Retrofitting for efficiency

As drivers scramble for alternatives to gas guzzlers, Philadelphia steel wholesaler Barry D. Bernsten is planning a local assembly plant where 100 workers can install batteries and electric motors in 4,000 cars he says he is importing from Asia this year.

Bernsten, one of a growing army of entrepreneurs trying to do what big carmakers find challenging, says his newly formed BG Automotive Group Ltd. will sell the cars as low-speed battery-electric vehicles, retailing around $16,000 each, before upgrading to higher-speed, highway-ready cars next year.

"We're going to put new cars on the road" starting this fall, Bernsten said. He said electric cars were legal on roads in a majority of states at speeds below 35 miles per hour, including most Northeastern states - though not Pennsylvania. State Sen. Stewart Greenleaf (R., Bucks) is sponsoring a bill to allow the cars on public roads, said Greenleaf aide Aaron Zappia.

New Jersey, in 2006, approved the use of low-speed vehicles, subject to local ordinances.

Bernsten's initial markets: urban commuters, students, and vacation-home owners.

The would-be auto magnate, who owns Center City-based steel wholesaler American Steel Industries L.L.C., says he has arranged to ship the cars through Baltimore's port, safety-test samples at a Washington-area facility, and mass-produce models "within 30 miles" of American Steel.

"We have sent them a list of 30 available properties in Philadelphia and surrounding counties that have 200,000 square feet, expandable to 400,000," said J. Eustace Wolfington III, industrial broker at Grubb & Ellis in Philadelphia.

Auto specialists see plenty of obstacles. "You need to show this is more than a golf cart," said Dennis Virag, head of Detroit-based Automotive Consulting Group Inc., which has worked for groups that oppose public subsidies for electric cars.

"You need a dealer network, which is very, very expensive to put together. You need a warranty program from the original equipment manufacturer, which isn't easy to get once you start doing work on their drive train. And we are a litigious society. One little mishap can cost you everything," Virag said.

"We think plug-in hybrids are probably more a reality than pure electric cars," said Sanjay Deshpande, who manages the lithium-ion-battery business at industrial battery-maker EnerSys in Reading. "We're not convinced that the consumer is ready to accept the limitations the pure electric car imposes."

Toyota, whose hybrid gas-electric Prius has sold well, sold around 1,000 all-electric vehicles in California in the late 1990s, but "we had to subsidize it heavily to get the price down to $42,000," said spokesman John Hanson. "Battery technology right this minute has not advanced to the point where we can develop a vehicle that will live up to the expectations of customers, in high volume, at an affordable price."

Bernsten says his 30-year experience in his family-owned international steel businesses has given him the manufacturing and trade finance contacts he needs to make BG an affordable, mass-produced success.

He lists errors that he said have bogged down rival builders - plastic parts, poor-quality steel, small-batch production, high sticker prices.

According to Bernsten, he has financed the project with his own money so far, while meeting with several private-equity investors in New York, and two in Philadelphia, to fund increased production.

Bernsten and two partners raised $200 million from a group of European banks to build the Galvex OU steel plant in Estonia in 2003. Bernsten sold his stake the next year, before the plant's sales declined and it was taken over by one of its lenders. Arcelor Mittal, the world's largest steelmaker, agreed to buy the plant for $250 million last year.

He said all-electrics should have been mass-produced by big carmakers, but growing global trade, improved U.S. battery technology, and the proliferation of Asian auto suppliers has now made it possible to bypass them.

Broker Wolfington said it's unusual to hear from a manufacturer looking to open such a big plant. "We'd like to keep this in Philadelphia," he said.