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Gov't Funded Electric Car Company Goes Out of Business 195

Posted by Soulskill
from the money-well-flushed dept.
thecarchik writes "Consider yesterday's collapse of electric car company Green Vehicles an object lesson in why it's a bad idea for cities to invest in the risky business of start-up car companies — perhaps especially start-up electric car companies. Even such companies with a viable product have seen their fair share of financial troubles, but Green Vehicles did not even have a product to sell off at a fire sale. The city of Salinas, California learned that lesson as Green Vehicles shut its doors, costing the city more than $500,000."
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Gov't Funded Electric Car Company Goes Out of Business

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  • Just cities? (Score:5, Insightful)

    by MrEricSir (398214) on Tuesday July 19, 2011 @06:28PM (#36817418) Homepage

    I'd say it's a bad idea for *anyone* to invest in a company that has no product and/or does not make money.

    Business plans are a dime a dozen; ability to execute is an uncommon skill.

    • Re: (Score:2, Informative)

      by Anonymous Coward

      So many people don't understand the amount of work that's involved. Any class in entrepreneurship will push that starting a business takes many long hours, with almost no days off, and you should expect to lose money the first few years.

      After seeing a promise of $700,000 in tax revenue a year, I sincerely hope the business plan didn't state that was in the first year. You ALWAYS plan for losses in the first couple of years (at least that's what I was taught.) That should be a sign to anyone investing in a s

    • by Darinbob (1142669)

      The real story here is a city employee deciding to invest in a bad investment. This happens all the time. The investors think they have a good deal, and it's someone else's money, and rarely does anything bad happen to this person.. Usually these aren't even elected officials so the voter anger gets aimed at their boss instead.

    • It's a big thing for people in the USA to fund companies that have no product and/or does not make money, the companies are called 'start-ups'.

      A big thing in Silicon Valley, where people fund a couple of geeks with a half baked piece of software and a crazy idea (or a couple of marketing wizards who promise a good idea and have a flakey demo). Also big in the space industry, [bbc.co.uk] NASA has invested billions into companies that are promising a working earth to space person-rated spacecraft, and in most cases have

    • the winners or the losers because in the end we usually are the losers.

    • by npsimons (32752) *

      I'd say it's a bad idea for *anyone* to invest in a company that has no product and/or does not make money.

      Ah, but then you'd be leaving out the vital message that anything government does is bad, and even when it isn't, government can't do anything right, so we should let all the rich people keep all their money because they earned it.

      The story is vaguely interesting, but I don't know how it made it through the firehose unedited, especially with that biased bullshit line.

    • by tehcyder (746570)

      I'd say it's a bad idea for *anyone* to invest in a company that has no product and/or does not make money.

      Yet these concerns seem not to apply to computer-related companies, which is why you get tech bubbles and not small plastic widget bubbles.

  • Shocking (Score:2, Insightful)

    by Anonymous Coward

    A "green jobs" investment that went sour. A car without a market. Socialists everywhere scratching their heads.

    Yes the pun was intended.

    • I'm confused too. What do Socialists have to do with venture capitalism and entrepeneurship?

      • by JeremyR (6924)

        I believe it's a suggestion that the investment was made based more on an ideological basis (i.e. the desire to be seen as supporting "green jobs") than on a robust economic analysis. Not that this has anything to do with socialism...

        • Any "robust economic analysis" which ignores the environmental damage our current economy is doing is sheer folly.

          However, instead of picking individual winners and losers, the government should just impose a dollar-a-gallon carbon tax and let the market sort out who stands and who falls on the new green playing field.

      • Few seem to realize it any more but the actual definition of Socialism is government ownership of the means of production.

        The city buying into this company is a classical example of socialism.

        • To be precisely Marxist, the definition of Socialism is ownership of the means of production by a government made up by the proletariat as ruling class (as a transition state on the way to a true classless society). It is debatable whether this city government fulfills that criterion.
    • by Sulphur (1548251)

      Startup electric car company fails to start up. Shocking.

