Here’s a recipe for a clean technology business that was tasty enough to lure Azure Dynamics from Toronto to Oak Park 20 months ago.
Buy a conventional gasoline-fueled commercial truck chassis — Ford Motor Co.’s E-450. Convert the powertrain to a gasoline-electric hybrid. Subcontract with a reputable manufacturer of walk-in van and truck bodies — Utilimaster of Wakarusa, Ind. Then market the vans for sale to commercial fleets, cities and universities based on the fuel economy benefits and lower maintenance costs.
“Our model depends on finding the right partners,” said Chief Operating Officer Curt Huston, who along with CEO Scott Harrison came to Azure from the automotive wheel supplier Hayes-Lemmerz. Key customers are Canada’s Purolator, FedEx and AT&T.
Cities, fueled by the Obama administration’s $787-billion economic stimulus package, are showing interest in the shuttle used vans. Earlier this month, Metro Mobility, the public transit system for Minneapolis/St. Paul, ordered 15 hybrid shuttle vans to be delivered this fall.
The scale is quite modest and geographically dispersed. There are only 20 employees at the Oak Park headquarters. About 40 people in Woburn, Mass., engineer the electric motors, inverters and electronic guts of the system.
In Vancouver, B.C., another 40 workers concentrate on vehicle development. Another half dozen marketing employees work out of Toronto.
This is a startup scenario. Azure, whose stock is traded on the Toronto Stock Exchange, lost $7.4 million in the first quarter of 2009, an improvement from a $7.9-million loss a year earlier. But revenue rose in 2008 to $7.7 million from $2.8 million in 2007.
Through June it has orders for 300 vehicles, up 175% from the same period last year. Harrison and Huston estimate Azure can become profitable when revenue reaches the range of $50 million to $80 million annually.
Here are the numbers at the heart of Azure’s business plan: The Ford chassis costs about $22,500. The hybrid system, which incorporates a nickel-metal hydride battery from Orion Township-based Cobasys, costs roughly $40,000.
The finished vans are priced almost twice as high as a conventional all-gasoline vehicle — about $200,000 for the hybrid shuttle vans.
The conventional van hire gets about 6 to 8 m.p.g. The current hybrid system can improve that to 11 to 14 m.p.g.
When the battery, which is the sole propulsion source up to about 20 m.p.h., is not used, the energy it saves can be used to slow the vehicle in stop-and-start driving. That saves wear and tear on the brakes, reducing maintenance costs.
“At $2 per gallon, payback is about 10 years,” said Jay Sandler, Azure’s vice president of sales. “At $3 a gallon, that comes down to between three and four years.”
As crude oil prices have bounced from about $40 a barrel early this year to about $70 now, Sandler has a bounce in his step. Harrison and Huston are speaking with investors trying to raise some additional capital.
Earlier this year, Azure announced a partnership with Johnson Controls Inc. and French battery maker SAFT that will supply lithium-ion battery cells for future Azure powertrain systems.
Lithium-ion batteries are smaller and more powerful than nickel-metal hydrides, which could enhance future vehicles’ fuel economy and open up design options because they occupy less space.
As with all new technology, higher volumes will bring costs down quickly.
Recalling his previous life at Hayes-Lemmerz, Huston has no regrets.
“I was running the North American wheel group, closing plants and la
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