How Terry McAulliffe Might Kill the Electric Car
On July 6, GreenTech Automotive celebrated the start of production of its first car, a neighborhood electric vehicle (NEV) called MyCar. The launch garnered national media attention due to presence of several high-profile political VIPs. Bill Clinton delivered a speech and posed with the vehicle alongside GreenTech chairman Terry McAuliffe, a longtime friend and fundraiser for the Clinton family.
This week's New York Times Magazine examined McAuliffe's career in politics and the nature of Washington fundraising networks—but did not provide substantial details about MyCar and its dubious business prospects. The company might have deep political connections, but it lacks auto industry experience and stands little chance of success in the marketplace.
Despite the boisterous optimism that McAuliffe and the company's other supporters showed earlier this month, there's no evidence that GreenTech will grow into a regional job-creating powerhouse as promised. McAuliffe said his company aims is to sell 10,000 vehicles during the first year of production. So far, the company has announced plans to deliver about 20 MyCars to local Dominos Pizza restaurants, and a somewhat vague distribution agreement in Denmark that it says could lead to “thousands” of sales there.
Last year, Pike Research released a report estimating the annual worldwide NEV market at 37,000 units per year, projecting it to grow to 55,000 units by 2017. In the United States, low-speed vehicles (LSVs) are limited to a top speed of 25 miles per hour and are prohibited from traveling on roads with speed limits exceeding 35 mph, making them impractical for most commuters.
The lithium ion-powered version of MyCar will cost around $18,000 and carry a claimed range of about 115 miles―a big price tag and a lot of battery power for a vehicle that is commonly regulated under the same rules as golf carts. Whether that combination proves attractive to consumers and private fleets remains to be seen, but demand for full-speed feature-rich EVs like the Nissan LEAF has so far proven to be softer than expected.
McAuliffe says GreenTech has raised $100 million so far―although the company won't give any details about where that money is coming from and how much of it is destined for the U.S.-based manufacturing side of the business as opposed to its operations in China. Does a company that sells $18,000 vehicles in the niche NEV market really warrant $100 million in startup capital?
The Back Story
What details can we piece together about GreenTech? The company was born out of a failed partnership between current CEO Charles Wang and a Chinese auto magnate named of Yang Rong. Terry McAuliffe effectively replaced Rong as chairman of the company. At the time, what would become GreenTech had little money and owned no technology of its own. McAuliffe and Wang purchased an existing Hong Kong-based NEV manufacturer, EUAuto, after McAuliffe saw a MyCar on the streets of London and offered its owner $100 to take a brief test drive.
GreenTech received support from politically influential members of both parties. Former Mississippi governor Haley Barbour tangled with Clinton and McAuliffe throughout the 1990s as chairman of the Republican National Committee, but at the July 6 event, the three men stood side by side in support of a business that claims it will bring thousands of jobs to Barbour's state.
Hillary Clinton's brother Anthony Rodham sits on the board of an investment group created to raise funds for GreenTech, as do former Louisiana governor Kathleen Blanco and a former head of the IRS. GreenTech CEO Charles Wang formerly worked at one of Washington, D.C.'s most influential law firms.
EUAuto's operations have since been split between GreenTech's Virginia headquarters and a converted elevator factory in Horn Lake, Miss. GreenTech says it will soon open large new factories in China and Tunica, Miss., planning to build MyCar's drivetrain and battery management system at its U.S. facilities for final assembly in Asia. The company promises to create an initial 426 jobs in the United States, ramping up to as many as 1,500 by the end of next year.
Path to Citizenship and Start-up Funds
For part of its funding—GreenTech isn't saying how much—the firm is counting upon the little-known EB-5 program, which allows prospective immigrants to gain a path to citizenship by investing $500,000 or more into approved projects. At the end of a two-year period, if a project is deemed to have created 10 permanent jobs, the investor and his or her family are issued visas.
As reported in the recent New York Times Magazine article, GreenTech's “primary investment group” is Gulf Coast Funds Management LLC, a firm specializing in EB-5 fundraising. Both McAuliffe and Gulf Coast CEO Anthony Rodham have travelled to China to speak at investor conferences aimed at attracting wealthy Chinese families to the program.
Unfortunately, the EB-5 program has recently proven susceptible to fraud, leading to a chorus of calls for reform. Prospective immigrants are typically charged a non-refundable fee of $40,000 or more by firms like Gulf Coast, and are sometimes told by agencies in their home countries that their investments are guaranteed. In several instances, families have lost their money and faced deportation due to alleged fraud.
Asking for Trouble
Failure at GreenTech could prove disastrous for its EB-5 investors and the local communities it's made promises to help. Moreover, if GreenTech is unable to deliver on its promises, it could affect the reputation of modern electric vehicles.
In the wake of the Solyndra collapse, Republicans have already been targeting government support for electric vehicles. (Never mind the major distinctions between viable EVs and a questionable neighborhood electric vehicle.) Though MyCar doesn't qualify for federal loans, it does stand to receive at least $10 million in incentives from the state of Mississippi. Failure for GreenTech would be likely to increase media scrutiny for electric vehicles, particularly with such politically polarizing figures as Clinton and McAuliffe associated with the project.
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