Ian Wright Picture
Tesla co-founder Ian Wright has found a huge market for his EV hybrid powertrain. Source: Wrightspeed.

Tesla Motors co-founder Ian Wright isn't very typical of a lot of the people at ACT Expo, the alternative fuels for transportation conference, where I spoke with him in early May. With a Silicon Valley background in networking equipment, he's about the last person you'd expect to meet at an event that features speakers from heavyweights in the trucking and transportation business.

Not to mention the convention-goers, a crowd largely made up of truckers and fleet managers who operate the 2.2 million vehicles Wright says are potential users of the technology he is developing at his company, Wrightspeed.

The funny thing is, his path to a major alt fuels event for trucking is far from traditional. But he's here today showing off the electric drivetrain system he and his team have developed for heavy- and medium-duty transportation, a system that features multiple 250-horsepower electric motors and -- get this -- a jet turbine. Seriously. 

Okay, so it's really part of a hybrid electric system, where the turbine acts as the battery generator. According to Wright, it can cut fuel consumption -- usually one of fleet manager's largest expenses -- in half. That's cool and practical. 

A funny thing happened on the way to Japan...

Jason Hall: So, tell me a little bit about your background.

Ian Wright: I have an electrical engineering background. I spent 20 years building networking products, up to and including ultra-long optical switching systems. A terabit router project at Cisco, and that kind of thing.

Then in 2003, one of my crazy neighbors, Martin Eberhard, said he wanted me to join him and his buddy Mark [Tarpenning] and help them get a business plan together for electric sports cars.

Hall: So, he [Eberhard] was your neighbor?

Wright: That's actually a funny story. I met him on a flight to Tokyo a few years before, and we were chatting on the flight, and it was only when we were coming in to land in Tokyo that it occurred to us to say "Where do you live?" It turns out we live about two miles from each other.

Then I used to see him at least once a year because we live in the rural part of the [northern California] Bay Area. We did this little Halloween tradition. So, there was a party every Halloween, and I would see him at that party every year. So, that's where we started talking about Tesla.

Hall: So, that's 2003?

Wright: Yeah. Then there were just three of us in a little rented office in Menlo Park for a while. Then we met Elon Musk and were introduced to him in February or March 2004. Martin and I went and had a two-and-a-half-hour meeting with him. He said, "Yeah, we'll do it." That's how we got funded.

Hall: That's one of the big things he [Musk] brought to the table besides his brain, was his finances.

Wright: I can tell you, it would not have got funded without him. It would not exist if he hadn't done that.

From the racetrack to the delivery route
Wright didn't jump straight from Tesla to putting jet engines in garbage haulers. After leaving Tesla, he continued to pursue the benefits of electric drivetrains for super-high-performance automobiles. 

Hall: Let's talk about your transition away from Tesla to the next phase.

Wright: Well, my crazy idea was to build really fast, really high-performance electric cars. I still think that's going to happen, because electric drive has some really serious advantages for very high-performance road cars. If you put a 250hp motor on each wheel and you control them independently -- and we have a patent on how to do that -- you get much better ABS, traction control, and more stability than you get out of conventional systems.

So, you can build a car that hasn't been hobbled, as the supercars tend to be, in the handling department by the drivers that buy them. Maybe they've done one track day, and so they think they're a racing driver, but they're not.

Hall: They know just enough to be dangerous.

Wrightspeed X1, still owned and driven by founder and CEO Ian Wright. Source: Wrightspeed.

Wright: They do. And they crash them. One of those people crashed my X1! [pictured above]

And it's only rear-wheel drive. So, part of the thinking there was, OK, you've got to go to four-wheel drive, and if you do that, then, what if you just drove each wheel with its own motor and got independent control of the slip? Then if you do the software right, you can get the best you can get out of the tires, no matter what the instantaneous conditions are. That's what we do. We have a pretty strong patent on that now. So, that was the original idea.

That's not really -- you can't really build a scalable business that way. There isn't a big enough market. You can make pretty good margins, but you can't make enough revenue, enough growth; it's never going to take off, because you need to have the growth rate, but you need to have enough headroom as well.

Hall: It's finding that balance between both, right?

Wright: Yeah. So, that drove me to say, OK, if that's not going to work from a business model point of view. The technology's really cool. What else can you use it for? What wouldn't be constrained like that? So, then you say, OK, well it saves fuel. Well, OK. Where's the fuel go? How can we save enough fuel to make it economic for the end customer, so you'll cross the chasm [as a company], so you'll get into volume deployment, because it will be economically compelling?

The answer to that is: trucks. Cars don't [consume] enough fuel.

Hall: Right. Exactly. I guess a lot of the numbers in the U.S., I think it's 150 billion gallons annually of fuel, but it's millions, tens of millions of vehicles. Versus 40 billion gallons of fuel for a much, much smaller number of vehicles. So, that volume of consumption per vehicle, that's a huge driver.

