Silicon Valley is Emerging as World Innovation Center for Clean Tech

Tesla Motors and San Jose announced yesterday that the city has been tapped as the future home for the electric-car maker's factory and new headquarters.

Tesla chose San Jose because it's a Silicon Valley company, and it wanted its executives and engineers from the software and electronics industries to be near its factory. Tesla also expects many of its early buyers to be Californians; its first two showrooms are in Menlo Park and Santa Monica.

We're the world center of innovation in clean tech," said San Jose Mayor Chuck Reed on Tuesday. Said Ze'ev Drori, Tesla's chief executive: "We love San Jose. It's a good deal for both parties."

"We have had a change here in the last year in manufacturing jobs, and Tesla is the latest,” Mr. Reed said, citing thin-film solar companies that are also manufacturing in the region.

Tesla has gathered a serious buzz in Silicon Valley, thanks in part to high-profile backers that include Jeff Skoll, former president of eBay; Larry Page and Sergey Brin, co-founders of Google; and Tesla chairman Elon Musk, co-founder of PayPal. Venture capital investors include Capricorn Investment Group, Technology Partners, VantagePoint Venture Partners and Draper Fisher Jurvetson.

With Tesla's announced plans to have a 5-passenger electric Sedan out and on the road in 2010, Silicon Valley has secured bragging rights as the "Electric Car Capital of the World." The Model S is powered by a lithium-ion battery pack and will be able to travel a cool 225 mile range on a single charge. The price is expected to be around a pricey $60,000, and likely higher as the release date approaches.

California is creating a progressive environment, with incentives given by the state, including tax exemptions on manufacturing equipment and qualification for grants and special employee training programs.

In stark contrast to Tesla is Think Global, a Norwegian upstart plotting a U.S. invasion via pint-size, affordable electric cars. Think has been selling tiny gas-free city cars in Europe and will start peddling them to fuel-stressed Americans in 2009. The company's newly formed North American division has high hopes for the upcoming Think Ox, a concept unveiled at the Geneva International Motor Show earlier this year.

An electric-powered people's car for the 21st century, the Ox is a prelude to Think's next-generation production vehicle, due out in 2011. Roughly the size of a Toyota (TM) Prius, the Ox can travel between 125 and 155 miles before needing a recharge, and zips from zero to 60 miles per hour in about 8.5 seconds. Its lithium-ion batteries can be charged to 80% capacity in less than an hour, and slender solar panels integrated into the roof power the onboard electronics. Inside, the hatchback includes a bevy of high-tech gizmos such as GPS navigation, a mobile Internet connection, and a key fob that lets drivers customize the car's all-digital dashboard. Pricing has yet to be announced, but the company's current vehicles cost less than $25,000.

Think North America is backed by an undisclosed amount from Silicon Valley venture capital firms RockPort Capital Partners and Kleiner Perkins Caufield & Byers, which famously invested early in companies such as Amazon and Google. General Electric made an unrelated $4 million investment in March to support the company's battery research and development operations.

In theory, Battery electric vehicles (BEVs) are the ideal form of transportation. They produce no noxious exhaust fumes, and minimal pollution, especially when charged from renewable energy. They are capable of acceleration exceeding conventional vehicles, but are much more quiet. Widespread use of BEVs would also reduce dependence on petroleum, enhance national security, and help mitigate the effects of global warming.

So what’s the problem? Historically, the issue with BEVs was the high battery costs, limited travel distance, charging time, and battery lifespan. However, new technology advancements have addressed most of these issues and some believe the time is right for the emergence of the mass produced electric car.

Former SAP executive, Shai Agassi, announced recently that he's raised over $200 million for a company that plans to revolutionize the electric car industry. The idea should find plenty of fertile ground in California with all of the local enthusiasm for plug-in hybrids already in place. Silicon Valley is already the capital of the world's high-tech industry, so for many the move to become the Mecca of one of the hottest sectors of the automotive industry is quite a natural development.

The Palo Alto based entrepreneur has spent months preparing for the daring venture. He believes if anywhere is able to disrupt the car industry, it’s in the valley.

"Detroit is a car manufacturing center. I think what we're looking at is not something that can be done in a normal way. . . . It needs an Internet approach, a Google approach." Agassi noted. "In the valley, we know how to do technology disruption. We know how to do business models, how to develop proof of concept and get it adopted around the world."

No one will argue with Agassi on that point; the valley is notorious for shaking things up, but can a “Google” type approach really turn the auto world upside down?

Even Agassi’s most enthusiastic supporters aren’t sure about the potential of electric cars. They wonder what kind of company it would take to rival the huge global auto industry. How much of an impact can start-ups such as Agassi's Better Place and Tesla Motors of San Carlos really make when compared to the big players?

"It's not simple or cheap stuff to do," said Neal Dikeman, partner with Jane Capital Partners, a San Francisco merchant bank focusing on clean tech and energy technologies. "$100 million is the ante up to play the game," Dikeman said.

"People are waking up to the fact that this is not like software start-ups that raise $40 or $50 million, and then have IPOs," said Darryl Siry, Tesla's vice president of sales, marketing and service. "This business is capital intensive."

Agassi acknowledged that "massive investments" are required to begin the transition from gasoline engines to electric-drive autos. He calculates the total cost for every affected industry at a mind-blowing $6 trillion a year. Even so, he believes it will all end up being worth it.

"The first carmaker to field a solid electric vehicle at scale will enjoy benefits that will dwarf the success of the Prius for Toyota," he predicted.

Posted by Casey Kazan with Rebecca Sato

Source:

http://bits.blogs.nytimes.com/2008/09/17/tesla-motorss-second-electric-car-will-be-made-in-silicon-valley/