Edmunds: California is the new Detroit?

Edmunds Inside Line said:

If California had a state car, it would be this bright orange Tesla Roadster. It looks sensational in the fierce Los Angeles sun, as its eerily silent, electric-powered acceleration makes it an orange streak through the rush-hour traffic. You feel dangerously exposed to the vast Hummers and Suburbans on either side, but the Tesla Roadster makes the crass SUVs look like dinosaurs whose time have long since passed.

"Is that an Italian car?" a driver yells at a stoplight. "No," I'm pleased to answer. "It's from about five blocks back that way."

We're in the New Detroit, the place where investors, car-makers and a bunch of new technology companies have come together. They think they can do things better, and they're going to do it with electricity. We're in California — Los Angeles, to be exact.

Electrified Futurism
Though Tesla's headquarters lies in the San Francisco Bay Area, its design studio now is in Hawthorne, a suburb near the Los Angeles airport once noted for the manufacture of fighter planes. Henrik Fisker is developing his $87,900 Fisker Karma plug-in hybrid in Irvine, just about 40 miles away. And AC Propulsion (ACP), the technology company that scienced much of the drivetrains that underpin the Tesla and Fisker, is located in the Los Angeles metropolitan area, too. Meanwhile, small firms in San Francisco and Los Angeles are working on developing infrastructure, while the money flows from venture capital firms along Sand Hill Road near Stanford University in the Bay Area.

So is California the New Detroit? Will the next great technological leaps come from these firms and not the old-world industrial giants back East? And could one of these companies go supernova, Google-style, and become the next General Motors?

It's easy to dismiss the idea when you consider that only Tesla has actually put any cars on the road yet, and even then only a thousand examples of an otherwise irrelevant $100,000 sports car. Meanwhile, the other players are hip deep in unfulfilled promises about the future. But technology start-ups don't follow normal growth patterns. The recession that nearly did in Detroit has only helped Tesla and Fisker. Each has received approval for loans of around $500 million from the $25 billion Advanced Technology Manufacturing Loan Program announced by Congress in November 2008.

I need to do what I can to steer this ship around, away from making these death-creating explosion machines.

If you want to predict the future, it's useful to follow the money. And right now the money is coming here to the New Detroit.

Making the Motors of the Future
AC Propulsion lies in San Dimas, a Los Angeles suburb better known for its water park than its technology base. We park the Tesla Roadster in front of three utterly anonymous buildings in an industrial park. The only sign of what lies within is the presence of a place to plug in the Tesla so it can charge while we're inside.

The firm was founded in 1992 by Alan Cocconi, an engineer involved with the 1990 GM Impact concept car and the General Motors EV1 electric car, 1,117 examples of which were built between 1996 and 1999. AC Propulsion's most important accomplishment since then has been the all-electric tzero drivetrain, which it licensed to Tesla and which powers the 500-strong test fleet of Mini Es. AC Propulsion has been regarded as the visionary of the electric car revolution, although as former Tesla executive Darryl Siry once noted, "They lacked the entrepreneurial vision to see how big an idea this would become and the means to achieve it."

Tom Gage, AC Propulsion's lanky, laid-back CEO, laughs at that. "We're a bunch of engineers here; we're not venture capitalists. Sure it's possible that we don't end up making the big money, but we're the only company in this business making any money at all right now. Tesla and Fisker have huge investments. It will be a long time before they see black ink."

The premises look like the lair of a mad inventor. The area where the batteries, electric motors and power electronics are stored and assembled is surgically clean, but the main workshop is, frankly, a bit of a mess and appealingly low-tech, full of greasy, grimy drills, mills and lathes — everything you need to build a complete car from scratch. Outside there's a pile of discarded gas tanks from the business ACP does in converting conventional cars to electric propulsion. "We don't know what to do with them," Gage jokes about the gas tanks. "Nobody seems to want them."

Do Electrons Attract or Repel?
AC Propulsion's CEO doesn't think that the new car businesses clustered around L.A. and San Francisco see themselves as a New Detroit. Relations between the firms seem to be marked by bitterness and legal action rather than by a sense of common purpose. In late 2008 Tesla lost a lawsuit it brought against Fisker, and it sounds as if there might be another row brewing between ACP and Tesla.

"It's fairly competitive," says Gage. "There's a lot of inventor's jealousy; mine is better than yours, that kind of thing. We're all engaged in the same thing — trying to build cool cars that people will want to buy.

"We licensed all our patents to Tesla. They built their drive systems under those patents for the first 500 cars, then announced abruptly that they'd changed the design and accordingly were no longer paying the royalties. There has to be an accounting at some point and the time is approaching when we have to confirm if that is true or not."

The Tesla Connection
We coil up the Tesla Roadster's charge cable and move off into the L.A. traffic. We're reminded again that countless surveys indicate drivers despise the need to visit the gas station and will do anything to avoid the chore. Much of the enthusiasm driving the electric car comes from this hatred of gas stations.

