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Murtaugh will have a tough job at Coda even if mission is selling electric vehicles in China

January 31, 2011

Coda Automotive announced last week that it had hired Phil Murtaugh to be the company’s permanent CEO. In the sense that he is replacing temporary CEO Mac Heller, that is. Heller was filling in for former CEO Kevin Czinger, who resigned in November because, Czinger told me at the LA Auto Show, he felt “there are different roles at different times in a movement.” (Coda sees itself as the initial vanguard of a movement away from dependence on oil and into a new reality, Czinger told an audience at the show.)

Is Phil the right man to lead Coda’s movement? Depends on what that movement really is.

To be sure, Murtaugh has more experience in China’s automotive industry than just about any other foreigner.  In 1996 he negotiated the original agreement that paired SAIC with General Motors , forming Shanghai GM . The partnership now encompasses multiple companies, and is arguably the most successful Sino-foreign partnership in the world.

Murtaugh said his job at Coda was to launch a new car into the market, the same situation he faced in China in 1996. “But I don’t have to negotiate the joint venture,” he said.  He also said something I hadn’t previously heard from anyone at Coda–that Coda would sell its vehicles in China as well as the U.S.

Coda Automotive , based in Santa Monica, CA, is a manufacturer of electric vehicles. The chassis and body of the electric car it will launch is produced in China at Hafei Automobile Group . The car is based on the same aged Mitsubishi model as Hafei’s Saibao, though Coda says the design has been substantially modified.  

The battery is also produced in China, at Lio Energy Systems, a joint venture in the north China city of Tianjin between Coda and Tianjin Lishen Battery Joint-Stock Co.  The remaining components are from multinational suppliers such as Delphi, Borg Warner, and Lear. Final assembly will take place in the U.S.  

I like and respect Murtaugh, whom I have known for a decade. But I think he faces a much different task at Coda than he did at GM.  He is not backed by General Motors, one of the world’s largest and, at the time, most successful, automakers. GM had a stable of proven, popular products it could bring to the joint venture.  

China was, to be sure, a difficult market for a foreign company to do business in at that time. But GM had the help of SAIC, a well-connected state-owned company.  And the competition was limited. Volkswagen was the only foreign automaker with successful joint ventures at the time—it had two, with First Auto Works and SAIC. (My friend/translator/editor Kevin Huang pointed out that the Guangzhou Auto and Peugeot joint venture was still limping along at that time, as well. It closed in 1997 because of poor sales.)

With Coda, Murtaugh has a relatively expensive, unproven vehicle.  In the U.S., Coda is selling its electric car for $37,400 after a federal tax break. It will be fighting for share in a small market with many established brands.

Coda originally planned to deliver 14,000 units of its electric car in 2011. Now, the start of production has been delayed until the second half of 2011. It will deliver more than 10,000 units within a year of starting production, said Forrest Beanum, Coda’s vice president of public affairs and communications.

However, Coda has not yet finalized the location of its assembly plant in the United States.

As for the China market, Coda hasn’t given me any more details about the China electric vehicle launch plan–yet. I’ve submitted questions and have been nagging Beanum.  But, the China market for electric vehicles will be at least as competitive as the U.S. market. And, the Saibao, the car on which the Coda is based, doesn’t have an especially good track record in China.  Hafei sold fewer than 1,200 in 2010, according to J.D. Power and Associates . Of course, Coda did upgrade the small sedan’s looks.  But it will also be trying to sell an electric vehicle, a segment for which there is essentially no market in China right now.

As I wrote last year, I think Coda is really just using the car as a marketing tool for the battery. Coda denies this publically, though people it has approached about investing have told me the company is upfront about the strategy. Coda does say it also aims to market the battery for electric utility grid storage.

Murtaugh said Coda’s product “is truly going to be a very, very competitive.” He also said Coda’s business model of marketing the battery as an electricity grid storage device had as much potential as the automotive applications. Well, if Phil is aiming to sell batteries as storage devices, there isn’t really a market for that yet, either. But it will probably develop.

If his aim is volume sales in China of Coda’s electric vehicle, the size of China’s electric vehicle market remains to be seen (as does the size of the U.S. market). But I think he faces an even tougher challenge than he did when he was at General Motors. Still, Coda couldn’t have found a better man to lead that movement.

2 Comments leave one →
  1. January 31, 2011 2:52 am

    Excellent piece Alysha!
    Your China automotive experience brings great insights and makes these articles very interesting reading.

  2. January 31, 2011 5:07 pm

    I don’t yet know the mission Mr. Murtaugh was brought on to undertake at Coda but if he can’t get it done at Coda it’s unlikely anyone can, whatever the task. Nice article Ms. Webb

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