What GM gets from investing in hybrid startup Bright Automotive
GM Ventures, the investment arm of General Motors, announced Tuesday that it would invest $5 million in Bright Automotive, an Indiana startup developing a cutting-edge plug-in hybrid delivery van.
While the amount is modest, the GM investment gives the Detroit giant a "strategic relationship" and inside track on new technology that it might be able to use to expand its electrified vehicle fleet a few years from now.
For Bright, which had hoped to begin manufacturing its IDEA van by 2012, the cash infusion is certainly important – but perhaps not as critical as GM's endorsement of its technology, auto industry analysts say. It could help persuade other investors – including the US Department of Energy – to take the plunge with some funding, too.
"With this deal, Bright gets financial support that puts us on the fast-track toward mass production of the IDEA," Reuben Munger, Bright Automotive chairman and CEO said in a statement. "Perhaps just as importantly, we gain a strategic partner that is a world leader in electrification.”
Only last week, GM formally put a $41,000 price tag on its new electric Chevrolet Volt and began taking orders. It has said it wants to take the Volt technology and put it into vehicles across its product line. It is leading in the vehicle electrification trend – but will face a host of competitors a few years from now. Ford, for instance, is known to be developing an all-electric delivery vehicle – and the relationship with Bright might lead to technology sharing or even sales of Bright-designed vehicles down the road.
Bright has spent a lot of time and money analyzing the small-delivery vehicle fleet and how to make plug-in hybrid technology work for that market, analysts say. The IDEA is expected to go 40 all-electric miles on a charge before switching over to gas-electric hybrid mode at 36-miles per gallon. Overall, the vehicle should achieve the equivalent of 100-plus miles per gallon.
"This is a case where both companies kind of need one another," says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "If someone has a hot technology and you're the first one to get in, you have an inside track if you are GM. On the other hand, Bright is a small company facing a tough financing climate – and it may help their credibility to bring GM into the picture."
Aerodynamics and the carbon-fiber supporting structures in the van's shell would make it significantly lighter than other vans in its class. That would enable the vehicle to use a smaller four-cylinder gasoline engine when in hybrid mode – and require a smaller, less costly battery pack as well when in all-electric mode.
For its investment, GM gets not only at least some access to this technology, but it will also provide gas engines for the front end of the IDEA van, while Bright's electric-drive technology is used in the electrified rear wheels.
"Funding early-stage start-up companies is a new way of doing business at GM to accelerate the introduction of innovative technology to support our core automotive business and give us a competitive advantage," Jon Lauckner, president of GM Ventures said in a statement. "In this case, our funding of Bright Automotive will accelerate the introduction of advanced propulsion and light-weight technologies in the commercial vehicle market."
Bright wants to turn out 50,000 IDEAs a year. But its original 2012 timeline has been pushed back to 2014 or later. It needs cash to begin manufacturing. With private investment hard to come by during a financial collapse, Bright turned to the federal government. It applied for $35 million in grants from the stimulus bill as well as a $450 million loan from a Department of Energy green technology program.
Bright is still waiting on the DOE loan. But it's just possible the new GM investment might help impress the right people at DOE, and private investors, that Bright is a company that not only has a hot technology – but a bright future, too, Mr. Cole says.
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