Wright: Yeah. That's what you have to do. You have to say, how many gallons per year, per vehicle, and how much of that can I save? So there's two pieces to that. How much does the vehicle burn? So, city cars, maybe 250 gallons, a family car, maybe 600 gallons per year. Pickup truck/SUV, maybe 1,400. But a medium-duty delivery truck may be 4,000.

Hall: Right.

Wright: And a garbage truck is 14,000. Now you're talking. But then you've got to do the second piece of that, which is, what can we save? If it's a long-haul truck, they burn a lot of fuel. But because of the drive cycle, we can't save very much of it.

Hall: Right.

Wright: So, you put those two together, and you get a compelling economic case for garbage trucks.

Hall: That whole stop/start thing. That's where...

Wright: 1,000 stops a day, putting a thousand horsepower on the brakes.

Hall: That circles back. That's where it comes in.

Wright: It would have been smarter to figure all that out in the beginning, but I didn't [laughs].

Wright: FedEx was the first customer, and we did the medium-duty trucks first. Once we got some publicity with that, I got a call from one of the local garbage service providers, Lou Ratto [CEO of refuse hauling company Ratto Group] said, "This looks like it would work great for delivery trucks, [but] can you scale that up to my Class 8 garbage trucks? Will that work?"

We said, we hadn't thought of that, but let's go do the engineering and see if it will. In fact, it does, and it works really well.

Fedex Ground Truck Courier
FedEx, Wrightspeed's first "big customer," is currently testing 25 delivery vehicles. 

Where the jet turbines come in
Wrightspeed doesn't build vehicles, just the powertrain, which in a traditional vehicle is an engine, transmission, and the gears that connect them to the drive wheels. Wrightspeed's target is the powertrain replacement market, which Wright says could be worth $5 billion per year. 

While a traditional auto almost never gets a new engine unless the old one is beyond repair, it's actually commonplace for medium- and heavy-duty vehicles to get replacement powertrains. The engine may only be good for seven or eight years, depending on the duty cycle, while the vehicle itself can last 20 years. Wrightspeed's system is designed to replace the original diesel combustion engine and transmission with a combination of batteries, electric motors, and advanced software, all designed to work together as a system to maximize performance, reliability, and power efficiency.

At the end of the day, the system is designed to save users money by reducing the amount of fuel they use. Of course, batteries are limited in their range, and this problem is compounded the heavier the vehicle gets, and the more weight it must carry in cargo. 

Wright's answer? Use a turbine as a battery charger, which Wrightspeed sells as its Range Extender system. 

Wright: Yeah. So, the turbine helps us there because it's a completely different combustion process. It's more like a blowtorch. Continuous combustion and a lot of excess oxygen. So, you really do get to burn all the hydrocarbons, all the particulates, all the CO gets burned.

So, the turbines are at least 10 times cleaner than [traditional combustion engines].

Hall: So, how did you guys arrive at [that path]?

Wright: I really don't remember. It's lost in the mist of time. I guess more aficionados of turbine -- I have a collection of turbine engines myself. Everybody loves turbines. They're just awesome things.

So, I guess it starts with that. You say, Yeah, turbines, they get used for all kinds of things. One of the things we noticed when we started Tesla, and Martin did all the calculations about emissions and fuel efficiency and so on, you're going to get your power from the grid. Well, how's that power made? So, you start looking at power stations because that, by the way, is another counterintuitive thing.

If you run our systems on fuel instead of plugging them in, they're actually cleaner because the turbines are clean.

Hall: When you look at total emissions?

Wright: Yes. Cleaner than the average mix of power stations, which is 48% coal in the U.S. OK, California is cleaner than that, but there are other parts of the country that are mostly coal.

Silicon Valley roots driving further disruption
Cool tech like electric motors and jet turbines are only part of the secret to what Wright is doing. With a background in data systems and networking, and connecting computer systems that get turned on and don't turn off for a decade or more, Wright and his team are using software to add value and improve performance and reliability. 

Wright: We find our fleet customers usually want to tune the acceleration, the peak power, the peak speed -- and we can set all of that software.

Hall: That in and of itself is just so disruptive. 

Wright: There's more to it than that as well. We've got a lot of diagnostics and control -- because we did the whole powertrain as an integrated system. We wrote all the code and designed all the electronics. So, we got a lot of stuff in there that makes it robust against failures. So, you could have a cooling system failure and in the conventional vehicle, if you keep driving, you're going to cook the engine.

Hall: You're going to blow it up.

Wright: Yeah. But in our case, it will limit itself, and limit itself, and eventually stop. It will try very hard to get you home, but it will limit the torque, it will limit the speed, it'll do whatever it wants regarding the motor and gearbox and inverter drive wheels. So, two [electric motors] in the medium-duty trucks, and four in the garbage trucks. You can have a catastrophic failure in one of those things, and you can drive home on the other one, or the other three with no problem at all. The system anticipates that.

