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Red Herring - CA,USA Sunday, April 30, 2006

Q&A: EDrive's Greg Hanssen

EDrive's president says the company plans to launch plug-in conversion kits for the Toyota Prius hybrid this summer.

With oil prices above $70 per barrel, plug-in hybrids are gaining worldwide attention.

The hybrids, retrofitted with extra batteries, plugs, and chargers, use electricity from wall outlets to get more than 100 miles per gallon, albeit by adding electrical energy generated by other sources.

DaimlerChrysler and Toyota Motor are researching the technology, and even U.S. President George W. Bush mentioned plug-in hybrids in his Earth Day radio address last week (see Plug-In Hybrids Get 100+ MPG).

Some startups are working to make converted plug-in hybrids available to the masses in the next year, including EDrive Systems. Engineering company EnergyCS has developed a system that converts the Toyota Prius hybrid into a plug-in, and EDrive-a joint venture between Energy CS and electric vehicle company Clean-Tech-has been formed to commercialize the technology.

'We realize there aren't a whole lot of people willing to pay an extra $10,000 to save a few hundred dollars on gas every year.' -Greg Hanssen, EDrive

Greg Hanssen is the president of EDrive, and a founder and the vice president of engineering at EnergyCS. EDrive plans to begin selling its conversions this summer, and is targeting a price of $10,000 to $12,000, on top of the price of the Toyota Prius. The Prius suggested retail price is $21,725, putting the final price tag well into the range of conventional luxury cars.

Mr. Hanssen said his involvement with plug-in hybrids began in 1997, when he began leasing an EV1 electric car from General Motors. He got it mainly because it was cool and could drive fast using no gasoline. "But then it opened my eyes to how much our civilization is based on fossil fuels and gas, and how precarious it is," he said. "We've been using so many of the Earth's resources and expecting so much, it's going to be a really rude awakening once we discover we can't keep this up."

That's when he switched from just being interested in the technology to trying to find something better, he said. The path ahead became clear when EnergyCS was working with technology companies Texaco Ovonics and Quantum Technologies to build a hydrogen-powered Prius.

Hydrogen didn't produce as much power as gasoline in the same internal combustion engine, so EnergyCS was developing electronics to trick the engine into working harder to deliver a similar level of combustion. Mr. Hanssen said he and a coworker then asked themselves "How hard would it be to trick the car into using bigger batteries?"

At the same time, CalCars, a nonprofit that advocates plug-in hybrids, was having trouble building its first plug-in hybrid, said Mr. Hanssen. The hybrid kept ignoring the extra lead-acid battery the nonprofit had installed, he added. Then EnergyCS developed the electronics needed to "trick" the car into using its extra battery, and the CalCars plug-in worked.

EnergyCS began working on its own conversion technology about a year and a half ago, partnering with Valence Technology, a Red Herring 100 company that makes large-format lithium-ion batteries for vehicles. EnergyCS converted its first Prius last February.

"The great thing is Toyota has already done 90 percent of the work for us," Mr. Hanssen said. "All they need is a bigger battery, a plug, and a little charger. What we're doing is just an evolution. Turning a Prius into a plug-in hybrid is a lot less radical than turning a gas car into an electric car."

Q: Why did this technology appeal to you? A: Me and my partner, Pete Norton, have solar panels on our roofs and drove electric cars, and we're appealing to a similar market: people who get it. We're on the bleeding edge. For everyone else, I suggest a Geo Metro. People complain about gas prices, then drive Hummers. Carpool, drive the speed limit, if not slower, and stop whining. And get used to it. You're going to look back at 2006 and wish you had $3 gas.

Q: Will the plug-in conversions cost $10,000 to $12,000 as soon as they're launched, or only after a ramp-up in production? A: It's hard to say. My goal is to get this available to the public as soon as we can have a manufacturable, reliable, safe system. I really do hope that it will be under $12,000. But while I'm optimistic that we'll be under $12,000, I can't say that definitely right now. When we look at all the other elements in manufacturing-things like insurance, paying back our R&D development debt-those are things we might have to consider when making that price.

Q: Are you looking for investors? A: We're got a little internal funding, but for the most part, we're not looking for investors at this point. Quite honestly, the market's probably not that big for a $12,000 retrofit. While plug-in hybrids might sound like a magic bullet to our energy problem, right now, they're not economically viable. But the people we're targeting are the hyper-early adopters-those who had the electric car, those who want to do what's right for the environment. We're hoping those will give us a nice niche market, and once those people are on the road they will make a statement.

Q: How are you going to expand your market from the "hyper-early adopters" to the mainstream? A: I think the market will blossom over the next five years. What may be several hundred people in the first year, could be... several thousands in five years. We realize there aren't a whole lot of people willing to pay an extra $10,000 to save a few hundred dollars on gas every year, but the question is, will people five years from now be willing to pay an extra $1,000 to save an extra $500 on gas? That will happen a lot sooner than you will see a fuel cell car in your neighbor's driveway.

Q: Why? A: People are in a hydrogen cloud right now, thinking it's right down the road, and they're in for a rude awakening. It's going to be 15 to 20 years down the road if it comes at all, and I'm of the mind that it won't. It's idiotic when you think about it. But people treat hydrogen like it's a religion, and believe in it even though there's no evidence that it can work. The belief is, "We've tried everything else; this is the last thing left. Let's just ignore how much energy it takes to make hydrogen."

Q: Are you going to make any money? A: The goal will be to make EDrive a sustainable company, in so much as the sale price will recoup the cost of manufacturing, the cost of installation, the cost of warranties, and enough to pay back the R&D costs going into it. It's just like any company. I'd imagine we're going to spend the first year or two paying off debt, and then if we're able to grow a substantial enough market, we'll get a bit of paybac