ECOtality pulls $15M to build EV charging network in China

Scottsdale, Ariz.-based ECOtality (OTC:ETLY) said today it's breaking into the Chinese market with its technology to rapidly charge the batteries of electric vehicles.

ECOtality signed a letter of intent to form a new joint venture in China, representing the first time a company is moving into China with the infrastructure to support electric vehicles, CEO Jonathan Read told the Cleantech Group. The company is working with Shenzhen, China-based holding company Shenzhen Goch Investment to set up manufacturing and distribution of the network of charging stations it hopes to install across the country.

"This deal allows us to become familiar with various Chinese vehicles and batteries. We are very curious what they're doing because there's a flood of electric vehicles in China that will eventually be coming across the ocean to us," Read said.

Shenzhen Goch Investment is expected to invest $15 million in the joint venture with ECOtality, with $10 million going to the manufacturing joint venture and the remainder to the sales and distribution venture.

Read said he expects manufacturing to begin before the end of 2009, likely in an existing factory that could be repurposed. The facility could potentially be located in the recently established Tianjin Goch Science & Technology Park, which is owned and operated by Shenzhen Goch, Read said. The Tianjin government plans to invest at least $750 million in the 160-acre park, which is expected to attract high-tech and cleantech companies. Read said he expects Chinese orders to be fullfilled by the new Chinese factory, as well as the U.S operations.

As part of the deal, Shenzhen Goch is also investing $2 million in ECOtality's U.S. operations. ECOtality said its existing institutional shareholders contributed an additional $500,000.

Terms of the joint venture were not disclosed, and it is subject to Chinese government approval. Shenzhen Goch has exclusively licensed ECOtality's charging technology for the country, but ECOtality plans to work hands-on with the venture and is deploying employees to China by the end of the month to meet with government officials, Read said.

"It's not just a license agreement but a pure joint venture," Read said. "This way, we can remain involved in the uses and applications of our technology." 

ECOtality and Shenzhen Goch's efforts are expected to initially focus on Shanghai, which is host of the 2010 Shanghai World Expo starting in May 2010. Officials there have said they plan to have electric vehicles and the supporting infrastructure in place before the event, Read said.

China is expected to be the world leader in the market for electric vehicle charging equipment, with nearly 48 percent of annual global sales by 2015, according to a Pike Research report. Global annual sales of EV charging equipment are expected to reach $1.9 billion in 2015, the report says.

"Our partners are moving at a breakneck pace to meet with five to seven different regional authorities," Read said. "They seem understand very rapidly what needs to be done. Somebody gets it there."

Much of the reason for China's projected dominance is strong government support, Read said. The central government's mandates are forcing utilities and municipalities to embrace EV technology. Meanwhile, companies such as ECOtality still must educate each municipality and utility in the U.S. individually, he said.

Still, the U.S. is a major focus for the company, which is working with automaker Nissan (Nasdaq:NSANY) to develop a high speed EV charging network in Arizona (see Nissan and ECOtality envision an even Better Place). The network would be based on chargers by ECOtality and electric vehicles from Nissan, expected to hit the market in the third or fourth quarter of 2010. Read said that timeline means ECOtality would install its charging network in the summer of 2010.

The pair is also working on EV infrastructure for other U.S. cities, and Read said the company is seeking support from the U.S. Department of Energy. He hopes to announce details on both in coming months.

Through the Renault-Nissan Alliance, Nissan is working with France's Renault to supply EVs and a charging network to the Wuhan city government, one of a dozen cities the central Chinese government has tapped for a pilot to test alternative energy vehicles (see China taps Renault-Nissan for electric car pilot in 2011).

Although the supplier of the charging network was not named, the alliance has previously announced plans to use a charging network from ECOtality competitor Better Place in Australia, Israel and Denmark (see Better Place to charge up Australia, Electric cars are coming to Israel and Project Better Place goes to Denmark). 

However, Renault-Nissan secured a deal with Irish utility Electricity Supply Board (ESB) in April for an electric vehicle charging network, and ESB subsequently contracted ECOtality to develop a blueprint for electric vehicle charging infrastructure, said ECOtality Marketing Director Colin Read. The guidelines were to include the planning, design and installation of charging infrastructure for plug-in electric vehicles. ECOtality struck a similar deal in March through its subsidiary Electric Transportation Engineering Corp. (eTec) with BC Hydro.

Jonathan Read is critical of Better Place's business model, which calls for drivers to swap out drained batteries for fully charged ones at designated stations. ECOtality has proposed that its technology would fully recharge drivers' batteries in 10 to 15 minutes, and can be used for any type of lithium battery, as well as lead acid batteries. Read says Better Place's plan would require the adoption of uniform battery technology among automakers, while ECOtality's allows for the use of any technology. And Read said Campbell, Calif.-based competitor Coulomb Technologies promises a charge of two to three hours—too long to be convenient.

"We believe a 10 to 15 minute charge is going to ultimately enable everyone who wants to drive electric vehicles to be able to do so," Read said. "It can't be something that you have to go out of your way for, or something that would inconvenience you, because we’re not that type of culture."

Read said the company's fast-charge technology is already being applied by industrial vehicles such as forklifts, but that it's not in place for consumers because there's no electric vehicles in the market to use it, with the exception of Tesla Motors' Roadster (see Tesla recall: Good for the electric car industry?).

"It’s a bit of 'chicken and the egg'," Read said. "You have to time to the two of them to come out about the same time." 

Read said ECOtality is now seeking partnerships with Chinese automakers, similar to the deal with Nissan. 

China’s largest private automaker Chery Automobile said in June it secured $425 million from domestic investors for new-energy vehicle development (see Chery Auto drives China’s week of cleantech domination). In December, Shenzhen, China-based BYD (HK: 1211) began selling the country's first mass-produced plug-in hybrid-electric vehicle, the F3DM (see China's BYD sells first mass-produced plug-in cars). And stealthy electric vehicle startup Wheego and Chinese carmaker Shuanghuan Automobile said they plan to jointly release an electric car to global markets this year (see RTEV, Shuanghuan Auto plan 2-seater electric car for '09).

"We used to be in an arms race with China, and now we're in an EV race with them," Read said.

ECOtality, which started out in 1999 as a hydrogen fuel cell developer, began acquiring companies in 2007 for technologies including batteries, recharging systems, solar, and fuel cells.

ECOtality has exclusive rights to the patented Minit-Charger technologies, which the company claims can fast-charge an EV in less than 15 minutes. ECOtality acquired the Irvine, Calif.-based fast charging subsidiary of Edison International (NYSE:EIX), for $3 million in cash and stock in 2007 (see ECOtality grabs another fast charger co.).

The same year, ECOtality grabbed eTec of Phoenix, Ariz., another fast charging group, for $6.25 million in cash and stock (see ECOtality racks up third acquisition of the year). In October 2007, ECOtality closed its purchase of Innergy Power, a San Diego, Calif.-based maker of solar panels and rechargeable lead batteries, and in June 2007, the company bought the Fuel Cell Store, a fuel cell manufacturer and online retailer headquartered in Boulder, Colo.

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