A Reality Check as Ecotality Inc Teeters on the Brink of Collapse

A reality check as Ecotality Inc teeters on the brink of collapse
A reality check as Ecotality Inc teeters on the brink of collapse

While there is no doubt that the electric vehicle sector is enjoying something of honeymoon period, with an array of positive signs from manufacturers, battery technology companies and governments around the world, the road to the mass market may not be as smooth as many expected. Today we hear news that Ecotality Inc is on the verge of filing for bankruptcy protection with its shares down as much as 84% on the NASDAQ.

This is an electric vehicle charging company which has received significant finance from the U.S. government before going public on the stock market in 2005. The operation has failed to generate a profit since going public and while first-quarter turnover was just under $16 million, the company still reported a loss of $588,000.

What went wrong with Ecotality Inc?

The simple fact is that the company, which trades under a variety of different brand names for its electric charging services, was unable to sell enough chargers to finance the operation going forward. Even though the company has yet to file for bankruptcy protection, and is taking advice from an array of advisers about other options, it has stated that there is insufficient finance available to support the business in the second half of 2013.

Quote from ElectricForum.com : "As we see more and more electric cars on the roads perhaps we now need to look more closely at electric car charging stations. How far away from you is your nearest car charging station?"

There have been issues with regards to overheating with some of the company’s products which has obviously placed further pressure on its finances and dented the company's reputation somewhat. Sceptics will pick up on the fact that the US government has offered finance to this operation in years gone by but the reality is that with such a new sector as the electric vehicle industry there were always going to be failures along the way.

The long-term prospects for electric charging networks

As we have seen over the last couple of weeks, various government and private companies across the world have put aside a significant amount of money to invest in electric charging networks. We are talking literally billions of dollars put aside to install confidence boosting recharging stations across the world. While it will take some time to put together such an enormous integrated network it will certainly be worthwhile and will assist the EV market in getting ever closer to the mass market.

It may be that Ecotality Inc was just ahead of the times, maybe the technology was not as up-to-date as first thought, or it may well be that other companies have simply overtaken the operation. There are likely to be further casualties in the run-up to mass-market penetration and while they will create negative headlines, and short-term negative sentiment, many experts believe that the electric vehicle industry is as strong today as it ever has been.

Conclusion

The U.S. government will no doubt receive further criticism for its past investment in Ecotality Inc., but the reality is that there have been more successes than failures. Indeed there are likely to be more high-profile failures across the worldwide electric vehicle sector in the short to medium term as more mainstream systems emerge and future protocols are agreed which will leave some technology obsolete and out of date.

It will be interesting to see how the industry grows in the future because it is likely the shape we see today will be very different in a decade.