http://www.mercurynews.com/mld/mercurynews/business/11956577.htm

Posted on Wed, Jun. 22, 2005

Cars that run on overnight charge catch valley VC's eye

By Matt Marshall
Mercury News

With oil prices hitting new highs, venture capitalists are considering a
kind of car you can plug into your home power outlet at night. And one
person they'll be hearing from soon is Palo Alto's Felix Kramer.

The Toyota Prius and its ilk are in high demand -- with engines that run on
gasoline and electricity.

But with a plug-in, you can do away with gasoline almost entirely. You can
get a car that charges overnight so you drive it 10 miles each way to work
on batteries alone. And if you need to drive it more, you can rely on a
cleaner fuel blend, say, 80 percent ethanol -- made from corn or sugar --
and 20 percent gasoline.

With the U.S. Senate's move this week to add new tax credits for
gas-electric hybrid cars in its version of national energy legislation, the
plug-in car may also get new impetus.

``I'm looking very actively to play,'' said Marty Lagod, a venture
capitalist at Firelake Capital in Palo Alto, who wants to invest, but also
wants a plug-in car himself.

Though Silicon Valley sometimes has gotten a bad rap for not excelling at
clean tech, it turns out the region is a hotbed of plug-in innovation.

The Electric Power Research Institute in Palo Alto, for example, has helped
develop plug-in hybrid conversions for the Dodge Sprinter van, to be tested
as early as this fall. And Andrew Frank, a professor at the University of
California-Davis, has built several such vehicles with his students.

But some say it's time to build real businesses. And that's where Kramer
comes in.

We met Monday with Kramer, founder of CalCars, a Palo Alto non-profit where
he and engineer Ron Gremban developed a plug-in conversion of the Prius.
They've gotten it up to a 100 miles per gallon, compared with the 45 mpg
maximum driving a normal Prius.

When Kramer pulled up to a restaurant in his Prius on Lytton Avenue Monday,
the only parking space available was behind another Prius. They're that
popular.

Kramer is about to start looking for venture capital for a plug-in, he
said. So far, he said, he's been content to let others do the business.

For example, he approached Greg Hanssen, of EnergyCS in southern California
last year, with a crude conversion. Hanssen launched a start-up called
E-Drive Systems, which soon plans to sell conversion kits for the Prius. He
is looking for angel investors, too.

The problem is that E-Drive's conversions will cost $10,000 and $15,000,
which will leave most people out in the cold, Kramer said. ``It's for movie
stars,'' he said, predicting they'll sell only 100 to 1,000 vehicles.

Kramer thinks he can sell 10,000 to 100,000 vehicles, and at $750 a car in
possible carbon credits, he thinks there's a promising market.

The easiest option, he said, would be to have a major automaker sign on,
especially Toyota. With its economies of scale, Toyota should be able to
get the cost down to about $3,000 -- enough for consumers to afford. They
might even be able to save money over the life of the car, he said. But
Toyota, one of the world's largest automakers, hardly feels any urgency to
embrace a plug-in car: ``The situation is evolving,'' said Cindy Knight, a
Toyota spokeswoman in Southern California. ``We're studying the matter, and
keeping a careful eye on the projects happening around California.''

The refusal to commit is why Kramer is considering Ford Motor, which has
expressed interest in clean technology, and also some other Asian automakers.

Ideally, though, he'd set up a company that could be a qualified vehicle
modifier (QVM), which would be accepted by an automaker as an official
partner, and operate under the automaker's warranty. If he has a separate
company, that takes away the risk for automakers, he said.

For that, though, he needs plenty of capital. VCs may balk: If the car is
at all successful, what's stopping Toyota or others from building their
own? Whether or not he pulls it off, the hum of regional experimentation is
a good sign. Silicon Valley can no longer be considered a slacker in clean
tech.

Contact Matt Marshall at mmarshall@... or (415) 477-2518.