Same product, new technology
Though the technology to run cars on rechargeable batteries has existed for more than a century, no company has succeeded in making electric cars the average consumer can afford.
The original Detroit Electric was no exception.
The cars could go up to 100 miles on a single charge, but battery costs made the cars several times more expensive than combustion-powered vehicles.
In contrast with Ford’s mass-produced Model T, which was designed as a car for the masses, most Detroit Electrics were driven by wealthy customers such as inventor Thomas Edison, steel magnate John D. Rockefeller Jr. and Clara Ford, the wife of Ford Motor Co. founder Henry Ford.
Today’s car companies are working to bring those prices down. Lam said Detroit Electric’s new short-range model will get 110 miles per charge and will cost $25,000. The longer-range model will get 200 miles per charge and will cost $33,000, he said.
Detroit Electric has contracted with Proton to assemble the vehicles in Malaysia. He said Southeast Michigan would likely land Detroit Electric facilities if the company reaches sufficient sales volumes in the United States.
Howard Forman, an auto industry consultant and associate professor of marketing at California State University-Fullerton, said the name Detroit Electric might rub some American consumers the wrong way if the company’s vehicles are built overseas.
He said foreign carmakers such as Volkswagen AG and Toyota Motor Corp. historically have placated U.S. consumers by expanding U.S. offices and facilities, providing more American workers with jobs. If Detroit Electric hopes to avoid backlash from American consumers, he said, “they should consider manufacturing or at least assembling their cars in the United States.”
Lam said Detroit Electric has several hurdles to clear for entry into the U.S. market, such as securing safety certification for the vehicles and developing a distribution network.
Naming issues with Patent officials
The company’s name poses another problem.
The U.S. Patent Office has refused a trademark to Detroit Electric so far, in part because the company doesn’t have any connection to Detroit.
In a January letter to Detroit Electric explaining the decision, patent office attorney Paula Mahoney wrote that the trademark could be considered “geographically deceptive” if the company’s cars aren’t made or produced in the Detroit area.
“Given the nexus of the manufacture of automobiles in the city of Detroit,” she wrote, the purchasing public would be inclined to believe that the company’s vehicles actually came from Detroit.
Lam said he expects the disagreement to be settled by the time the company is ready to start selling cars in the United States.
Rebecca Eisenberg, a law professor at the University of Michigan Law School, says Detroit Electric is unlikely to get its trademark, though the company wouldn’t need it to do business. Without a trademark, Detroit Electric could encounter trouble enforcing the rights to its brand in the U.S., she said.
Patent Office attorneys noted in correspondence with Detroit Electric that other Detroit-based companies are developing electric cars. In addition to heavyweights like Ford Motor Co. and General Motors Corp., there are smaller companies like Detroit Electric Vehicles LLC, which sells electric car kits and converts vehicles from gasoline to electric engines.
John Mogelnicki, the founder of the suburban Detroit company, said Detroit Electric shouldn’t get the trademark because his company, formed in January 2007, predates Lam’s. He said he has already received phone calls from people confused by the similarity between the two companies’ names, but he doesn’t intend to defend his right to the name.
“Any legal action requires considerable resources, and I'd rather put the money into making cars,” he said.
According to U.S. Securities and Exchange Commission filings, the new Detroit Electric started in September 2007 as a partnership between ZAP, an electric car firm based in Santa Rosa, Calif., and Youngman Automobile Co., a Chinese commercial truck company. The companies appointed Lam the CEO of the Detroit Electric Joint Venture the next month.
ZAP and Youngman agreed to invest $100 million into development in 2008, but the money never materialized. Lam said the companies couldn’t agree on how to proceed with the project because Zap wanted to develop passenger cars and Youngman wanted to build trucks.
In August 2008, Lam bought the Detroit Electric venture from ZAP for $750,000 and moved its headquarters to Damwoude, Netherlands, about 100 miles northeast of Amsterdam. He said he and business partners invested their own money in the private company’s first phase and are now pursuing venture capital from private equity firms for the company’s second phase.
Belzowski compared the fledgling electric vehicle market to the Wild West. He said small companies like Detroit Electric and ZAP are dueling with international auto companies to get their cars to market first.
“If you have the product, you're in the game, because no one has the product right now,” he said.