INVESTMENT REPORTER
Electric cars are supposed to be the green wave of the future. So why have shares of Toronto-based ZENN Motor Co. Inc. ZNN-X lost their charge?
Since peaking at $6.89 last July on the TSX Venture Exchange, ZENN's stock has plummeted 70 per cent, closing yesterday at $2.05.
The stock has languished even as the auto industry embraces the electric car as the key to its future. General Motors Corp. aims to launch its Chevy Volt next year, and this week it announced a partnership with scooter company Segway Inc. to develop a two-wheeled electric vehicle called the PUMA.
WHAT'S A ZENN?
ZENN is an acronym for Zero Emission No Noise. The two-seater cars have a top speed of 40 kilometres an hour and can travel up to 80 km on a single charge, so they're not for everyone. What's more, although most U.S. states have passed legislation allowing so-called neighbourhood electric vehicles, in Canada they're available only in Quebec as part of a pilot project.
SALES IN THE SLOW LANE
For the first quarter ended Dec. 31, gross revenue was $545,392, down 39 per cent from a year earlier. Unit sales fell to 24 from 69, hurt by a "supplier problem and a significant deterioration in the sales of automobiles of every type," the company said.
ZENN posted a loss for the three months of $1.8-million or 5 cents a share, compared with a loss of $1.7-million or 6 cents.
Compounding the effects of the recession, lower oil prices are making electric vehicles less attractive. "The environmental benefits of green transportation are taking a back seat to more pressing consumer concerns," Versant Partners analyst Massimo Fiore said in a report after ZENN's fiscal 2008 results in January.
THE ROAD AHEAD
ZENN aims to expand its lineup to include a four-seater low-speed vehicle and the faster cityZENN, which will be highway-capable. The company hopes to produce the cityZENN starting in late 2009, with a commercial launch in 2010.
But ZENN's future hinges on its relationship with EEStor Inc., a private Texas company that is developing an electric energy storage system that, if it works as advertised, will revolutionize the industry by vastly expanding the range of electric vehicles while dramatically reducing the charging time.
The issue is that EEStor's technology - which, unlike the lead-acid batteries in ZENN's current cars, is based on a so-called ultracapacitor made with barium titanate - remains cloaked in secrecy. Right now, ZENN investors have little more than promises, which may explain why the stock has languished.
"While [the company] recognizes the frustration of its shareholders with the timeline towards commercialization, this is something simply beyond the company's control," Ian Clifford, ZENN's chief executive officer, said in an update to investors late last month.
"EEStor is building what management believes will be a groundbreaking technology that is expected to benefit not only our shareholders but the entire planet from an environmental, geopolitical and sociological perspective."
Those are big expectations indeed. But if they're fulfilled, ZENN's shares may move into the fast lane. If not, then investors might lose what patience they have left with this slow-poke stock.
