Monday, May 5, 2008
Southern California: The New Detroit?
Story by Tom Taulli
Recently, the CEO of GM (NYSE: GM), Rick Wagoner, extolled the importance of electric cars. It does seem like a no-brainer, especially in light of environmental concerns and the soaring price of crude. In fact, the mega car company is exploring many alternatives, such as fuel cells, ethanol, hybrids and so on.
Of course, it’s all good news for a variety of companies in southern California, which are developing next generation car technologies. “Southern California is the home to a myriad of design studios for all the major car companies,” said Andre Peschong, who is a principal at Bridgewater Capital. “There is a talent pool of engineers, CAD design specialists and let’s face it, a car culture.”
Capital Comes to Socal
So, it should be no surprise that there is an influx of capital into the region, looking for big returns.
For example, Phoenix MC – which is based in Ontario – raised funding in March (the amount was not disclosed). The investors included Al Yousuf LLC, a Dubai-based diversified commercial company and The AES Corporation (NYSE: AES), which is a major power company.
Since 2001, Phoenix has been developing battery-electric, freeway-speed vehicles. And the cars are expected to hit the road next year.
“We have the advantages of being nimble and quick,” said Daniel Elliott, the CEO of Phoenix. “Although, we went with strategic investors because of the added value they can bring as well as their long-term perspective.”
Some of the other alternative vehicle makers include: Miles Electrical Vehicles (Santa Monica), Venture Vehicles (Los Angeles) and Aptera Motors (Carlsbad).
Socal also has a myriad of auto technology providers. Just look at Transonic Combustion, which is based in Camarillo. Over the years, the company has been working hard to develop an advanced fuel-injection system so as to greatly increase fuel efficiency. The platform can operate on gasoline, diesel and bio-renewables.
“We are looking for leapfrogging technologies not incremental steps,” said Ford Tamer, an operating partner at Khosla Ventures, which recently invested in Transonic. “We think there are opportunities in revamping the old ways of doing things.”
Another interesting company is Fallbrook Technologies, which is based in San Diego. In the research mode, the company is building an advanced transmission systems. In fact, the system has more than 200 patents and pending applications worldwide.
The Big Pay Off
Despite all the activity in the alternative auto space, there are still some concerns. After all, many of the technologies are experimental. Moreover, it will take time for them to get traction.
But the long-term certainly holds lots of promise. “We are in the early days of the market,” said John Babcock, who is a venture capitalist at Rustic Canyon. “Even if oil drops, there will still be opportunity because of the regulatory pressure. We are looking at very large markets.”
(Photo credit: Benjamin F. Kuo)