Dan Elliot, CEO, Phoenix Motorcars

I've been in the business for about 16 years, the automotive industry. I've done chassis dynamic work, break-certification, testing, interiors. I worked on the Ford Electric Ranger project, on contract to them. I also worked on the Think! City project, with Rausch industries. worked on the Ford Echostar, that was a high temperature sodium sulfur battery they were working with in early '90s. Also done durability work on the Honda Civic hybrid, I've been around.

Ingrid Lobet: Is there a still a ZEV mandate that is helping make your venture possible?

Dan Elliot: Yes, there is still a ZEV mandate and really it is based around ZEV credits, producing alternative fuel vehicles to meet a certain specification for ZEV credits. The credits aren't paid by the state so much as that they can be traded among the vehicle manufacturers, and that's how they can be monetized.

What we are really trying to do is use those credits the way the state has wanted them to be used, to use that to drive the cost of technology down. We are using them on the front end while we are getting the vehicles out there in fleets, and working through any bugs, to get the cost down. As our volume moves up into mass production where we are doing 20 thousand units, then the vehicles will be able to support themselves.

Ingrid Lobet: Do you have the money you need for production or are you seeking financing?

Dan Elliot: We have all the funding we need to do the engineering work and that is what we are doing right now. We've been at this for five years. Phoenix Motorcars has been pretty quiet for a long time. This is a five-year process. We're now at the end of our research and development phase. We're going into the commercialization phase. We've partnered with some really good companies-we've partnered with UQM, that's who makes the drive system you can see here under the hood. It's quite small. This drive system is very powerful. UQM has produced drive systems for other types of vehicles--military application and things like electric wheelchairs. They are a good company, a public company trades on the AMEX.

This particular motor is quite small, compared to most internal combustion engine cars. But it's quite hefty, it weighs 180 pounds. It is a permanent magnet DC motor and it produces almost 500 foot-pounds of torque. It has a lot of launch. Now, we've tuned it so it feels like a midrange SUV, but it has A LOT more capability. But if course we don't want to utilize all our energy to go fast, we want to use it to be environmentally friendly, so that is the drive system.

It has a lot of torque, people like to put in a lot of stuff and five passengers, put stuff in the trunk and certainly with the 480 foot-pounds of torque, it will move.

The other thing, we've partnered with Altairnano technologies in Reno, Nevada for the battery. The battery is a lithium titanate called a nano-safe battery. It doesn't have the historic issues and problems that you've seen with lithium ion batteries where they get hot and get into a thermal runaway situation and then burst into flames.

Like the Dell laptops, that is a standard lithium ion technology has a potential for that issue, although rare, it still has a potential for that issue. The lithium titanate, or Nanosafe process, removes the carbon from that process, takes the graphite out, and by doing that and replacing it with an NLTO material, it allows us to do several things, one is rapid charge. We can recharge the vehicle in ten minutes, and that is tremendous. Most people won't use that feature They will recharge in the garage overnight for four, five, six hours. But it does have the capability of rapid charge and it can do that safely.

The other thing is the Nanosafe battery, is it safe, it cannot, because of its chemistry, get into a thermal runaway problem, you can't get that heat-up and then that fire.

The other extraordinary feature of it is extended life. The nanosafe battery has already, we have been cycling it over 20 thousand deep cycles, discharges, and when you are talking about that, you are talking about a battery that will last more than 12 years. The vehicle itself will probably be worn out before the battery. That's tremendous.

Ingrid Lobet: What is the replacement material?

Dan Elliot: NLTO is the replacement, a nano-particle, lithium titanium oxide.

Ingrid Lobet: Any problems with that material? Toxicity? Disposal?

Dan Elliot: No, it's a lithium titanate material, and with the lithium ion battery there are no toxicity issues. It's natural.

Ingrid Lobet: Well cadmium is natural too.

Dan Elliot: That's true. But no, there are no toxicity issues. You should talk to D. Evan House from Altairnano about that.

The other thing is we've partnered with Boshart Engineering and they are doing all the testing and the safety homologation, safety certification. Boshart Engineering is known in the industry for doing this kind of work. They do it for GM, DAEWOO, GMDAT out of Korea. They work with Honda, they work with Nissan, all these different manufacturers. This is the business they are in. Now they are bringing their expertise to bear on an alternative fuel technology.

