Monday, October 12, 2009

The Tough Business of Selling Electric Vehicles: Zenn Stops Selling Electric Cars

In a stunning, but not entirely unpredictable turnaround, Zenn, ZNN.V, has announced it will stop selling electric vehicles.

Based in Quebec, Canada. the company has built about 350 all-electric vehicles for delivery across North America. The 2-seater car car sells for US$15,995 and plug into a standard electric outlet, for about 80 kilometres drive (about 50 miles) on a single charge.

With every major car company planning to launch electric vehicles next year, it was indeed nearly impossible for a small company to sell its relatively high-priced vehicles and compete, unless it has a unique advantage. In the matter of months the company's future propsects turned sour, very sour. The company did have a unique advantage, its partnership with Eestor for the unique supercapacitor that charges in afew minutes and could take the car for hundreds of kilometers (the same technology - in much larger scale - my son demonstrated in a video, see older post here).

EEStor Inc., is a controversial and secretive privately held U.S. battery maker in which Zenn has invested $7.5M for a 10.5% ownership in the company. As of today, the technology has not yet been really proven. The Globe and Mail says that auto makers will line up at Zenn's door if everything goes as planned, because Zenn has exclusive rights to sell the technology for small cars and those one year and older of any size.

Zenn's CEO believes Zenn has a better chance of prospering if it works with big companies, rather than compete with them – so it now plans to offer its drive trains ti larger companies.

The company's shares are up 166% YTD. Three analysts follow the shares maintained their “buy” ratings after the company changed its business plan.

(click to enlarge)

Says the Globe and Mail: "Massimo Fiore, an analyst at Versant Partners, said the decision makes sense because Zenn's intention as it developed its own car was to demonstrate that the technology worked. It doesn't need to be an auto maker to make its point, he said. “Becoming the all-electric drive train supplier of choice was and remains the company's ultimate goal,” said Mr. Fiore, who has a “buy” rating on the company's shares. “We had anticipated this, but not the timing. Nevertheless, our investment thesis remains the same as Zenn's medium-term price movement will only be impacted by progress at EEStor.”

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