Electric Car Dream Short-Circuits

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Is the notion that Los Angeles will become a capital of the electric car industry skidding to a halt?

It’s starting to look that way. After all, Tesla stiffed Downey last May and said it would locate its electric-car assembly plant in Fremont. And now Coda of Santa Monica, which had looked in Los Angeles and Ventura counties, is poised to locate its final assembly plant in Benicia. (See the article on page 1 of this issue for more.)

Since Fremont and Benicia are both in the Bay Area, it appears Northern California, not Southern, is in the fast lane to become the capital of the new generation of cars.

Of course, Los Angeles does have a victory of sorts with BYD of China. That electric car maker will locate its North American headquarters and R&D staff near downtown. But, as reported last week in the Business Journal, that deal came with fairly generous giveaways from taxpayers. What’s more, there’s no guarantee that it will build a manufacturing or any other facility here, and the 150 jobs it originally promised is down to 102, and they’ve been delayed from 2011 to 2013.

If you think back a year or two ago, Los Angeles seemed to have the inside track in the race to get the electric car industry. After all, an automotive corporate culture is here, what with the heavy presence of Toyota and Honda along with various design studios and the like. Throw in the ports of Los Angeles and Long Beach, the good infrastructure for manufacturing and warehousing operations, and L.A.’s mania for just about anything green, and it seemed that electric car companies, at least Asian ones, would almost have to plug in here.

But the early indication from the electric car companies is that Los Angeles may not be all that attractive a place. What’s particularly unsettling is this: Los Angeles is losing out not to low-cost Tennessee or Mississippi but to the relatively high-cost Bay Area.

On second thought, maybe L.A.’s advantages aren’t all that overwhelming. After all, car companies, like most all companies, are concerned most about their cost structure and efficiency. Los Angeles doesn’t exactly offer low costs: rents, utilities and labor are all high. Efficiency of movement can be challenging, given L.A.’s traffic. And other cities have ports, ones that are cheaper for the users, to boot.

Of course, L.A.’s embrace of anything green often confuses matters. Angelenos seem to think that because they want to buy eco-conscious products, the manufacturers will need to be here. But for the maker of any expensive product, such as a car, the proximity to customers is a negligible consideration.

The good news is that it is still quite early. There are still several decisions to be made by the electric car industry. It is quite possible that Los Angeles will benefit. And, given companies’ tendency to cluster, if another electric car company announces its intention to open a sizable facility here, that would imply that more may follow.

Still, it now appears that getting the electric car industry to park here won’t be the easy victory lap that many thought only a year or two ago.

Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].

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