The Bigger Implications from the Think Bankruptcy

By · July 01, 2011

Think City

Norwegian based Think Global AS is in bankruptcy. We have heard this news before (four times actually). The company’s latest variation launched in Europe in 2010 and had the wholly owned subsidiary, Think North America manufacturing battery electric vehicles for the United States in Elkhart, Indiana. But last fall, it started to run into financial trouble.

Rumor has it that by the end of 2010, Think had about 500 of its BEVs, the City, unsold (which is low considering they announced production of 2,500 vehicles last October). By March 2011, production of the City had stopped in Finland, ending glider manufacturing for Think North America. If the rumor of unsold vehicles is true, then Think NA claiming that the production stoppage would have little impact on their operations was likely true. But in the end, it appears that the stoppage may have had more to do with a lack of funds than it did an excess of inventory (though too much inventory often leads to too little funds).

There has been a lot of press on the Think bankruptcy and Ener1’s losses. Think NA claims to be able to survive the bankruptcy (and since the company that has been through bankruptcy four times, they might know a thing or two about surviving it). However, I am skeptical. So, the question many are asking is whether this spells a broader trend in the plug-in vehicle world. In my opinion, there are definitely lessons to be learned from Think.

First, the size of the vehicle is important. Think’s City is a tiny car, even by European standards. For comparison, the vehicle is about a foot and half longer than a Smart ForTwo (123.7 and 106 inches, respectively) and about three feet shorter than a Ford Fiesta (160.1 inches). This spells trouble for Think NA, as this size of two-door vehicles is typically not as popular among Americans. In Pike Research’s reports on Plug-in Electric Vehicles and Hybrid Electric Vehicles for Fleets, I point out that electric vehicle segments often limit the appeal to both consumers and fleets. To add weight to this, I can point to a recent press release from GfK stating that they found that U.S. demand for compact cars (such as the Ford Focus or Honda Civic) grew to 18% in May 2011, while demand for subcompact cars (such as the Ford Fiesta or Honda Fit) remains flat at less than 4%. In other words, the compact car sized Nissan Leaf and Chevrolet Volt more appropriately match current consumer demand trends with lengths of 175 and 177.1 inches overall, respectively. Subcompact “city” BEVs will be relegated to very small niches simply due to their architecture.

The second challenge facing Think and many other start-ups is price. With a retail price of $36,495 (including destination charges), a quick, back-of-the-napkin calculation of total cost of ownership puts the Think City at about $38,095 before federal incentives over 120,000 miles, compared to $33,269 for the Ford Fiesta with 31mpg at $4/gallon gas prices. Assuming the purchaser qualifies for the full $7,500 incentive, the City would be less expensive, but it is not a huge savings when compared to the larger, four-door, Fiesta. Think’s prospects look even worse when compared to its larger BEV competitor, the Nissan Leaf.

Total Cost of Ownership

And there’s the rub for new brands like Think. A niche vehicle that does not offer unique and compelling features or specific positioning in the marketplace is not likely to last long, particularly if that brand cannot offer savings over other BEVs. Being a “city” vehicle in and of itself is not a unique enough position in today’s market. The Tesla Roadster has done well because despite its price, it has a unique proposition in the market. The Nissan Leaf and Chevrolet Volt are both doing well because they have broader appeal and are more appropriately sized to reach a bigger market. Even these two are niche vehicles in the compact car segment, which had sales of over 1.4 million vehicles in 2010.

Think has financially failed despite sales of just over 1,000 vehicles since 2010 and what appeared to be solid financing. This should serve as a shot across the bow for other start-ups who need to clearly define their unique position in the North American or European markets.

Comments

· JJ - Can (not verified) · 3 years ago

Also we have to consider all the money we save on the oil changes and other fluid changes and filters and other parts that need to be changed on ICE vehicles, including all the time we waste at the garage and then going back to keep trying to fix problems that were misdiagnosed.

· Chris C. (not verified) · 3 years ago

6 cents per kWh? There are some places (and rate plans) in the country where you can get that, but in a back-of-the-envelope cost comparison calculation that's a terribly low value to use.

Rework those numbers with more realistic 10-20 cents/kWh and you'll see it's nearly impossible to justify an electric cars purely on an economic basis. TODAY. But the technology is rapidly improving (the costs in particular) and I have no doubt that EVs will wash like a tidal wave over the market soon enough.

· Larry P (not verified) · 3 years ago

Posing Think's failure as a test of the concept isn't really fair. It was only on the market publicly for a few weeks before the bankruptcy, nowhere near enough time to realistically gauge demand. Had it been backed by a major auto firm like Ford or Nissan, they probably could have sourced the components more cheaply, they'd have marketing already in place, and they wouldn't have had so many quality control problems. I think the design could have succeeded, given a better manufacturing structure.

· · 3 years ago

Actually, Think is radically different from every other EV on the market now, in that it was designed from the ground up as an EV. The packaging options are much more flexible with an EV drive train, and it really shows in the Think, which almost seems bigger on the inside than it is on the outside.

The drawback is economy of scale. Nissan, Chevy, Ford, even Tesla shares their EV "platform" with a conventional piston engine car that defines the layout, so the phenomenal packaging efficiencies of the Think are not available to them. But they have lower costs in return. OK, fine. And a long car with not as much cargo space that is hard to park in New York City, Chicago, LA, etc. Will the market continue like this as it has for years? Probably not. BMW is preparing for the Mega Cities with some very small cars and has been leading with the Mini.

