Refocusing on electric vehicles is ZAP’s strategy to truly power up.
By all accounts, Santa Rosa’s ZAP should be on the very top of the green trend. As “going green” continues to gain in popularity, gas prices continue to rise and climate change continues to be in the news, ZAP—as in “Zero Air Pollution”—should be poised to be the next big green thing.
After all, the company has long developed environmentally friendly electric vehicles. It sells a slew of products ranging from the electric Xebra car and truck, to the Zappy3 scooter, to the moped-like Zapino, to electric ATVs; it also has a line of batteries, called Recharge-It-All, for mobile electronics. But although ZAP has a steady flow of revenue from selling vehicles to consumers, businesses and governmental agencies, the company never seems to reach that big-time status that sometimes seems just around the corner.
“We always seem to be on the verge of something great,” says Director of Communications Alex Campbell. “I think we’re doing some amazing things, actually. As to why ZAP hasn’t broken through, it’s for a number of reasons. But the number one reason is that the challenge we’ve chosen to undertake is one of the biggest issues humanity faces: What transportation models make sense for society today.”
Just two years ago, it looked like ZAP had reached the big time. In 2004, DaimlerChrysler abandoned plans to introduce the Smart car (a fuel-efficient microcar) to U.S. markets, citing losses in excess of $5 billion, but ZAP believed there was a demand for the car and jumped in with a plan to purchase the cars independently through brokers and distributors. To that end, Zap invested $10 million with a company that had the capability to bring the cars to conformity with U.S. safety standards. It then began lining up dealers that wanted to sell the car to the public.
The demand quickly exceeded ZAP’s expectations. In just 90 days, ZAP says it collected more than $2.2 billion in purchase orders from 141 auto dealerships, representing more than 156,000 cars. Interest in the company exploded. ZAP’s stock rose from $0.75 per share to $5 per share, and major news outlets took note.
The problem was, ZAP didn’t have access to 156,000 Smart cars. It needed to get them from the manufacturer. “We only expected to sell 15,000 vehicles a year,” says Campbell. “We stated all along we were never prepared to sell 150,000 vehicles.”
After ZAP raised the credit to buy the extra vehicles, CEO Steve Schneider flew to Germany and met with DaimlerChrysler. Schneider left feeling like everything was going according to plan. Then, after daily communication with the car giant, there was silence. For 10 days, Schneider didn’t hear a word from DaimlerChrysler.
“I knew the deal wasn’t going right,” says Schneider. “You know that sinking feeling you get when something is going wrong? So I gave them warning we were going to put out the press release and announce the deal. And when we put out the press release, they went to Reuters and said, ‘We don’t know who these people are, we’ve never heard of them.’ Our stock plummeted and our credibility was destroyed.”
ZAP speculates that by going to DaimlerChrysler with more than $2 billion in purchase orders, it effectively proved there’s a significant market for the Smart car in the United States. Schneider thinks DaimlerChrysler had no reason to use ZAP as a distributor when it could sell the car itself without a middleman. A year later, DaimlerChrysler announced plans to sell new Smart cars in the United States in early 2008.
As of this writing, ZAP is suing DaimlerChrysler for damages in excess of $500 million, claiming that the car giant is trying to eliminate ZAP as a competitor. DaimlerChrysler did not return calls for this article.
“Lesson learned,” says Schneider. “Next time, we’ll have a deal with the manufacturer before we go out and create a market.”
Expanding operations
In the meantime, ZAP is moving back to its roots by refocusing on electric vehicles. The company, which was founded in 1994, has been expanding both its product line and customer base. In addition to distributing vehicles to consumers, it’s begun moving into the business world, selling its products as fleet and delivery vehicles.
In November, the UPS distribution center in Petaluma leased 40 electric vehicles from ZAP to deliver packages throughout the holiday season. ZAP also signed contracts to provide vehicles to a Coca-Cola subsidiary in Uruguay, Domino’s Pizza in Las Vegas and the City of Richmond, among others.
Many of the fleets are small, since the businesses want to try out the vehicles before buying more. Over time, electric vehicles cost less and are more efficient than gas engines. “Businesses are even more budget conscious than families,” says Campbell. “If you operate a diesel truck just to carry a few shovels, it gets very costly.”
ZAP is also expanding its customer base worldwide. It has relationships in places as varied as Dubai, Canada and China. Among these, it’s partnered with England-based Lotus Engineering to develop several electric vehicles, including the ZAP-X, a more advanced electric vehicle that has 644 horsepower, can accelerate from 0 to 60 mph in five seconds, and can go 160 miles on one charge. The car has met the crash test requirements through 2016 and is now going through modifications.
ZAP also signed with Youngman Automotive Group, a large truck and bus manufacturer in China, to manufacture, market and distribute electric and hybrid vehicles. Schneider was unspecific about which cars would be marketed first and when they would come to the United States, although it will likely include long-promised electric cars like the Obvio, a minicar produced by a Brazilian company that ZAP first signed an agreement with in 2005.
“With a company in the United States, manufacturing is very challenging,” says Campbell. “Whereas in China, it’s an opportunity. Lots of corporate America is outsourcing, but we’re not just outsourcing—we’re partnering with China.”
ZAP is often criticized for not following through on its word. Like the Smart car, ZAP has a history of announcing products and not producing them as quickly as expected. Over time, this has led some critics to distrust ZAP. In a discussion on GreenCarCongress (www.greencarcongress.com), an online magazine devoted to green cars, a reader named Jack writes: “I hate ZAP no more than I hate the Tooth Fairy or the Easter Bunny. If it were to ever actually have a product besides press releases, there might be cause for taking a side.”
