Silicon Valley's New New Thing
The big brains are at it again. But this time it's not about PCs. It's about beating Detroit and Tokyo, saving the planet, and doing 0 to 60 faster than almost anything on the road.
By Michael V. Copeland

(Business 2.0) – It's late morning at Buck's, the diner in Silicon Valley's bucolic foothills where venture deals have been known to go down faster than the flapjacks and burgers. Today, though, the action is in the parking lot, not in the tan vinyl booths. Parked near the front door is a black-and-silver two-seat roadster with California plates that looks like a Formula One car gone missing from the track.

One by one, Buck's customers and other looky-loos gather around. "Is it a kit car?" asks one man in a pinstripe suit, gazing into the cockpit. "Where's the tailpipe?" another wonders. A couple of 10-year-olds on dirt bikes come screeching to a stop near the car.

"Whoa."

Dressed in a leather flight jacket and jeans, the owner stands aside to let everyone check out the hardware. "There is no tailpipe," Ian Wright responds in his New Zealand drawl. "It's all electric. I built it myself, and it goes from 0 to 60 in three seconds." The man in the suit walks up and down staring in disbelief. "Is this the future?" he asks.

"Well, I think so," Wright says, easing his slight frame into the driver's seat. He flips a few toggle switches until an LCD screen pops up from the dash, then gently steers the car away and out of the lot with barely a sound. With a passenger along for the ride, Wright pulls over on a nearby road, safely out of view of Buck's. A stop sign is visible about 200 yards ahead. "Hang on."

The car bolts like a Road Runner cartoon come to life, slamming passenger and driver deep into the seats and hitting 80 mph in half the distance to the stop sign. There's no engine roar or sound of screeching tires--just the blast of wind in your ears and the high-pitched whine of an electric motor. Then, almost as quickly, Wright brakes the car to a gentle stop. "Not bad, aye?" he says.

Not bad, that is, for a car whose motor has just three moving parts and fills up at any 220-volt wall jack. The car that the 50-year-old Wright spent the past year constructing in his Woodside garage has already blown away a Ferrari 360 Spider and a Porsche Carrera GT in drag races, and its 0-to-60 time ranks it among the fastest production autos in the world. In fact, it's second only to the French-made Bugatti Veyron, a 1,000-horsepower, 16-cylinder beast that hits 60 mph half a second faster. Price: $1.25 million. Mpg: 8.

There's more to this story, of course, than a tinkerer and his all-electric toy. Wright thinks his car, called the X1, can soon be made into a small-production roadster that car fanatics and weekend warriors will happily take home for about $100,000--a quarter ton of batteries included. He has even launched a startup, called Wrightspeed, to custom-make and sell the cars. But Wright isn't some quixotic loner. He's part of a growing cluster of engineers, startups, and investors, most of them based in Silicon Valley, that believe they can do what major automakers have failed at for decades: think beyond the golf cart and deliver an electric vehicle to the mass market.

Indeed, the race for the new consumer EV has already begun: Just a year ago, Wright was working for his Woodside neighbor Martin Eberhard, co-founder of Tesla Motors, a startup with 70 employees--and with a major investment from PayPal founder Elon Musk--that's building a mass-market rival to the X1. Wright left, believing he had an even better idea. Beyond that, startups are forming to equip new "plug-in" hybrids that run almost entirely on their electric motors. And around the country, a handful of other exotic EVs are showing up on the road--including George Clooney's new ride, a $108,000 commuter coupe that's just 3 feet wide.

The more that cars become technology platforms, the more the future plays into the hands of people like Wright and Eberhard. "Automakers can't do this," Eberhard says. "If you drill into the complexity of an electric car, it's not the motor, it's the electronics and battery system, which car companies aren't good at." Adds Musk, "The time is right for a new American car company, and the time is right for electric vehicles, because of advances in batteries and electronics. Where's the skill set for that? In the Valley, not Detroit."

Wright's garage-born heroics are, in many respects, long overdue. After all, electric cars predated the gasoline combustion engine. Battery-powered taxis and vans were around in the late 1800s, and Studebaker got its start selling mostly electrics. With limited range and power, though, they didn't stand a chance against piston engines or the assembly line. EVs slowly made their way to the museum.

They might have stayed there, too, had it not been for California's zero-emission vehicle mandate of 1990. The law required automakers that sold cars in the state to build a minimum number of nonpolluting autos. With hydrogen, fuel-cell, and even hybrid technology still years away, that meant all-electric.