Perhaps the Think is ahead of its time, or perhaps the media is just stupid or doing the will of their corporate sponsors. But there are significant advantages to the Think that should be obvious to any one who is really paying attention to the EV field. And rock solid battery charge estimation, which the Leaf does NOT have. What else is more important in EV electronics?

· Alvord1430 (not verified) · 3 years ago

I bought the Think City after months of going to my local Chevy and Nissan dealers asking for a Volt or Leaf only to be told they don't have them or some kind of wait list BS. If its not in the showroom, IT DOESN'T EXIST. Think is not just a bunch of advertising hype, Think can actually sell you an electric car.

· · 3 years ago

@Alvord1430 (not verified) · "If its not in the showroom, IT DOESN'T EXIST."

Hmmm - who should i believe ? My lying eyes which see Leaf in my garage or your statement of fact ...

· · 3 years ago

For us, the Leaf is also unavailable right now. We're not in one of the chosen markets, and the local dealer knew very little about the Leaf, except that he didn't expect to be able to sell any for many months.

Unfortunately, here it is a similar story with the Think: we tried to buy one, but they wouldn't ship it to us because we weren't in one of the target markets, and I hear that there were other potential buyers in the same position. Perhaps it is wise of them not to sell cars until they have a local service network in place, but it's frustrating to know that they have cars to sell and buyers who want them.

As far as I can tell, the only electric car that we can buy now in our area is the Wheego, and they actually are ready to equip one of the local mechanics to provide service.

· Dave K. (not verified) · 3 years ago

Chris C. I would say $4/gal. for the next 120K miles is kind of optomistic as well, and changes in the gas price move the equation a lot more than a few cents/Kwhr.
You really have to hand it to Nissan, they bet the farm on EVs, and if they were right they will dominate the market for years. Sadly, Th!nk was just too small and too late, if they had been selling Cities for $36K in 2008 when gas prices spiked it would be a whole different story.

· · 3 years ago

Dave,

Very nicely thought out and presented article. Thanks!

· cld (not verified) · 3 years ago

@Alvord1430 (not verified) · "If its not in the showroom, IT DOESN'T EXIST."

Hmmm - who should i believe ? My lying eyes which see Leaf in my garage or your statement of fact ...

As kcave suggests, I believe Alvord was referring to the lack of availability of the Leaf in his market, not the existence of the Leaf itself.

My brother bought a Think City (from a dealership in Indiana that actually had a tester available) two weeks before the bankruptcy was declared. For him, the Leaf wasn't available, and the Volt was out of his price range. The Think City was just what he was looking for for his daily commute of 26 miles. The federal and Indiana state incentives didn't hurt either at close to $17,000 off of the MSRP. I recognize all the caveats about the Think City (Heck, I own a Zenn!), but at the end of the day, it was available and it fit the bill for my brother. I think the real problems Think had were the manufacturing cost overruns and the limited public sales availability, both in Europe and the U.S. If more of the cars had been available to the public in more markets, I bet this whole discussion would be moot.

· Alvord1430 (not verified) · 2 years ago

I really enjoy the Think City. I wanted a freeway capable electric car right now. I drive it almost 400 miles per week. I used to spend $240 per month on gas and now I only spend $20 per month. People can't believe it when I tell them. I bought a ClipperCreek LCS-25 and put 240V outlets in my relatives homes. I created my own charging station network. My employer also provided a 240V outlet. Unfortunately, the poor business state of Think and EnerDel might leave me on my own for repairs. It also makes it difficult for me to recommend the car to others. However, the Think City did satisfy my desire for immediate EV gratification.

· Jim McL (not verified) · 2 years ago

Alvord, I would not worry much about service. EVs need relatively little service and the Think is the most mature EV on the planet.

I got confirmation that www.cleancities.com has all colors of the Think City EV in stock, and they have no hesitation about shipping out of state the way the factory in Indiana did. Price is the same as the
www.Thinkev-usa.com website, and retains the Federal $7500 tax rebate eligibility.

So it sounds like Think is getting back on its feet now that bankruptcy is behind them.

· IronRanger (not verified) · 2 years ago

I have had a Think CIty since March 2011. I have over 7500 miles on it and love it. I am currently saving over $300/month on Gas. I have no complaints whatsoever about the car......I am however disappointed in the lack of charging stations that were promised when I bought the car......they are being installed 6-9 months after they were promised. Still waiting for the charging station to be install at the Indianapolis Airport.......we are getting there but slower then we had hoped. :(

· Alan Larson (not verified) · 1 year ago

6 cents per kWh? Not likely. I just checked the bill, and it is 33.561 cents per kWh here in California. Sure, there are special rates for power for electric cars, but they don't tell you about how your daytime usage goes up in cost (so they collect it from you for other things, instead). If California wanted to encourage electric cars, they would enact more reasonable electric rates.
As it is, you would spend less on a VW TDI (Diesel) than an electric here.

· Spec (not verified) · 1 year ago

Gas costs $4/gallon today where I live. And I can assure you that the price of gas is not going to remain that low for the next 10 years. The price of electricity will remain steady though. They can make electricity from natural gas, coal, wind, nuclear, geothermal, solar, etc. Heck, if they start raising electricity prices then I can just install a solar PV system and create my own.

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