  • by bennomatic (691188) on Tuesday July 19, 2011 @06:33PM (#36817454) Homepage
    Who exactly expected to have a fully functional prototype of a sale-able electric vehicle with a $500,000 investment? Cities, counties, states and the Federal Government get into all sorts of businesses that take time and money to set up. Medicare, BART, the TVA... it's not always a good idea, nor always a bad idea. But if you're going to do it, do it. $500,000 gets you two engineers, some materials and a fab plant for a year, and not much else. That may be a nice way to do a lean start-up, but it's entirely possible that the only reason that the half-mil was a waste was because that was the limit, so it was doomed to fail.

    It may not be an impossible task, but if inventing the next generation of EV were easy and cheap--and in this context, I'd suggest that a $500,000 investment is cheap--then everyone would be doing it.
    • by avoisin (105703)

      It's not impossible. My co-worker has produced, for far less than $500,000 a fully functional, 100% legit, electric-only vehicle. He uses it to commute to work, or at least he did, until he quit to pursue creating more with his new company. And oh by the way, he drives it on public roads because it's DMV certified. And it will also beat a porche at a drag race. Fun, eh?

      http://evdrive.com/ [evdrive.com]

      If they couldn't turn $500k into a prototype, then they did not have the required skills to create the prototype in

      • by div_2n (525075)

        Can't see a cost anywhere on that page, but if it isn't less than 75K, it's a waste of time. I can buy a Tesla Model S for about that that gets over 200 miles per charge. His gets 140. And if there are issues, he has to fix it (no warranty).

        Building electric cars is not exceptionally difficult. Building one that doesn't suck that gets good range for a reasonable price is.

      • It's not impossible. My co-worker has produced, for far less than $500,000 a fully functional, 100% legit, electric-only vehicle.

        It's easy to produce something cheaply when someone else has paid 99.99% of the costs.

        And oh by the way, he drives it on public roads because it's DMV certified.

        You cleverly forget to mention that someone else has done 99.99% of the work needed to get that certification.

        Had your co-worker actually had to pay for engineering the body and suspension, getting the orig

      • by horza (87255)

        Except your friend didn't. According to the web site you already need to have something to start with... an existing car. It's a nice little niche product but nothing like what Green Vehicles is trying to do.

        It's unlikely you can build a prototype of a next gen electric car for $500k, but this was more like an electric motorbike with a roof. Try comparing the photo of the prototype BMW 'Clever' [leftlanenews.com] shown off 2006 running on natural gas, and the Green Vehicles [allcarselectric.com] from the summary. Similar concept, and BMW did this

      • No, your co-worker did not produce a fully functional, 100% legit, electric-only vehicle. He bought a conversion kit to turn a car he already owned (which is 90+% of the engineering costs) and swapped the gasoline engine + gas tank for an electric motor + battery pack. That's like claiming that I "produced" a new invention because I plugged my TV into a portable generator instead of the wall socket.
    • It may not be an impossible task, but if inventing the next generation of EV were easy and cheap--and in this context, I'd suggest that a $500,000 investment is cheap--then everyone would be doing it.

      It's doubtful that the $500k was the sole source of funding for the company. It's far more likely that it's the city that's out of $500k from things like forgone property taxes, perhaps the 'factory' went up on public land that was given to the company worth ~$500k, etc... Meanwhile there's lots of other investors out there that have lost their investment.

      Not saying this makes it all that much better, or less of a gamble.

    • by TubeSteak (669689)

      Who exactly expected to have a fully functional prototype of a sale-able electric vehicle with a $500,000 investment?

      The linked articles don't include the full story.
      http://www.montereycountyweekly.com/weblogs/news-blog/2011/jul/18/green-vehicles-in-salinas-closes/ [montereycountyweekly.com]

      Salinas city officials announced Monday that Mike Ryan, president of Green Vehicles, said he had closed the headquarters due to a lack of investors. Green Vehicles was selected in 2009 to receive a $2.7 million grant from the California Energy Commission, and was required to raise matching funds.

      "The reason why we failed is because we failed to raise the $2.8 million in matching funds," says former VP of Green Vehicles, Lee Colin, a Pacific Grove resident. Green Vehicles had planned to start making cars by the end of 2011.

    • because holy fuck, you remember when that baby blew up the empire state building?

      god damn it, load me up with a nother 10 billion dollars worth of backscatter x-rays, and dont ask me to give you an itemized list and keep those god damned auditers off our backs!

      remember 9/11!