Phoenix Motorcars is privately held. We have a private placement memorandum out there currently because we are seeking funding to go into commercialization. We are seeking funding now.

Ingrid Lobet: Are the credits essential to the financial well being of the company in its early stages?

Dan Elliot: Yes, absolutely

Ingrid Lobet: How things going with CARB?

Dan Elliot: We have certified with CARB to a Type II ZEV, we are going through it again for Type III ZEV. We have complied and they are issuing the executive orders to us.

Ingrid Lobet: Is Type II a pure ZEV?

Dan Elliot: Type II is a pure ZEV, and Type III is a pure ZEV also. We've previously certified to Type II, which means we are a zero emissions vehicle and we have a range of 60 or 100 miles. The main difference between Type II and Type III is the refuel rate. Type III is historically thought to be based mainly on hydrogen because you had to have a range greater than 100 miles, and be able to refuel in 10 minutes or less. And with this unique battery technology we can actually refuel in less than 10 minutes.

Ingrid Lobet: So you are meeting a requirement that only a hydrogen vehicle was thought to obtain?

Dan Elliot: Yes

Ingrid Lobet: Is that a big deal?

Dan Elliot: It's a huge deal. When we were at the California ZEV symposium, a couple months back, we had the vehicle there, we demonstrated the 10 minute recharge.

Ingrid Lobet: Why did you decide to make a pure battery vehicle instead of a hybrid?

Dan Elliot: Realistically, because we found the battery technology. Plug-in hybrid is a great idea, in fact all the hybrids today should be plug-in hybrids. The real challenge, there was a movie called Who killed the Electric Car, and I don't know, I haven't seen it, but what killed the electric car is the battery technology. Lead acid, nickel metal hydride, did not have the attributes and the cycle life, the durability and the other things that needed to be for an electric vehicle.

This battery technology, as you move into lithium ion, starts solving a lot of issues, but core lithium ion still has a potential for thermal runaway. When you move into the Nanosafe battery, that cures the safety issues and the allows for rapid recharge, so suddenly it makes a whole lot more sense to go to a zero emission vehicle.

And that is why we've been able to do it and that is why we are targeting that area.

Ingrid Lobet: Why not use Nickel Metal Hydride? Is it unavailable as some people say?

Dan Elliot: Really it would be pretty difficult for me to comment on whether there was a conspiracy or something in that regard. My feeling on it is, battery technology, even looking back on nickel metal hydride, really just wasn't there. For an electric vehicle and what has moved us forward, is if you look at all the PDAs and cellphones and laptop computers, there's been a tremendous amount of research on battery technology to power the electronics we carry around. There has been a tremendous amount of investment into lithium ion, and that really is what has gotten us to where we are today. So other companies, like Altairnano, have come on and are researching the core battery technology to be able to move lithium ion forward from drills and PDAs.

I mean my laptop battery, I have a Dell laptop, and the battery lasts maybe 2.5 hours if I am working on a plane. Boy I sure would like that thing to last four, five, six hours. The other things is I go home at night and charge my cellphone. It takes couple of hours to charge. Wouldn't it be great if I could charge my cellphone in 2-3 minutes?

I have every confidence that Altairnano technologies will put their batteries in other places, And I'm not sure what their business plan is in that. For a vehicle, the key part to this is that it is a safe battery, and the thermal runaway issues, historically with battery packs you have had to cool them, pump coolant around them or move air through them to cool them down. Especially in high ambient temperatures you couldn't charge them and low ambient temperatures you couldn't charge them, so you'd have to heat it up a little bit.

This battery has a very wide temperature range and it can be completely sealed because it doesn't have the heat issues, we can seal the pack completely and we don't have to worry about corrosion and rust, dirt and stuff getting in and contaminating it. So...

I don't know if you ever drove the EV1. I loved that vehicle, it was quite powerful actually. Electric motors have a lot of torque. The vehicle was fun car, but it was a two-seater, it was basically one big battery on wheels. I worked on the Ford Ranger, again, a very enjoyable vehicle, but again only a two- seater vehicle.

