Friday, March 02, 2007

Double Play: All-Electric Truck

Phoenix Motorcars announced the first sale of four of its all-electric Sport Utility Trucks (SUTs) to Pacific Gas and Electric (PGE: NYSE). The sale presents a double win for our Small Cap SEARCH newsletter, in which we profiled two of Phoenix’s partners. The truck features the Nanosafe batteries developed by Altair Nanotechnologies, Inc. (ALTI: Nasdaq) and a propulsion systems built by UQM Technologies, Inc. (UQM: AMEX).

The trucks will be used by PG&Es employees who repair and service the big California utilities infrastructure.
PG&E operates the fourth largest fleet of commercial trucks in the country and has pledge to order 200 SUTs each year from Phoenix Motorcars. PG&E already operates approximately 1,000 natural gas and fuel cell vehicles.

The Phoenix SUT has the same functionality as a conventional half-ton pickup truck, operating at high-way speeds and carrying a full payload and five passengers. Most importantly it requires no gas and can travel up to 100 miles without a recharge.

Now you might be thinking that you have heard this kind of news before from hybrid and all-electric vehicle manufacturers. What is different about this all-electric vehicle is that it can be recharged in less than ten minutes and the battery could last up to twelve years.

This is Altair’s contribution to the vehicle. Its nanomaterial technology is incorporated in
Nanosafe lithium ion batteries, enabling faster charge time, longer-life, and reducing safety risks associated with the “thermal runaway” that plagues other battery types. Altair hired battery engineers who had been with GM’s Delphi division to help commercialize its proprietary lithium titanate spinel oxide (LTO) electrode materials that replace the graphite electrode materials used in conventional batteries.

Batteries are just one of several market opportunities that Altair is pursuing for its nanomaterials technology and expertise. The Company has been investing heavily in R&D and market development and has yet to produce profit. Orders for battery packs from Phoenix Motorcars or any of it other battery market partners are non-likely to propel the Altair to breakeven in 2007. Nonetheless, the PG&E order presents strong endorsement for Altair and its ability to commercialize its science.

UQM Technologies is in much the same situation. Its
propulsion system is integrated into the Phoenix SUT to take the energy from the Altair batteries to the SUT subsystems. All-electric and hybrid vehicles require a complete revision of the drive train system to make the vehicle perform on par with conventional vehicles. UQM has opportunities in military as well as commercial markets and is able to earn revenue on engineering and consulting services as well as product sales.

The question for investors in these early stage companies is whether higher volume orders will follow this one order for 200 units. Profitability for either Altair or UQM probably requires unit orders in the thousands per year.

One point in favor of this consortium is that the more fuel-efficient vehicle is likely a faster route to reducing fossil fuel consumption and reducing greenhouse gas emissions - two hot issues in our economy. For example, compressed natural gas reduces particulate emissions by 90% and nitrogen oxides b 33%. All-electric vehicles reduce emissions to zero at the vehicle and shift fuel efficiency and pollution reduction to the electric generation site.

Some scientists argue that the electric generation site is a better place to employ alternative, renewable fuels. A central location might make it easier to solve fuel transport problems associated with hard to distribute fuels (think sticky biofuels) and safety issues with volatile fuels (think hydrogen). Furthermore, pollution abatement solutions for fossil fuel combustion might be more effective at the electric generation site than at the vehicle.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. ALTI and UQM are profiled in the
Small Cap SEARCH Newsletter. (Sign-up for a free trial subscription by clicking on the icon at the right.)

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