      • Maybe they're trying to irradiate babies to make them the next green energy source for electric vehicles.
    • by drinkypoo (153816)

      It's been done before. And at least one EV company in existence today based acquisition of funding for its entire line on a "prototype" they bought from another group which developed their car for very little.

  • by flaming error (1041742) on Tuesday July 19, 2011 @06:36PM (#36817472) Journal

    > it's a bad idea for cities to invest in the risky
    > business of start-up car companies

    Perhaps it's a bad idea for cities to heavily invest in any high risk venture. But it should be noted that we don't all come out and cluck at them when their risk pays off.

    Anyway, if the good people of Salinas wanted to risk $500 thousand in a questionable startup, it's a free country (sort of). I imagine other cities have squandered far more money on far worse ideas.

    • It is unlikely that every single citizen of Salinas would have been happy with making the investment, so what you should have been able to say is - "if the good people of Salinas wanted to risk $500 thousand in a questionable startup, they should have done so individually"
      • Good plan. If there's a citizen that opposes it, the government shouldn't be allowed to do it.

        If nothing else, your plan would have the virtue of saving lots of taxpayer money.

        • by anti-NAT (709310)
          Exactly. Governments aren't very good at getting value for tax payer's money, as this example (and plenty of others), shows. This served no public good (i.e. it wasn't building a common use road, or providing a social service), it was purely commercial venture. A government won't have done appropriate due diligence on this because "who cares, it's only $500k". An individual would have, and even if they didn't, they'd have only lost their own money. http://steshaw.org/economics-in-one-lesson/ [steshaw.org]
    • by horza (87255)

      Risky is not the same as questionable. The Japanese cities invested in the mag-lev bullet train. In this case it paid off. London invested in building a railway system underground. Now we can't imagine the city without it. I think it was questionable rather than risky as common sense tells us that is seriously underfunded.

      However critics love a failure. Look how people crowed when the Segway failed to change transport as we know it (ok not a city investment but just an example). However we don't know yet i

    • by TheSync (5291)

      It turns out that Cali taxpayers may be on the hook for Salinas' failed investment:

      "Salinas plans on asking the California Energy Commission to reimburse the money it lost."

      Nothing scares me more than the combination of green religion with socialism.

      • by TheSync (5291)

        update: Green Vehicles already got $187,000 from the California Energy Commission, on top of the over $500,000 from Salinas.

      • Not socialism, mind you.

        Salinas gave this bussiness investment in order to get them to build their factory/HQ there so they get more employment. It happens all the time (either directly or through tax cuts or infrastructure investment) as it is one of the few ways a government can promote bussiness in its area in a capitalistic country. Of course it ends with a "race to the bottom" where every town is ready to outbid its neighbours in order to get some relief / allow politicians the chance to brag about it

  • Meanwhile.. (Score:5, Insightful)

    by lul_wat (1623489) on Tuesday July 19, 2011 @06:36PM (#36817476)
    Banks and finance companies don't make anything tangible either, yet get government bailouts in the hundreds of millions, if not billions.

    Too bad they wern't 'too big to fail' while making nothing.
  • The taxpayers of the city lost $500K. It's easy to spend or play with money that you haven't earned through working your ass off.

    The good citizens worked hard for that money. Did they have a vote about how it was being "invested" in some feel-good scheme their know-it-all leaders wanted? Seriously, a man can be selling insurance one day, and then after he's elected he's suddenly an expert on everything? Give me a break.

    Politicians of every stripe are out of control. Rein them in before they destroy everythi
    • by artor3 (1344997)

      The good citizens worked hard for that money. Did they have a vote about how it was being "invested" in some feel-good scheme their know-it-all leaders wanted?

      This may come as a surprise to you, but the United States is a representative democracy. The people don't have to vote on every little thing. They chose representatives who they felt would look out for their interests. Those representatives spent $3 per person on one particular venture. That single venture didn't pay off. Others likely did. The people are most likely still quite happy with their elected leaders, and probably don't know or care about this.

      The only reason you're hearing about it is beca

      • The United States is not uniformly a representative democracy. Examples where it is a direct democracy:

        1. Referendum and initiatives on state ballots.
        2. Cases where the Town Meeting system of government is practiced.

        http://en.wikipedia.org/wiki/Town_meeting [wikipedia.org]

        There is no particular reason that this town could not adopt this form of government.