We've got telemetry in the things as well. The trucks are actually smart enough to send my test manager an email if they have a problem above a certain threshold.

Hall: That's interesting, because one of the big challenges with managing a vehicle fleet has always been the maintenance. Maintaining before you have to repair is always the goal.

Wrightspeed Ev System
The Wrightspeed systems is as much about tech as it is about torque. Source: Wrightspeed. 

Wright: Well, then in telemetry, we have enough detail on that, and we can anticipate problems. We can see all the parameters when the trucks are driving around. There's data logging on board, there's data recording function, we can suck down the logs later if we want to. So, if you see anomalies in that, at our place, we can analyze that and say, "Huh, that truck -- No. 17 -- that's got the temperatures on the left motor are higher than they should be. Why is that?"

So, before you get a failure, you can go and investigate that.

There's a bit of that in conventional engine systems now. We have the entire powertrain, and I think we've done a pretty good job with that software. That's something with Tesla as well. They architect the electronics and the software in the car as a complete system -- which isn't the way the OEMs do it.

Hall: Well, they're sourcing everything from somebody different.

Wright: So, they write specs for this black box and that black box, and then they tie them all together, and that's not the way to do it reliably and at low cost. There's a lot of things you can't do if you do it that way.

Hall: You're talking about disrupting the model. You're essentially building an entire powertrain system that's designed to run forever.

Wright: So, a little more of the computer and networking and high-tech stuff gets built into the business model as well. It's not just a 12-month warranty, it's a maintenance contract. That includes software upgrades, because there's a lot of software in these things, and there's features we can add as we go along, and you can get those if you've got a maintenance contract, but not if you don't.

So, there's a bit of business model stuff that's built up around the high-tech industry that I think can transition to this as well.

Hall: And you've got background there to help you understand and see where you can bring revenue to your company, and also bring some value to your customers.

Wright: Right. 

Medium duty truck being put through its paces on the Salt Flats. Source: Wrightspeed.

You get a jet turbine! And you get a jet turbine!

Hall: You see this progressing into the automobile?

Wright: Ultimately, yes. Right now, they make tens of millions of turbochargers per year at $150 each or less. So, there's more to this engine than there is a turbocharger, but there's a significant scope to drive the cost way down. The more of that you can do, and so long as you've got the efficiency, then you can see it all over the place.

So, I think the same way that turbines took over the aircraft industry -- and it probably looked pretty gradual at the time, but you look back on it now and you say, "Wow!" World War II and then a decade, 15, 20 years later and -- bang!

Hall: By Korea it was pretty much done.

Wright: Yeah. This all happened. I think that's going to happen here, too.

Hall: Wow. Hadn't even really thought about it from that perspective. That's an interesting angle.

Wright: It'll be high-power, high-consumption applications first, and it will work down from there, just as the whole range-extended EV architecture works that way. You can save so much fuel. The scaling properties of this are interesting. It costs, maybe, just less than twice as much to build the powertrain for the Class 8 garbage truck than for the medium-duty truck -- but you save three times as much, four times as much fuel.

Hall: Because it's at a great scale.

Wright: Yes. There's a whole bunch of numbers that happen to work out for you. So, as you look up the scale, it costs X dollars to build a powertrain for a Nissan Leaf, and you only save Y dollars in fuel. It costs maybe twice as much to do the power train for a Tesla, but you save more than twice as much fuel.

So, to do a truck versus a car, maybe the power train costs twice as much, but it's 10 times as much fuel you save. So, the more you go up that curve, the better the economics work. So, that's why you start up there and you work back. As the price of fuel goes up, as the cost of technology comes down, as the volume goes up, then you come further down the curve.

Hall: Right.

Wright: So, why would you ever start at that end? You can't make any money. Start at this [medium- and heavy-duty] end and work back.

Hall: Well, and the funny thing about it too is, the public perception. We see the Nissan Leaf, but we don't think about a garbage truck.

Wright: Right. 

Hall: For you -- for your business -- the person that's buying a Nissan Leaf is not saving fuel. They're saving the world, right? But on the flip side, your customer wants to cut his fuel costs.

Wright: Yeah, the thing is, that's what will drive the really high-volume deployment. If it's economically compelling, it's going to make it happen regardless of what people believe, or want, or the aspirational aspects, anything else. If it's economically compelling, it's going to happen.

Wrightspeed Turbine Range Extender
Jet turbine on display at Wrightspeed ACT Expo booth. 

Jason Hall owns shares of Cisco Systems and Tesla Motors. The Motley Fool recommends Cisco Systems, FedEx, and Tesla Motors. The Motley Fool owns shares of General Electric Company and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.