Though the final assembly of Tesla Roadsters takes place at Tesla's headquarters in a small industrial building near the train tracks in San Carlos up in the San Francisco Bay Area, the firm's design studio lies in this aircraft hangar in Hawthorne where fuselage sections for the Boeing 747 airliner once were built. The most visible player in the Tesla game is Elon Musk, the engineer who made his money when he sold PayPal to eBay for $1.5 billion in 2002. The proceeds have gone into SpaceX, his company dedicated to create a private spacecraft for public access, as well as Tesla. This building is a vast silver edifice on Rocket Road, the opposite of AC Propulsion's unassuming premises.

Tesla's chief designer Franz von Holzhausen meets us and immediately launches into a tour of the Space X factory. We've just missed the colossal Falcon 9 rocket, which is about to be launched for the first time, but we can still gawp at the prototype Dragon manned module. The tour is a substitute for access to the Tesla design section. There's so much new, secret product in a small space that it can't all be hidden, and we just can't be let through the door.

Drawing the Electric Sedan
Von Holzhausen joined Tesla last year after a brilliant term at GM where he did the Pontiac Solstice and then a time with Mazda where he created the Furai and Nagare concept cars.

"To be in at the start with a company that could be one of the great American brands is the opportunity of a lifetime," Von Holzhausen says. "This is where industry needs to go. It needs to have more thinking like this. The recession weeds out the dead wood. We're seeing the break-up of the norm because it hasn't been delivering what the consumer needs."

Von Holzhausen says he's invigorated by the Silicon Valley pace of innovation, where decisions are made quickly. "Here it's just Elon and me," he says. "We make the decisions. It might be 8 a.m. or 11 p.m.; it doesn't matter, though more often it's late in the evening. But having that direct connection is what will take this brand to market quicker and make the product more focused."

Von Holzhausen takes us for a brief drive down Rocket Road in the concept vehicle for the Tesla Model S electric sedan, fitted with a Roadster drivetrain. The designer says the car's appearance is 90 percent of the final production version. It looks sensational, designed simply to be beautiful, rather than to underscore its environmental credentials.

"When I first came to California to study car design at Art Center College of Design in the late 1980s, it was two months before I could see through the smog to the other side of the valley," Von Holzhausen says. "I thought even then that it was ridiculous, and that if automobiles are doing this and I'm part of this business then I need to do whatever I can to steer this ship around, away from just making these death-creating explosion machines. So really, that's why I'm here. We live or die — literally as a business and as individuals — on getting this technology into people's hands."

Early Adopters Have Lots of Money

"We were in the right place at the right time," says Henrik Fisker, leaning back in his chair in his brightly lit design office. Now that Fisker has closed its engineering center in Detroit and centralized its operation here in L.A., almost all of the building is packed with product secrets so no public access is permitted. Fisker even had to clear a bunch of sketches off the drawing board before he could let us in.

Noted for his contributions to the Aston Martin DB9 and BMW Z8, Fisker admits that his step toward car manufacturing was a big one. "Two years ago when we started out, our plan was to build the Karma, make some money, then think about another car," he says. "In the meantime GM and Chrysler went bankrupt and suddenly the government saw that we still need car industry in the U.S., so they created these loans and we got a half a billion dollars which accelerated our plans dramatically."

Fisker's plans are particularly bold: not just for their sheer scale, but for his aim to export half his production from the U.S. to the world's major markets, including those that have spurned American cars in recent decades. "Nobody needs another supercar and America doesn't have a history of making them," he says. "But America does have a history of innovation and this is not just a new car, it's a new technology and a sexy design. It's like the iPhone.

"If you want to be successful you have to design vehicles for the world, but for the past 30 or 40 years they've been designed for the U.S. market only. I don't know if that's to do with being in Detroit, but it's a fact. But California is a melting pot; it's a very international place. You can't sell a car here just because it's American, and if you want to design a car for the world you do it best in California."

The New Detroit?
AC Propulsion's Gage and Tesla's von Holzhausen were reluctant to identify themselves as part of a movement, part of a New Detroit. But Fisker, a Dane by birth, displays the real bravura about California's sense of place in the automotive future.

He says, "There's a spirit in California that anything is possible, that money is available if you have a great idea and are willing to take a risk. And yes, there is that feeling that California could become the second place in the U.S. where car development will thrive. The action is clearly in California right now. Quite a few companies are starting up, although not that many will survive."

But of those that do survive, how big are the prizes? Will one of these companies be the next General Motors? Fisker is plainly aware that for all his plans of six-figure sales, he hasn't built a car yet.

"I don't want to outline a whole huge plan because we have to get our first car on the road. But we've already planned our second car for significant volumes, a minimum of 100,000. I don't think there are any limits on how far we can go, and we have some investors behind us who think the same way, I'm Danish, I've lived in England, Germany and Switzerland and maybe in Europe we tend to put limits on ourselves. But not here. We're living in a land of endless opportunity."

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