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OPERATIONS

Thanks, Toyota. We'll Take it From Here

Start-ups compete to win, place, and show in the hybrid aftermarket.
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Who doesn't want a Toyota Prius? The hybrid gas-electric car is fuel efficient and wildly popular -- but that doesn't mean there isn't competition to make it better. Toyota (NYSE:TM) is working on a stronger battery pack that will be rechargeable via a standard electrical socket; a charged car will be able to go faster and farther on just electricity. In the meantime, a number of start-ups are also developing systems to turn Priuses into so-called plug-ins. How big is the business opportunity? "In two or three years, I think there will be over a million old hybrids that can be converted," says Felix Kramer, head of CalCars, a group that advocates for plug-in hybrids and electric cars. So who will complete the most conversions the fastest and win the race? Here's a look at some contenders.

1. Having raised $148 million in venture capital, A123 Systems of Watertown, Massachusetts, recently built a 30,000-square-foot plant. There, the company plans to produce conversion systems for sale to municipal fleets. A system costs under $10,000 and can be installed in less than two hours. A123's technology meets California emissions standards and has proved safe in a series of crash tests. The company also has development deals in place with GM and Saturn. No. of conversions to date: 75

2. For $24,000 to $36,000, Hybrids Plus of Boulder, Colorado, will replace a Prius's battery with a lighter lithium battery and charger that allow it to run longer in electric mode, up to 34 miles per hour. Though Hybrids Plus charges a hefty price, Colorado offers a credit to taxpayers equal to 85 percent of the cost of a conversion, which should boost in-state sales. No. of conversions to date: 30

3. Greg Hanssen engineered the first prototype of a Prius conversion for a company called EnergyCS. Now he runs EDrive of Irvine, California. Though EDrive has just emerged from research and development mode, people in the industry think it's one to watch. "He's the best singular brain in all of this," says Chelsea Sexton, an electric-car advocate who used to work at GM. No. of conversions to date: 4

4. While others focus on technology, Carolyn Coquillette of Luscious Garage in San Francisco is thinking about the customer experience. Her garage is an oasis for Prius owners, her website is attractive and user friendly, and her technicians are happy to install whichever plug-in technology you prefer. Prices range from $8,500 to $13,000, and the company already has a waiting list. No. of conversions to date: 10

The Line: With crash-tested engineering, a reasonable price, and enough capital to scale up quickly, A123 is the odds-on favorite because in a niche industry, such early advantages may prove decisive. At 10 -- 1 odds, EDrive is a long shot, but it does boast a superior bloodline and bears watching.

To track the progress of these companies, go to www.inc.com/keyword/horserace.




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