        Having lived in a town that used the Town Meeting system I'd say that it is not actually better than the representative systems as meeting turnout tends to consist of cla

        • by artor3 (1344997)

          Even in the case of areas with referendum and initiative, the fact remains that the people do not vote on every little thing. They would never have seen a bill spending such a relatively tiny amount.

          And the Town Meeting system (which I am well aware of, having spent some time living in Connecticut), is rarely true direct democracy. Maybe for really tiny towns, it might be, but in most cases you have a Board of Selectmen who do most of the governing. They put policies up to a vote, and the system ends up

  • Ummm, so they invested a half million and the company failed. It seems to me that more than half new businesses fail, as a matter of fact, the last time I checked new businesses have a failure rate of around 80% in the first five years of business. If your starting a new business with a new product, then the odds are stacked against you. Does that mean we stop trying to launch new products? If we stop trying to invest in new projects then I guess the only way to open up new funding is by legislating income for current product lines, which doesn't seem like a viable way to do business.

    So the county invested in a new business and it failed. Chalk it up as a loss and move on. While the taxpayers might not like the way the gov is spending their taxes, cities/municipalities, counties, states and national governments do this all the time. Sometimes it works, sometimes it doesn't. But I'd rather fund a new startup that fails, rather than fund the good-ol boy network that siphons money off the top to fund their retirement account. It doesn't sound like the failure was due to mismanagement or corruption, just that they weren't able to continue and that it cost more than expected. This happens all the time. A half-million is a small investment and though it didn't work out this time, the only way to "win" is to make investments in the future. If all the bugs had been worked out before the company went into business there would have been no reason for the gov to invest. They gambled on a decent return and it failed. But one failure shouldn't be held up as an example to bash investing in the future, which is the slant the article seems to imply. If we don't invest in better ways of doing things, where will we end up?

    • Re: (Score:2, Insightful)

      by kmac06 (608921)

      But I'd rather fund a new startup that fails, rather than fund the good-ol boy network that siphons money off the top to fund their retirement account.

      Or they could refrain from confiscating people's hard earned money at gunpoint to hand out to favored group, whether it's the good-ol boy network or some green nonsense.

      • by mozumder (178398)

        Your money you earn isn't yours anyways.

        You are the last step in a giant network that money travels through to get to you... before it goes off to somewhere else.

        Taxes are the price you pay to keep that network operational so that money flows through you.

      • by Lando (9348)

        Yeah, I can see your point on that, but I think it's a matter for the citizens to take up with the people authorizing this rather than a guy that writes articles saying that the industry in the whole isn't doing enough to help out other people. That was my main point of contention. Personally, I'm in favor of spending money on research rather than a lot of projects that the government funds. Someday we need to change the economic indicators to consider other things rather than just cash flow. I think

      • Why is people in /. so obsessed with the "green" issue? It is like showing a red cloth to a bull.

        Local (and national) government court bussiness to setup shop in its area. If this company, instead of electric cars, wanted to create some compound toxic to people and wildlife that was to be sold to India, it probably would have get the same investment, as long as they promised to get jobs to the town. And if it would have failed, it would not have been mentioned in /.

        Yet here a lot of people seem somehow visc

    • by gl4ss (559668)

      you sound like you were a cog in this plan to use 500k of city money to lure the other investors to dumping money into the city..

      if they wanted to gamble, they should've gone to vegas, at least there doing due diligence is pretty easy(even though if it means that you'll end up knowing that you're going to give the casino money). investing isn't just about giving money to some guys, not all product ideas are equal and not all entrepreneurs are equal worth giving the money, which you pretty much imply

      • by Lando (9348)

        Hmmm, no I wouldn't say learn nothing. The question of whether or not the government should be investing is a different issue that the taxpayers should have an interest in deciding. I don't know the specifics in the case; however, many governments offer incentives and grants to businesses in the gamble that they will provide jobs and taxable income in the future. Heck, the Federal government provided and investment to the banking community because they felt that the failure of many in the banking commu

  • But wait: http://www.allcarselectric.com/news/1063329_aptera-answers-our-questions-shares-no-new-information [allcarselectric.com] At least Tesla is still making the roadster, but wait: http://www.treehugger.com/files/2011/06/tesla-stop-production-electric-roadster-focus-model-s-sedan.php [treehugger.com] At least there's the Corbin Sparrow or the Sinclair C5 or ??? http://jalopnik.com/5809904/whats-historys-most-awesome-failed-electric-car [jalopnik.com] I'm an electrical engineer and this is depressing. Oh yeah, and there are still no batteries good enough!
    • Yes, it is difficult to create new technologies that have the capabilities of older ones plus a few extra benefits.

