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A big bet on electric vehicle manufacturing goes bust

Production of electric vehicles and batteries was supposed to create high-tech jobs in Indiana. Think City and Ener1 set up shop, enticed by government incentives. But soon they filed for bankruptcy.

January 27, 2012|By Julie Wernau
  • This Think City electric car and many others await additional assembly at a plant in Elkhart, Ind.
This Think City electric car and many others await additional assembly… (Michael Tercha, Chicago…)

Reporting from Elkhart, Ind. — For politicians betting on electric vehicles to drive job growth, the view from inside Think City's plant here is their worst nightmare: 100 unfinished vehicles lined up with no word on whether they will be completed.

Only two years ago, the tiny Think cars (two can fit in a regular parking space) were expected to bring more than 400 jobs to this ailing city and a lifeline to suppliers who once made parts for gas-guzzling recreational vehicles.

"We've said we're out to make Indiana the electric vehicle state. It's beginning to look like the state capital will be Elkhart County," Indiana Gov. Mitch Daniels said in January 2010 in announcing government incentives used to attract Think to his state.

Instead, the Hoosier State's big bet has been a bust. The plant is devoid of activity; there are just two employees. A Russian investor who recently purchased Think's bankrupt parent in Norway has been silent about its future. A government-backed Indianapolis battery maker that was to supply Think wrote off a $73-million investment in the car company and Thursday declared bankruptcy. Two unrelated electric truck makers Indiana planned to nurture have yet to get off the ground.

Indiana's foray into electric vehicles is a cautionary tale for states in hot pursuit of high-tech manufacturing jobs. Think's story illustrates how politicians so badly wanted to stimulate job growth that they showered the automaker and the battery supplier with tax benefits and incentives while at the same time failing to determine whether there was a market for the car: a plastic two-seater with a top speed of about 65 mph and a price tag approaching $42,000.

"Where's the value?" Gregg Fore, an Elkhart recreational vehicle industry executive, said of Think. "I could buy a golf cart for five grand if that's what I wanted to drive."

Fore says the federal and state governments as well as Elkhart subsidized the Think project apparently believing those tax benefits would drive down the vehicle's price and make the cars more attractive. "By giving money to the battery company and electric car company, they are saying, 'We want you to buy their products even though we know you don't want them.'"

Indiana's total losses aren't immediately known. Katelyn Hancock, a spokeswoman for the Indiana Economic Development Corp., the state's economic development arm, declined to disclose how much Think and battery-maker Ener1 had received in taxpayer-funded credits and incentives, saying such information is confidential. Ener1 also refused to provide the information.

What is known, however, is that the Obama and Bush administrations poured millions of dollars into battery production in a quest to power thousands of Think City vehicles with lithium-ion batteries. To date, Ener1 has spent $55 million in federal funding, according to the U.S. Energy Department.

Some analysts say government backing of the car didn't seem like a bad investment at the time. "It looked like electric vehicles were it in 2008. It really did," said Theodore O'Neill, an analyst who has followed the electric car industry. "You had the government calling the shots and doling the money out with the major" automakers.

Still, O'Neill says he wouldn't buy such a car. "For $40,000, you can get a certified pre-owned BMW convertible and a Vespa scooter. Both of them. And if you want to have a good time, put the top down." General Motors' Chevy Volt electric car sells for about the same price.

Think City's plant, a 10-minute drive from Elkhart's Main Street, appears all but abandoned these days. When a reporter visited recently, the parking lot was empty and the visitor entrance and lobby were laced with cobwebs. A single pickup truck and a sign telling visitors to ring the buzzer were the only signs of life near the rear of the building. Inside two men were quietly baby-sitting the plant, awaiting headlights and seat belts from Europe so the cars could meet U.S. standards.

What eventually is supposed to happen to these cars isn't clear. No one in Elkhart could point to a local executive in charge of production. A person identified as a spokesman declined to comment, saying he was no longer on the payroll.

The person who may have the most to say about Think's future also isn't talking. Russian investor Boris Zingarevich bought Think Global, the Norwegian parent company, at auction a month after its bankruptcy.

Reached by phone in Russia, Slava Bychkov, a spokesman for Zingarevich's Ilim Group, said he could not provide details of plans for the car company.

"The management is now under the restart process and will communicate their strategy in [the] near future," Bychkov said.

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