As electric car experiments fumble, Tesla is last man standing

Updated: This week witnessed some notable high profile struggles from three companies that are aggressively betting their futures on electric cars. A123 Systems, Fisker Automotive and Better Place — representing billions of dollars of investment in the future of electric cars — are now facing major problems financially and commercially.

The three companies suffered from different setbacks, though all are facing the fact that consumers and companies are adopting electric cars more slowly than expected. And the necessary next-gen batteries are still too expensive. Looks like Tesla is the last man standing when it comes to the aggressive electric car startups that launched over the past few years — and even it is not without risk.

If Better Place can’t make it in Israel. . .

Electric car infrastructure company Better Place started rounds of layoffs as its first network in Israel has been moving more slowly than expected. The Globes says Better Place Israel has already laid off 140 employees and will be cutting another 150 to 200. There were 400 employees at the company before the first round of layoffs. The company only sold 23 cars in November, its slowest month to date, said the Globes report.

Better Place IsraelThe layoffs are disconcerting because Israel is essentially the proving ground for Better Place’s business model. Yes, Denmark is another early market, too, but in Israel, Better Place — and founder Shai Agassi — had a particularly close connection to the Israeli government and important investor Israel Corp.

Better Place, which launched in the winter of 2007, builds out electric car charging infrastructure and battery swap stations and then sells electric car charging and a subsidized electric car (Updated: made by Renault, part of the Renault-Nissan Alliance) like a wireless carrier would sell cell phone service. The company made some amazing strides in past years by managing to convince Israel and Denmark to act as early markets, by partnering with Nissan, and by raising so much money.

But the problem is that it’s expensive to build out the needed network to make the service work optimally. Whenever I asked Agassi in previous interviews throughout the years about that issue, he always waved away the seemingly high capital expenditures needed to build these networks. He commonly would compare the costs of the network to the prices of oil imports.

But if you’re working with investors, at some point they want to stop losing money and they want to start making it back. Israel Corp certainly did, which is one reason why it reportedly replaced Better Place’s CEO.

Better Place still could make it. The company has raised another $100 million in two tranches, Better Place spokesperson Julie Mullins told me. So they have some breathing room to try to make the offer more attractive to Israelis car drivers . But this week’s news is a worrisome turn Ray Lane's Fisker Karmaof events for them.

Fisker on life support

Then there’s electric car startup Fisker, which is searching for a lifeline — a.k.a a partner or acquirer — to help it produce its second car, the Atlantic. It’s also stopped assembling its Karma cars and says it’s waiting to see what will happen with its now bankrupt battery supplier A123 Systems.

Fisker told the Wall Street Journal this week that it has hired investment bank Evercore Partners to help it try to sell itself, or raise more money. The company that had been helping it raise funds previously, Advanced Equities, is being shut down for lying to investors about raising money for another cleantech company, Bloom Energy.

A123CellFamily1If Fisker is sold off, I speculate that the valuation would be pretty low. I heard the company’s last fund raising round was at a far lower valuation than its previous fundraisings. Fisker has raised funds from Kleiner Perkins, NEA, and others. Fisker launched back in the 2007. The company has had a lot of problems and some pretty bad luck, too.

Battery bankruptcy

And finally, there’s the high profile bankruptcy of lithium ion battery maker A123 Systems. This week the company held an auction to see if American battery maker Johnson Controls or Chinese auto parts giant Wanxiang would win bids for the automotive division. There could be a lot of controversy if Wanxiang bought the company, as A123 was given a large DOE grant, and also had military contracts.

A123 Systems had a long slow death over its years as a public company. Fisker was one of its major customers, ad when Fisker had to downgrade a quarter of orders, it hurt A123 hard. A123 also didn’t scale up its manufacturing very well, and had problems with some of its batteries — particularly faulty batteries that caused problems for Fisker.

Green Overdrive: The Think City thumbnailLike the deadly combo of electric car maker Think, and battery maker Ener1 — which helped bring each other down — A123 and Fisker also have contributed to each others’ problems.

Tesla still going

One of the last really aggressive startup electric car bets left is Tesla. Yes, the company had to lower its estimates of production of its Model S this year, but now it’s on track with new numbers. And Tesla CEO Elon Musk tweeted recently that the company “was narrowly cash flow positive last week.” Musk can be a little creative, so wait for the next earnings report to check on that one.

In addition, Tesla also had some other good financial news this week. Investment management giant Blackrock has taken a 5 percent stake in the company, according to the Wall Street Journal and an SEC filing. Updated: That WSJ story was inaccurate and has since been corrected. Blackrock already had a stake in the company and reduced its share to just under 5 percent, selling some off.

So what’s the difference in these three struggling companies and Tesla? Well, for Tesla, strong leadership, strong technology, a little bit of luck and good investors. But I’ll go into that in another post, in a few weeks.