas tanks from the conversions ACP carries out. "We don't know what to do with them," Gage jokes. "Nobody seems to want them."

Gage joined the firm in 1996 with an engineering degree from Stanford and an MBA from Carnegie Mellon, a career spent partly with Chrysler in Detroit and a background as a racer and backyard tinkerer. He thinks that California's current automotive mojo has roots far deeper than the current craze for clean-technology start-ups and the dot-com money that funds them. "The car culture is unique in Southern California. As far back as the Thirties and Forties we had this vibrant culture of automotive experimentation. The hot-rod culture and speed racing out on the salt flats became very vibrant after the war. There's something about southern California that leads to this experimental mentality."

Next stop is home for the Roadster. Elon Musk, Tesla's 38 year-old co-founder, biggest shareholder, CEO and "product architect" made his money by cashing out of the dot-com boom twice, including selling PayPal to eBay for $1.5bn in 2002. The proceeds have also gone into SpaceX, his rocket design and launch company based in a half-million-square-foot hangar near LAX. The Roadster is assembled in San Francisco but Tesla's design studio is here.

Tesla's chief designer, Franz von Holzhausen, meets us, and immediately launches into a tour of the Space X factory. The tour is a substitute for access to the Tesla design section; there's so much secret product in a small space that it can't all be hidden. Von Holzhausen joined Tesla last year after a stellar career with Mazda and General Motors. As a big-name signing, he added to Tesla's credibility, but does he think it's a risky move?

"My colleagues thought I was fairly nuts. But to be in at the start with a company that could be one of the great American brands is the opportunity of a lifetime. If I'd passed, five years from now I'd be kicking myself. "This is where industry needs to go. It needs to have more thinking like this. The recession weeds out the dead wood. We're seeing the break-up of the norm because it hasn't been delivering what the consumer needs. We're able to provide answers, maybe not for everybody, but a lot of them."

I ask von Holzhausen where those environmental issues rank alongside creative freedom and the chance of making a fortune for those working at the new, eco-friendly Californian car companies. "When I first came to California to study car design in the late Eighties, it was two months before I could see through the smog to the other side of the valley. I thought even then that it was ridiculous, and that if automobiles are doing this and I'm part of this business then I need to do whatever I can to steer this ship around, away from just making these death-creating explosion machines. So really, that's why I'm here. It's the ultimate reason I left Mazda. We live or die - literally - as a business and as individuals, on getting this technology into people's hands."

In a brightly lit designer's office at Fisker's headquarters in Irvine, another LA suburb, Henrik Fisker leans back in his chair and describes how the recession affected his company: "We were in the right place at the right time." Like Tesla, Fisker's facilities are so packed with secret new product since he moved his engineering centre here from Detroit that everywhere except reception, this office and the parking lot is out of bounds.

"Two years ago when we started, out, our plan was to build the Karma, make some money, then think about another car. In the meantime, GM and Chrysler went bankrupt and suddenly the government saw that we still need car industry in the US, so they created these loans and we got a half a billion dollars, which accelerated our plans dramatically. We pulled our Nina project forward three years, then we saw that GM had all these plants available and we could buy one for $18 million [Dh66m] rather than building one for $400m [Dh1.4 billion]. That changed the game. These are things that might not have been possible five years ago, might not be possible in five years' time."

Fisker's plans are particularly bold; not just for their sheer scale, but for his aim to export half his production from the US to the world's major markets. Does he believe the world will want American cars again? "If you want to be successful you have to design vehicles for the world, but for the past 30 or 40 years [American cars] have been designed for the US market only. I don't know if that's to do with being in Detroit but it's a fact. But California is a melting pot, it's a very international place. Californians are almost neutral when they buy a car, will try anything out. You can't sell a car here just because it's American, and if you want to design a car for the world you do it best in California."

Gage and von Holzhausen were reluctant to identify themselves as part of a movement, part of a New Detroit. It's the Danish Fisker who displays the most Californian bravado. "There's a spirit in California that anything is possible, that money is available if you have a great idea and are willing to take a risk, and yes, there is that feeling that California could become the second place in the US where car development will thrive. The action is clearly in California right now. Quite a few companies are starting up although not that many will survive."

But of those that do survive, how big are the prizes? Will one of these companies be the next General Motors? Fisker is plainly aware that for all his plans of six-figure sales, he hasn't built a car yet. "I don't want to outline a whole huge plan because we have to get out first car on the road. But we've already planned our second car for significant volumes, a minimum of 100,000. I don't think there are any limits on how far we can go, and we have some investors behind us who think the same way. I'm Danish, I've lived in England, Germany and Switzerland and maybe in Europe we tend to put limits on ourselves. But not here. We're living a land of endless opportunity." [e-mail]