Another, gentler soul, calling himself Domenick, replies, “It’s frustrating it hasn’t followed through on a lot of its vehicle promises. I’m still waiting to see an Obvio. It has, though, sold a bunch of Xebras and scooters and such. So, it’s not like it hasn’t produced anything.”
Ron Freund, chairman of the Electric Auto Association, is also skeptical about the company. Like many, he questions whether it will deliver the ZAP-X any time soon. “There’s a tremendous difference between delivering a three-wheeled NEV [neighborhood electric vehicle] and a full-fledged, highway-capable electric vehicle,” he says. “No one would be happier than I to see it in showrooms, but I’m not holding my breath.”
Campbell feels this criticism doesn’t take into account how difficult ZAP’s mission is. It’s trying to start a car company in the United States (something that takes a lot of capital and time) using the newest technology (something that takes experimentation and extensive investigation).
“You have to be really careful about the technology you invest in,” he says. “We were testing a lithium battery back in 2002 and we let the public know. Well, I’m happy to report that we recently conducted successful experiments with that battery. It took us several years of hearing about how we talked about the battery but didn’t deliver. Just because it takes us a while doesn’t mean we’re not going to deliver.”
In December 2007, ZAP announced iZAP, a rechargeable and portable lithium battery pack for iPods. It joins the company’s Recharge-It-All series, which includes power tips to fit most mobile electronic devices, including cell phones, smart phones, digital cameras, MP3 players and more. “The iZAP line is the offshoot of many years of research into a better electric car battery,” said CEO Steve Schneider in a prepared statement. The iZAP debuted at January’s MacWorld Conference & Expo in San Francisco. For more information, visit www.zapworld.com.
For the love of the Earth
ZAP believes that what it’s doing is important—world changing, even. As the United States’ dependence on oil continues to be a major issue, the pressure for alternative engines increases. California alone uses 14.5 billion gallons of gas a year and spends $82 million a day on fuel, according to the California Energy Commission.
Given that, the benefits of the electric car are obvious: They mean no fill-ups at the gas station, no messing with engine oil, and no concern about air emissions. Some models even have a solar panel to recharge. Compared to a gas engine, the impact of the electric car is nil.
“For every gallon of gas that’s burned, 19.5 pounds of carbon are released into the atmosphere,” says Freund. “I think about that when I’m going to the store. Luckily, I’ll be going to the store in an electric vehicle that’s powered by the sun.”
ZAP believes it’s serving a consumer base that’s under-represented in the marketplace: people who want to buy tiny, eco-friendly cars that are largely unavailable in the United States.
“The best part of my job is helping people go green,” says Campbell. “Anybody can change to fluorescent light bulbs [to save energy], but driving gasoline cars makes the biggest negative impact on the environment. So if you can switch to electric, that’s the most you can do to help the environment—more, perhaps, than everything else combined.
“I meet people who own solar homes and plug their Xebras in at night. Revolutions are taking place.”
ZAP released the Xebra line in June 2006. It includes both a sedan and truck. Weighing only 1,800 pounds, the Xebra sedan is a tiny car with three wheels and an egg-shaped hood. It comes in four colors, including the black-and-white zebra pattern. The charger can be plugged into any normal 110-volt wall socket. The battery, once charged, can go approximately 40 miles at a maximum speed of about 40 miles per hour. Classified as a city car, it cannot go on the freeway. It costs roughly $0.01 to $0.03 per mile (depending on electric rates) to run compared to $0.20 to $0.30 per mile for a gas engine to run. Xebras start at $10,500.
By having only three wheels, the Xebra is technically not a car, so the U.S. government didn’t require it to undergo crash testing before it could be put on the market. Crash testing costs millions and would have significantly raised the cost of the Xebra, explains Campbell.
Although the company says it internally tested the vehicle and believes it’s safe, Freund is concerned the vehicle wouldn’t hold up in an accident. “Put it this way, it’s a three-wheel vehicle that’s exempt from crash testing,” he says. “If a Hummer out there that’s 6,000 or 7,000 pounds hit me, I wouldn’t have a prayer. It would just roll over me. These little cars don’t have NHTSA crash testing—but they will hold up to the rigors of regular driving. I’d be willing to take that risk. And instead of having to pay $3.30 or more per gallon for fuel, my solar panels will drop that cost to mere pennies per mile.”
Even when the ZAP-X is marketed in the United States, it isn’t clear whether SUV-driving Americans will accept the electric car. Because of this, ZAP has begun expanding to other countries where there’s a stronger interest in alternative engines due to higher gas prices.
While more people are talking about being green, the word often means nothing outside of a feel-good advertising campaign. For a company like ZAP, which has promoted environmental principles from the beginning, it can all seem like so much green washing—making products appear more environmentally sound than they really are. “Some of the most polluting companies in the history of the planet are putting out green ads,” says Campbell. “They’re trying to look like heroes.”
ZAP is facing more competition these days as the need for alternative fuel creates new entrepreneurial opportunities. But the company is banking that experience will pay off in the end. It is, after all, one of the few companies in the world with a full line of affordable electric vehicles.
“We’re the longest lived electric vehicle company in history,” says Schneider. “We have the most experience. There are others jumping into the market that have never been in the industry. You make a lot of mistakes and see a lot of cash disappear when you don’t know what you’re doing.
“Everybody is trying to be green because it’s cool and there’s profitability in it. But it wasn’t cool when we started out, believe me.”
For ZAP, the future may seem uncertain at times, but it’s always green.
