Coda Automotive Faces Self-Reckoning in 2013
For the past couple of years, the electric car market has been characterized by a degree of irrational exuberance. Much of that was killed in 2012. This past year dealt a tough lesson about overstated sales goals for Nissan—and bankruptcies for A123 Systems, Azure Dynamics, Ener1 and Think. Better Place’s Shai Agassi stepped down from the top position at his company, where elaborate battery-swapping schemes have not gained traction. The takeaway for EV companies and fans in 2013 should be to reset expectations—and to be brutally honest about real shortcomings. That’s where Coda Automotive comes in.
Last week, a former employee who asked to remain anonymous informed me that Coda, the maker of a bland China-sourced EV, recently laid off approximately 50 of its employees. Only after PluginCars.com posted the news did Coda officially acknowledge the lay off. After the post (which was picked up by major news outlets), two former employees provided more disturbing news about the state of affairs at Coda. They accused executives of refusing to accept or acknowledge the realities of its business.
“The core problem within the company is they didn’t want to listen to people that had a different opinion,” one source told me. “You couldn’t disagree with the senior organization and be held in good standing.” The source also said the company had a “spend mentality,” explaining that executives were lured to the company with salaries above industry norms, made frequent flights to China in business-class, and despite low sales (only about 100 vehicles so far, and only available in California) had at least a few more vice-presidents in the sales department than Coda required.
I made multiple requests to speak with Coda’s communication team, to Mac Heller, its chairman, and to Shaun Del Grande, the president of the Silicon Valley dealership group that sells Coda’s sedan. All requests were declined. “We decline to respond to rumors and speculation from anonymous sources,” said Matt Sloustcher, a company spokesperson.
The layoff of approximately 50 people—predominantly in sales and marketing—apparently corrected some of the bloated sense of optimism about the prospects for a $40,000 electric car built to China’s relatively low standards of quality and safety. In a company statement, Coda said the lay off was “to streamline our operations and right-size the company.”
Coda’s board is made up of razor-sharp business leaders, such as Heller, formerly the top mergers and acquisition guy at Goldman Sachs; Henry Paulson, another Goldman Sachs exec and former U.S. Secretary of the Treasury; John Bryson, former U.S. Secretary of Commerce; and Thomas McLarty, former Chief of Staff for President Bill Clinton.
What these investors apparently couldn’t see—they are, after all, Wall Street guys, not car guys—has been made abundantly clear by the market. The company said it would sell between 10,000 and 14,000 cars by the end of 2012—but it has sold fewer than 100 units. That’s a clear message. Did Coda leadership not expect its electric sedan to be cross-shopped against cars like the Nissan LEAF and Chevy Volt? “The belief was that if it’s an EV, people will buy it,” one of the insider sources told me. “It almost became more of a religion than a business plan.”
Turning a Corner
I would be shocked if the company’s top-notch leadership—which has raised a whopping $320 million in private capital—is not preparing a major shift away from cars, and towards Coda Energy, its spin-off focusing on stationary grid storage systems. According to the sources, Coda will find it difficult to produce substantially more cars for a number of critical reasons, including strained relations with is Chinese partners.
The EV industry experienced a lot of growing pains in 2012—a year in which the best intentions of entrepreneurs wanting to move transportation off oil, and on to electricity, crashed head-on against a challenging marketplace. I don’t believe we’re entirely finished with frothy expectations, especially if EV startups fail to exhibit new levels of honest self-assessment.
Despite the difficulties facing newcomers like Coda, the overall plug-in car market continues to grow—with 2012 sales nearly three times the level from last year. This trend will continue, even with changes in the roster of automakers offering electric vehicles.
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