Ener1 (Nasdaq: HEV) has its pockets turned out again getting $20 million in equity financing yesterday. Over the last month, a cool $85 million has been handed over by investors, showing the capital markets haven't given up on lithium ion batteries yet. The question is, should you?
What concerns me most is Ener1's lack of long-term capital planning, diluting existing shareholders. It has raised $160 million in equity this year after raising over $120 million in capital since 2007. A123 Systems (Nasdaq: AONE), another company waiting for electric vehicles to take off, has raised even more cash, but has planned longer term with $353 million in cash on the balance sheet at the end of last quarter, a cozy amount when compared to Ener1's $10 million.
Management is still making the argument capacity, not demand, will be the issue in coming years. Call me a skeptic, new electric vehicles have been slow to come to production in the U.S., and although the large truck and bus market may be faster to launch, they haven't slowed the cash burn. New vehicles are going to have to launch to help both companies. Below are highlighted vehicles already launched or planned to launch soon.
|
Model |
Anticipated Launch | |
|---|---|---|
|
Ener1 |
Th!nk City |
Launched |
|
Volvo C30 |
2011 (low volume) | |
|
Japan Postal Service |
2011 (1000 vehicles) | |
|
A123 Systems |
Fisker |
2011 |
|
Navistar eStar |
2010 (400 vehicles) |
Burning cash
As capacity is being built, the cash burn is quick for both companies. Ener1 burned through $49.8 million in the last 12 months of operations alone, and another $70.3 was spent on investing cash flow. A123 burned through $86.5 million in the last 12 months of operations, spending another $69.3 on investing cash flow. At that rate, shareholders should be concerned about more dilution before seeing positive cash flow. We know some Chinese manufacturers like Advanced Battery Technologies (Nasdaq: ABAT) have figured out a way to post positive earnings, but U.S. manufacturers have a long way to go.
For the sake of Ener1 and A123 Systems, the electric vehicle market better catch on quickly, or finding new sources of cash will be a big issue. One car company, Tesla Motor's (Nasdaq: TSLA) has grandiose plans, but a $38.5 million loss last quarter wouldn't help me sleep at night in the lithium ion battery business.
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