Inside the Think bankruptcy: was the plastic electric too late, too expensive?

On the one hand, the fact that Think needed to file for bankruptcy – again – yesterday was not a big surprise. The company has had a hard time selling its plasticky two-seat commuter car in a world that also includes the cheaper, better-equipped Nissan Leaf. The Think City starts at $36,495 in the U.S. (but a strange combination of incentives meant it was possible for some lucky people to get one for just $17,995 recently), while the Leaf, even if it is a different segment vehicle, starts at $32,780 ($25,280 after federal incentives). On the other hand, the reason for the bankruptcy filing are not at all transparent, so we went out and got as much information as we could about what happened behind the scenes. Turns out, sources were willing to talk, but only off the record, so take what follows as the truth from people who were there (or were close) but who do need to protect themselves. Here's the story:

Some time around December of 2010 or January of 2011, it became pretty clear inside Think that the company was starting to run into financial difficulties. The Norwegian company had excess inventory of around 500 cars that could not be sold, and some were shipped to the U.S. to try and move them here. A four-seat version was introduced (well, reintroduced, since it was first promised in 2008), but only a small handful were ever delivered. There was talk that Russian investor Boris Zingarevich, who is Ener1's largest shareholder thus had the most to lose if Think went under (battery company Ener1 has been Think's supply partner since 2007), would step in – and he did provide some short-term loans – but it was not enough to save Think. Its partners were hurt – Ener1 took a $71 million hit in its Q1 earnings call earlier this year – and at some point this spring, Think City production was halted at Valmet. It seems that Think stopped paying some suppliers earlier this year, too. In May, Ener1 ended its deal with Think. (Continue reading...)

Think's problems extend to its home country of Norway, too, as these electric vehicle sales numbers for January-May of 2011 sent to us show:

• Mitsubishi iMiev: 532 sales and 62% of the market
• Think City: 85 sales and 10% of the market
• Citroen C-Zero: 79 sales and 9% of the market
• Pure Mobility Buddy: 72 sales and 8% of the market
• Peugot iOn: 54 sales and 6% of the market
• Tesla Roadster: 14 sales and 2% of the market
• Tazzari: 10 sales and 1% of the market
• Reva 8 sales and 1% of the market
• Fiat 500 Microvett converion: 2 sales and 0% of the market

As one source told us that, "At the end of the day the Think City did not survive the introduction of the iMiEV triplets. At an identical price of $44,000, the iMiEV had an easy match against the home team supporters who were thirsty for something just a little bit bigger." Everyone we talked to mentioned the too-high price of the Think City, and some were in a position to let those in charge know, but all to no avail.



So, what happens next? At this point, Think has only been in bankruptcy for a few hours and it is far too early to tell. The first step is for the appointed trustee to put Think's assets up for sale. The profits from this sale, if any, will go to the creditors, of which Ener1 is the largest one. Someone could come in and buy up Think and move forward with trying to reduce the cost of the car. This would make Ener1 happy, since it is trying to get the $35 that Think owes it and could maybe even continue to supply batteries to the new owners. Ener1 disclosed the $35 million charge to the SEC yesterday, and of that $35 million, $14 million were receivables for Ener1 that was written down to zero. When you know that the Think's battery pack costs $17,000, you can do the math to find that Think effectively got around 823 battery packs for free. Even then, it could not make money selling the cars.

If someone else tries to come in and pick up the pieces, it will only leave us with many more questions. Is it possible to rethink the Think so that it gets a price tag of around $20,000 – or even $15,000 with a battery lease option – and bring that deal to the U.S. market? Might a new owner actually get a DOE loan to make the car, something Ener1/Think tried but could not accomplish? Is the "window of opportunity" that Think had when it was one of the only companies with an electric car on the market now closed, and that means the shutters will remain closed as well? Would another automaker without a good electric vehicle program want to snap up these assets and get a jumpstart on EV technology? Off the record, we have no idea.