General Motors took the lead and spent five years designing the EV1, a Jetsons-esque electric coupe. Introduced in 1996, the car caught on with a small--very small--group of buyers, mostly well-to-do environmental enthusiasts who didn't mind the expense (lease payments as high as $574 per month), range (55 to 95 miles), size (two seats), and inconvenience (six- to eight-hour recharges). By 2000, after spending more than $1 billion on the EV1, the company had leased just 800 cars in California and Arizona. So GM pulled the plug. After donating some EV1s to schools and museums, GM crushed the remainder of the fleet and sold it for scrap.

Toyota and Honda designed their own cars for the California EV market. Toyota introduced the RAV4-EV in 1999, and Honda sold the EV Plus. But those cars were doomed too, with sticker prices of $40,000 and up and with the hybrid Prius gaining traction after its U.S. debut in 2000. "By 2003 we stopped selling them," says Bill Reinert, Toyota's top advanced-technology manager. "There's not that many people who want to drive the environment." After selling just 7,390 EVs combined, the top six automakers abandoned the market.

But Ian Wright was just getting started. An electrical engineer who had raced souped-up Datsuns in his 20s in New Zealand, Wright moved to the Valley in the early 1990s, working at Digital Equipment, Altamar, and Cisco, specializing in the design of optical switches and routers. Along the way he earned a reputation as a problem-solver who delivered on time and under budget.

Everything changed one afternoon late in 2003 when Eberhard stopped by Wright's house to show him a custom electric coupe that he had on loan from an engineer friend. Like Wright, Eberhard was a car nut. And he had his own ideas about starting a car company. Eberhard took Wright out for a drive on the winding roads above Woodside. "I was impressed," Wright recalls. "It wasn't a production car. But after driving it, though, I could see how you could get there." After the drive, Eberhard talked Wright into joining the team.

There was plenty to be excited about: Eberhard, who had founded e-book company NuvoMedia, persuaded Musk to sign on as an investor and brought in talent from Ford and GM. But Wright quit after just nine months. Neither Wright nor his former boss will say why. But ask Wright how he's positioned the X1 and you get an idea of where the two companies parted ways. "People won't pay $80,000 for an electric car because it's good for the environment," he says. "But they will if they are buying the fastest car on the road." With $150,000 in savings set aside, Wright went home to build his dream car.

So how do you build the EV of the future on a six-figure budget when GM couldn't do it with more than $1 billion? For starters, you get all the basic parts off the shelf, starting with a chassis. Wright found one he liked in the Ariel Atom, a blazing-fast custom British roadster designed by Simon Saunders, famous for his work with Aston Martin and Porsche. Saunders loved Wright's idea and agreed not only to sell Wright a chassis on the cheap but to style a production version if it ever came to pass.

Next, Wright cobbled together a very special drivetrain. In an EV, three main components replace the work of a standard engine and transmission: batteries to supply the power, an inverter to control the flow of electrical current, and a motor to drive the wheels. The EV1 used old lead-acid batteries, and Toyota's Prius runs on more powerful nickel-metal hydride cells. Neither type packs nearly enough punch to make the X1 a rocket ride. After testing several types, Wright found an Asian supplier of more expensive lithium-ion cells that balance manageable weight with unbelievable power: 4,000 amps, to be precise, about what you get from a small lightning bolt. Wright bought 538 pounds of batteries, enough to supply the necessary juice and a 100-mile range. They can also be recharged in just 4.5 hours.

The next two components, the motor and the inverter, came, ironically, from a team of engineers that GM had worked with on the EV1. They later founded AC Propulsion, a Southern California company that has since refined drivetrain technology. For $25,000, Wright picked up a high-performance motor that redlines at an incredible 13,300 rpm and a custom inverter that acts as the X1's transmission, converting current to control the motor's torque and speed. The final piece was to join the motor to the wheels. Wright pulled a transaxle from an Acura RSX.

By itself, all the hardware is nothing new. The X1's real secret is how Wright engineers it all to keep the car in optimum race mode whenever you hit the accelerator. In any type of two-wheel-drive car, if you can accelerate to a point where the driven wheels are slipping just a bit--rotating 5 mph faster than the other two--you've hit the car's ultimate sweet spot, operating at maximum torque. Achieving that in a standard car is very inexact, since it requires either the driver or an automatic transmission to constantly shift gears, and another component, a "limited slip" differential, to apply force to the right wheels at the right time, especially during turns.