What we wanted to do from the inception was bring together a realvehicle, with zero emissions technology. And so we looked for a platform that would allow us to do it. We wanted to start with something that was a midsize vehicle, that was a robust vehicle.

We looked for a vehicle that was high quality but unique to the marketplace, we didn't want to utilize a Ford or a Toyota or a Chevrolet, something that people are used to seeing that just looks like, "oh we took that vehicle and converted it." We wanted to start with a fresh platform in North America and that's what we've done.

What we also didn't want to do was make the mistake of Delorean and become an auto manufacturer where you have to design every component from the ground up, that's too costly. So we have partnered with vehicle makers overseas who make cars for other markets such as Europe, that we're able to use here in North American. That gives us a lot benefit, it gives us a high quality vehicle, it gives us a new look that is unique and identifiable with our vehicle line. It allows us to hit mass production volumes without a lot of difficulty and allows us to make sure we have a vehicle that is safe and can be certified for the North American market.

Ingrid Lobet: So what hitches do you have at the moment?

Dan Elliot: Well certainly money is a hitch. We are spending a tremendous amount to make sure the engineering is complete and done correctly. We really need to continue forward to get enough financing to go into commercial production. We are highly confident we will get that. There is a lot of investment right now into the green sector.

[Later]

[Phoenix has an idea for a 10-minute battery recharge]

Dan Elliot:

With the 10-minute charge, today at a gas station you have a tank in the ground that holds 3000 gallons of fuel, sized according to the volume the station is doing. The consumer pumps X-number of gallons and leaves. Say we have have a 35 kWh battery pack on our vehicle. You could, at a fuel station, put underground a 600 KwH battery pack. This pack would charge overnight on the grid, off-peak. It could be sized so that vehicle pulls in, they grab the pump handle and there is a meter that measures the power that transfers from the stationary battery into the vehicle's battery like a fuel pump. You pay the station and then you drive on.

When look at gas stations today, gas station owners are not making a whole lot of money, they're actually making less as gas price increases. Gas station owners are struggling, every time you swipe your credit card, they have to pay 3%. Gas stations are putting in fast food, putting things in there to get the consumer to come in and spend additional money. A place inside to pick up a latte or buy something you need.

If you think about how much time you typically spend at a gas station with an SUV that has a large gas tank, you're there for every bit of 10 minutes anyway.

Ingrid Lobet: Why are you selling only to fleets at first?

Dan Elliot: The reason that in 2007 we are concentrating solely on fleets. We are only going to produce 500 vehicles. If there is a higher demand, which we believe there will be, we may push that number up a bit. But we want to keep it in the 500-700 vehicle range for 2007.

In late 2007 we'll roll out the SUV and a larger battery back, with additional range. So that gives us early 2008, we'll start penetrating into the consumer market. But still, even in 2008, we'll be trying to fill so many fleet orders that the consumer market will be hard for us to fill.

We intend to have a just a very limited number of consumer customers in model year 2007 so that we can get some early feedback and understand how they use the vehicles. In 2008, January or March we 'll start to get into the consumer market.

Ingrid Lobet: Where will you assemble/manufacture?

Dan Elliot: The City of Ontario is very business-friendly and they are working with us to help us find the appropriate space and staffing as well, to look for highly-educated individuals to come to the city. We're intending to do production in the city of Ontario. This space is purely an engineering facility. The space that we are going to go into is 80-100 thousand square feet. What is going to happen, the batteries will be assembled out of the state, coming in large sub-assemblies, integrated into the car in Ontario. The motors come from Colorado. Vehicle itself shipped from Korea.

Ingrid Lobet: What if this goes well for Altairnano and they want to sell to other carmakers who are doing what you are doing?

Dan Elliot: We have an agreement with Altairnano for exclusive use in our market, 100% electric vehicles that are below 10,000 lbs GBW. If Toyota wants to use it on their hybrids, I hope they do. It will drive the cost down, the more people using the battery. I don't want to lock up Altairnano's technology.

For us, we need just that little jumpstart in our market area. But once that is over they can go into even our market area. We want this technology out there in the marketplace.