      Thank you for stating that out.

  • All those green jobs?

  • Mayor Mayor Dennis Donohue and city Economic Development Director Jeff Weir hoped that this investment would attract green industry to Salinas. Salinas wants to be more than agriculture, and green industry is the current buzz. Unfortunately, the green money that cities must manage has begun to disappear. Money makes the green go around but without it growing lettuce seems more sensible and reliable. Salinas will survive, even if the economy leaves us all feeling green, lettuce continues to grow...
  • A little is lost on where the tax money came from. A homeless man buying booze. A retired man on a fixed income paying more for his food. People who really cannot afford to give a cent. Taxation in the name of government tampering with the free market is the most insidious device yet conceived by the mind of man.

    Forever will these well meaning busy bodies toil in the name of our betterment, because they do so free of guilt, thinking honestly that the strong arm of government is the way to prosperity.

    • Re: (Score:2, Insightful)

      by artor3 (1344997)

      You're deluded. To just pick one of the many obviously wrong things in your post: you claim that it is offensive to think that the government is entitled to some share of our individual profits. But we wouldn't have those profits without a functioning government.

      To paraphrase a wise man, taxes are the price we pay to live in a civilized society.

  • Gov't does this all the time. Local, county, state, federal gov't will cut deals all the time. Often paying for infrastructure, capital improvements, bonding, loan guarantee and even direct/low interest loans. California Teachers Penchant is one of the largest investors in the country, with billions on the line. On a federal level the US gov't gifts hundreds of millions of dollars annually so that private business get preferential treatment and/or avoid tariffs. So what's the news here? How is a green

    • This is /. Talking about green issues (and more of failed green projects) is like moving a red cloth in front of a bull.

      My guess is that a guy in a Prius stole their lunch when they were in pre-school.

  • What a stupid conclusion! It makes me sick to see all the free-market apologists chuckling and slapping each others' backs over this. Firstly, in response to the idea that the govt shouldn't be doing this ... in fact this story demonstrates that ONLY the government should be doing this; as it's too risky a business proposition for private enterprise. Governments don't HAVE to make money on these ventures. The articles says this has cost the city more than $500,000. So fucking what! That's NOTHING for even a
    • by selven (1556643)

      in fact this story demonstrates that ONLY the government should be doing this; as it's too risky a business proposition for private enterprise. Governments don't HAVE to make money on these ventures.

      Economic calculation. The reason why no private venture went for this themselves is because all the private investors who are capable of acquiring $500000 capital in the first place were all smart enough to see that the risk isn't worth the reward here, so the business venture is not worth undertaking at all. That's the key - not all business ventures are worth undertaking, even if they make you feel warm and fuzzy thinking about them they might actually be huge wastes of money. If a government project fail

  • That amount of money is nothing. The Rochester, NY Fast Ferry project lost the city millions. "Ferry service had a brief but unforgettable run in Rochester in 2004 and 2005, first as a private venture then as a city-backed endeavor. Both efforts failed and lost millions in taxpayer dollars. " And this:"In 2008, the Fast Ferry was voted "Best Misuse of Public Funds" in City Newspaper's 'Best Of' Awards." See http://rocwiki.org/Fast_Ferry [rocwiki.org]
  • You could have a debate about the wisdom of the government's involvement, but startups fail all the time. Highlighting one as a cautionary tale teaches nothing, other than "don't invest in a startup unless you're willing to lose your investment".

  • I warned about this previously. For some reason the big study I submitted [caradvice.com.au] that blasted electric cars as being unsustainable and economically nonviable never made it into the main slashdot news. Some people even suggested an agenda behind it on the part of me or the publishers of the study. Let me assure you I am a environment hugging hippy and if electric cars had a real potential for saving the planet I would be right behind them. But the facts are that electric cars will only be viable when we have an exc

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