In the single-gear X1, however, Wright has programmed the hardware and the onboard computer to run constantly in this optimum state whenever the car is accelerating. It's a feat that's proven impossible to achieve in a conventional auto. "It's a radical innovation that totally changes how you think of an electric car," says Simon Cobb, director of Lotus's Advanced Vehicle Research Center. "With software you can very cleverly control the storage and release of energy."

Nine months of assembly and testing left Wright wondering if any of this was for real. So last November he towed the X1 to a racetrack near Sacramento to see how his prototype would do against a Ferrari and a Porsche. On paper, a win seemed guaranteed. But he hadn't yet run the car full out. "I wasn't altogether sure what would happen," Wright says. In the first matchup, the X1 crushed the Ferrari in an eighth-mile sprint and then the quarter-mile, winning by two car lengths. In the second race, against the $440,000 Porsche, the two cars were even after an eighth of a mile. But as the Porsche driver let out the clutch in a final upshift, his tires briefly lost traction. The X1, blazing along in its software-controlled performance mode, beat the Porsche by half a car length. "It never occurred to me that I would lose," says Kim Stuart, the Porsche's driver. "It was like a light switch. He hit the pedal and was gone."

So what now? Wright isn't sure himself. Only 50 or so people have driven the car, and Wright has just begun to hold his hat out for potential investors. With $8 million in funding, he says, he is convinced he can put into production a consumer version of the X1 that meets federal safety standards, has a 100-mile range, and recharges in 4.5 hours.

Tesla Motors, meanwhile, will unveil its EV sports car by year's end, Eberhard says. According to several sources, the chassis and styling are based on the Lotus Elise. "It's not a toy," Eberhard says. "The computer technology is far more advanced than anything in a Detroit car, and it will have airbags and meet federal standards."

To bring any EV to the masses, of course, will require much improved battery technology. Toyota won't even look at the exotic batteries found in the X1. But a handful of startups backed by Valley VCs are claiming that big advances are just around the corner. Menlo Park-based Li-on Cells claims that its technology will double the performance of lithium-ion batteries for about half the cost. In a car, that translates into either twice the range or half the weight. Li-on plans to break into the power-tool market in the next 18 months, says CEO Jeff Depew, "but we would love to provide powerpacks for the new EVs."

Thus, the X1 and the Tesla could be just the things to throw the EV race into high gear. As battery prices drop and performance improves, the cars could come within reach of a wider audience. And if oil prices keep climbing, more and more consumers will demand alternatives that are punchier than a Prius. Toyota's Reinert loves the notion of a new upstart EV but doubts that Tesla or Wrightspeed can endure the trials of crash testing and litigation to reach a mass market. More likely, he says, is that the technology in the new Valley cars will be sold to Detroit to help ratchet up performance on hybrids and other cars. "If you sell alternative-fuel cars, they must be superior in every measurable area than the car you would like to replace," Reinert says. The X1's performance specs and price might be a way for Wrightspeed to crack the market, he says, but it will never be more than a small niche.

Still, folks like Wright and Eberhard have more leverage that you might think. Big carmakers, Depew says, "are scared of losing control of the industry. Compare that to here in the Valley, where you have a clean sheet and a sense that anything's possible."

Like, for example, finding those first customers. Wright recently landed his at--where else--Buck's. After meeting Wright and getting a few test-drives, the diner's longtime owner, Jamis MacNiven, couldn't resist. He gave Wright a $30,000 deposit. MacNiven, who drives a 740 Ferrari and owns a solar-powered home in the hills above Woodside, can't wait to turn his commute to Buck's into a joyride. "My record in the Ferrari is 22 minutes," MacNiven says. "Ian's assured me I can get it down to 20."

EXTREMELY RAPID PROTOTYPE

How the X1 stacks up against top sports cars (and the top-selling hybrid).

Sources: Car and Driver; Edmunds.com; Wrightspeed

ELECTRIC COMPANIES

The startups leading development of next-generation EVs.

INSIDE THE POWER PLANT

Wright uses processors, flash memory, and software to get top performance out of standard parts.

MOTOR

Just 15 inches long and a foot in diameter, the motor has only three moving parts--the rotor and two bearings--and redlines at 13,300 rpm.

INVERTER

Using programmable flash memory and embedded software, the inverter constantly adjusts current flow to keep the motor in continuous peak-performance mode.

BATTERIES

The X1 runs on 538 pounds of lithium-ion cells capable of generating 4,000 amps. The car has a range of 100 miles and recharges in 4.5 hours.

ELECTRONICS

An in-dash touchscreen displays battery levels, speed, G-forces, and GPS navigation data.

Michael V. Copeland (mcopeland@business2.com) is a senior writer at Business 2.0.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.