ZAP: Low price, not top speed, drives electric vehicle market

Many electric carmakers have touted sportscar-like acceleration and long ranges as the most important factors to persuading consumers to give up their fossil-fuel burning vehicles.

But Santa Rosa, Calif.-based ZAP (OTC: ZAAP) has said its 15 years in the electric vehicle business have shown consumers are more price sensitive than anything else.

ZAP has dropped its highly publicized plans for its ZAP-X vehicle, also selling its stake in a joint venture with Youngman Automotive last year (see ZAP going big with China venture, ZAP issues ZAP-X drawings, specs and Look out Tesla... ZAP building electric supercar).

Alex Campbell, communications manager for ZAP, told the Cleantech Group that the ZAP-X was a concept car that would have taken "several years and a large amount of capital" to develop. And the Youngman Automotive partnership was a "bold plan that could have helped ZAP grow in the automotive sector," but the company decided to take a more conservative approach by carving out its niche for light-electric vehicles (LEVs).

"Full performance cars, buses and trucks were maybe too capital-intensive, and the decision was made to focus on LEVs and new products for fleets," Campbell said. "Something we've learned over time is that price is probably the most important consideration customers have."

With consumers cutting back because of the current economic climate, last year's decision seems to have been a wise one, Campbell said.

ZAP has delivered more than 100,000 electric vehicles to consumers since 1994, with the vast majority being bicycles and scooters, Campbell said. Since June 2006, the company has sold about 900 of its Xebra model, a three-wheeled, $12,000 vehicle with a range of about 25 miles and a top speed of 40 miles per hour.

Now the company is focusing its efforts on producing a limited number of hand-built two-passenger Alias vehicles, which are expected to cost under $35,000 and reach highway speeds. ZAP plans to unveil the three-wheeled Alias sports car later this week to its network of dealers (see ZAP to introduce brother of ZAP-X, and sooner).

And the company has unveiled two rugged fleet vehicles in recent weeks to target corporations and governments, Campbell said. The company is also seeking to grow its dealer network, which is currently 60 in the U.S.

The company expects to sell 2,000 vehicles this year, said ZAP co-founder Gary Starr. That includes a growing market for electric motorcycles in the U.S. and South America, as well as new electric ATVs, he said.

ZAP outsources its manufacturing and buys its batteries from outside vendors. ZAP has stuck with lead-acid battery technology for its vehicles because it's the cheapest alternative, and it offers the 25-mile range that most consumers need, Starr said.

"When they really think about what they're using their electric cars for, most people would rather buy the cost-effective vehicle," Starr said. "A lot of people think they need to wait, but the electric cars of today can meet their needs."

Only a small fraction of consumers have upgraded to a lithium ion battery, which offers three times the range and battery life for an additional $8,000, he said. The lead-acid batteries typically have a two-to-three year lifespan.

ZAP uses battery-management systems by Denmark's Lithium Balance for the upgraded vehicles (see ZAP, Lithium Balance boost range of Xebra). Starr declined to name the companies that have supplied the lithium ion batteries as part of the upgrade. The company previously announced plans to work with Advanced Battery Technologies (see ZAP makes battery deal and ZAP, Advanced Battery in joint venture).

"We're tracking about 30 different manufacturers of lithium ion, but most of them are still in prototype or startup phase," he said.

Starr said lithium ion batteries are probably going to be "the battery of choice in the near future," but ZAP has also considered ultracapacitors and nickel-metal hydride batteries—rejecting them for now because of the high cost. Competitors Zenn Motors and Light Electric Vehicles have announced plans to work with ultracapacitor developer EEStor (see Zenn gearing up for EEStor-powered car and EEStor ultracapacitors to run LightEVs cars).

Each ZAP vehicle is built to fit multiple types of batteries, allowing the consumer to switch to lithium ion if the cost drops, Starr said.

The vast majority of ZAP's vehicles are manufactured in China, but Campbell said rising costs in China are making U.S. manufacturers a viable option, especially in Kentucky. The company is also in talks with Uruguay to expand the current light assembly work there to full-scale manufacturing, Campbell said.

Canada isn't a market because it lacks provisions for light-electric vehicles, a circumstance that derailed a $1 million deal in 2007, Starr said (see ZAP gets $1M Canadian order).

The company also has a dealer network in Dubai through investor Al Yousuf Group, which has contributed $15 million in ZAP through two investments (see Dubai's Al Yousuf Group invests in ZAP). Al Yousuf Group's subsidiary Al Yousuf Motors is a distributor of automobiles, off-road vehicles and boats. The investment group's namesake, Eqbal Al Yousuf, is now chairman of ZAP.

ZAP has 45 employees.

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