One electric vehicle maker is staying afloat

  @FortuneMagazine October 4, 2012: 1:36 PM ET
duffy boats

Let 'er rip: The Duffy 22 Cuddy Cabin

(Fortune)

The infant electric vehicle industry is in turmoil. Toyota is backing off its EV plans in the face of disappointing sales by the Nissan Leaf and the Chevrolet Volt. At Tesla, founder Elon Musk is having trouble scaling up production from more than a few dozen cars a week, while a third CEO in less than a year has been installed in an effort to get Fisker's Karma back on track.

In the latest upheaval, Shai Agassi, the energetic founder of BetterPlace electric charging networks, has been ousted as CEO. Despite ramping up installations in Israel and Denmark, Agassi proved more successful at raising venture capital -- more than $750 million -- than stemming losses, which are said to reach nearly $500 million.

In September, reported EV sales for September brightened the gloom a bit. Subsidized lease terms enabled Volt to set a record for the month, and Toyota (TM) reported more deliveries of its plug-in Prius, but overall, the results have been pretty dismal.

Most of these automotive EV efforts have a few things in common: The were high-profile efforts by major players that were lushly funded, heavily promoted, and burdened with ambitious targets for growth.

MORE: 9 electric car stalls, misses, and crackups

Contrast them with the successful work by a little West Coast outfit that operates under the radar. It makes an all-electric, battery-powered vehicle of its own design that seats eight and can run for more than eight hours on a single charge (assuming calm winds). The design has been tested for more 30 years, and some 10,000 vehicles have found buyers. Six models are available in different lengths, with factory-direct prices starting at $27,000.

One drawback: The vehicle's top speed is five miles per hour, about the pace of a brisk walk.

Another thing: it only operates in water.

The vehicle is the Duffy Electric Boat, built at a factory in Southern California and in production since 1970. The company's owner, Marshall "Duffy" Duffield, started the business after his motorboat ran out of gas, and he rigged up a battery from a golf cart to keep it from happening again. The boats are built to order and distributed through a dealer network that extends from 10 states in the continental U.S. to Hawaii, Australia, and Sweden.

The magic of Duffy is that it uses proven technology to fill a market need for which it is eminently suited -- and for which it has little competition. The old-tech lead-acid batteries that power the boats are widely used in golf carts and can be recharged using an optional high-output charger in about 12 hours -- perfectly adequate for recreational boating. Duffy doesn't overpromise. It declares its boats are safe for cruising in harbors, bays, and small lakes and warns that it is not advisable "to go out in large open waterways or oceans in heavy winds."

Such candor has won Duffy a large body of loyal owners. Its epicenter is Newport Beach Calif., home to 2,500 boats. While its highways are clogged with exotic cars, its network of harbors make its waters ideal for Duffy boating. Owners grow attached to their vessels and outdo each other with word-play names like "High Voltage," "So Watt," and "Shock Cousteau."

Duffy hasn't been immune to the economic downturn. According to the Los Angeles Times, new boat sales that once reached $15 million a year are now running at a $7 million to $8 million clip. But Duffy's longevity suggests that EV success is possible under the right conditions:

Confessions of a Volt owner

1. Think small

Most EV makers seem to believe they have to develop a swoopy, design-forward body to go with their electric powertrain -- a decision that sharply ratchets up the capital investment -- when customers are really shopping for efficiency, not style. Consumer Reports blasted the Karma for its excess weight, sluggish feel, tight interiors, and dysfunctional touchscreen -- faults you don't expect in a $107,000 car. Ford is one of the rare automakers that avoided the temptation of exlusive designs, fitting its plug-in and electric motors in standard Fusions and Focuses. Duffy installs its batteries in a hull design whose basic shape has been unchanged for 100 years.

2. Set reasonable expectations.

Almost without exception, every EV maker has been forced to scale back its sales and production forecast. Tesla (TSLA) is the latest, having been forced to announce that it had built only 77 cars in the most recent week -- far short of its announced goal of 400. Nissan has no hope of living up to CEO Carlos Ghosn's optimistic prediction made two years ago that Nissan would be selling 500,000 EVs by 2013. General Motors (GM, Fortune 500) gave up making forecasts for the Volt, saying only that it will let the market decide. Duffy avoids the issue entirely by not making projections and only building boats to order.

3. Establish realistic benchmarks

Just as Internet companies used to make revenue projections based on the number of page views, some EV makers have been dazzling investors with tallies of buyer "deposits," even if those deposits eventually prove ephemeral. Better Place had declared that getting to a world without gas "was simpler than you think" and used a grandiose metric called "global progress" to measure its development. Actual customers, of course, are more interested in safety, reliability, and performance. Duffy modestly owns up to 100% customer satisfaction. In the 40 years it has been making the boats, it says "We can't remember a single customer demanding their money back because their boat lacked power or speed."

4. Think long-term

After 15 years, hybrids still make up only a fraction of auto sales despite being adopted by nearly every automaker in the world. The realization is growing that widespread adoption of all-battery EVs will take a lot longer. Although they may initially face criticism for being "behind in technology," automakers that hedge their bets and conserve their capital may be better off in the long run. The same goes for boatmakers. By finding a niche and taking things as they come, the Duffy boat has managed to stay alive for four decades -- even if it can't win many races. To top of page



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