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No pains, no gains

Development of new energy vehicles in the United States has seen several setbacks over the past few months. Aptera Motors, a developer of high-mileage electric vehicles, went bankrupt in December. And in the most recent case, the U.S.-based EV battery maker Ener1 just filed for bankruptcy protection in late January 2012.

The irony is that both Aptera and Ener1 were supposed to have received heavy backing in government loans. Aptera’s demise came after it failed to raise enough funds to match its $150 million federal loan, as investors cooled on EV startups, according to former Aptera CEO Paul Wilbur. Meanwhile, Ener1 received a $118.5 million grant in 2009 as part of a government stimulus package to boost the country’s electric vehicle industry. But it still faces critical time amid market competition.

These two sad episodes may demonstrate that some of the industry’s bubbles may have burst. The States is not alone in this conundrum. China has made a great leap in developing new energy vehicles over the past few years. In battery manufacturing alone, the number of EV battery makers in the country has soared to over 500 from just 30 years ago. Insiders have said this bubble in battery manufacturing will bust in 5-10 years, with only 50 battery manufacturers left alive.

It is hard to tell what would happen if Aptera had received the loan. Based on what happened to Ener1, Aptera would still have a hard time even it had received the government grant. Ener1 said it was affected by the bankruptcy of its major client Think Global and plagued by intense competition from Toyota, as well as Chinese and Korean rivals that have lower manufacturing costs. In this light, it is the market that determines the life and death of any company like Ener1.

That should not imply that government is in the wrong by fostering the fledging NEV industry. Government’s helping hand can provide needed support to this rising industry, but there are setbacks to such policy. In China, the government offers considerable purchase subsidies for NEV buyers. Yet these subsidies have given rise to speculation and bubbles in the country’s NEV industry.

After all, it is competitive prowess that defines a company’s own fate. Given all the setbacks and bubbles, vehicle electrification is the inevitable trend and a potential new market is out there waiting to be tapped.

The recent sales figures show that the Volt and Leaf sold 17,345 units combined in the States in 2011, the first year they were available. Back in 2000, the first year the Honda Insight and Toyota Prius hybrids were offered in the States, 9,350 vehicles were sold. So in comparison, the 2011 numbers look pretty good. The number of new energy vehicle sales in China in 2011 was 8,159 units, a slight increase over 2010.

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