Almost made it: Remembering Azure Dynamics' electric vehicles

By Matthew Klippenstein

By early 2012, Burnaby-based Azure Dynamics had shipped — or received orders for — about 2,600 hybrid-electric and fully electric commercial vehicles. This included 534 deliveries of the Azure Dynamics Transit Connect Electric in conjunction with Ford, a light commercial battery electric van that beat the Nissan Leaf to market. As with many startups, Azure reached positive gross margins but struggled to raise sales volumes high enough to break even.

On March 23, 2012, California governor Jerry Brown issued an executive order setting a goal for the state to have 1.5 million zero-emission vehicles on its roads by 2025. Three days later, the Ontario Securities Commission deemed that allowing the financially strapped Azure, by then a publicly-traded company, to do a $12 million capital raise “would not be in the public interest,” despite the clear growing demand. The company immediately entered bankruptcy proceedings.

This is Azure’s story — one that highlights the trend of Canada’s history of inventing products that other countries later commercialize. To avoid repeating that history, it should be learned and learnt from. 

Azure’s origins

Azure Dynamics was a spin-off from tech incubator BC Research’s work on electric drivetrains, which included early patents on hybrid vehicle control systems and battery management systems — areas that are core to electrified transportation. The former patent has been cited in more than 200 subsequent patents from hybrid pioneers Toyota, as well as Honda, Ford, Tesla, and others.

Two longtime B.C.-based patent agents, Dave Wainwright and another who asked to unnamed, who were not involved with the initial Azure filing, were careful when asked for comment to emphasize that a patent’s value can’t be inferred from how often it’s cited. Still, it’s safe to say that B.C. inventors created some of the world’s first intellectual property in these areas, and that others deemed it important enough to mention in their own later filings.

Azure also benefited from the ecosystem coalescing around hydrogen fuel cell pioneer Ballard Power Systems. Late 1990s investments by Daimler and Ford into Ballard brought vast talent and new expertise to Metro Vancouver, and a timely stock offering during the dot-com bubble helped Ballard accelerate its efforts.

As hydrogen fuel cell commercialization timelines became clearer, some Ballard employees pursued nearer-term opportunities — Azure Dynamics among them. Perhaps the lesson is that even if policymakers are wary of tech bubbles, they shouldn’t underestimate the spillover benefits of bringing new skills to their regions.

Azure was incorporated in 1997 — the year the first-generation Toyota Prius first went on sale in Japan — and went public on the TSX Venture exchange in 2001. The company merged with U.S. electric drivetrain innovator Solectria Corporation in 2005. While series hybrid systems were its early focus, it later extended into parallel hybrids and fully electric drivetrains as well. 

Reflecting the wisdom of Mariana Mazzucato’s book The Entrepreneurial State, Azure benefited from early government support, including a $9 million federal government R&D investment in 2002. Canada Post-controlled Purolator was an early champion, having deployed or ordered more than 950 Azure vehicles before its bankruptcy; FedEx and DHL stood at about 80 apiece.

Azure’s strategy

While Azure contracted on many one-off projects, it had a capital-light commercial strategy befitting a startup with shallow pockets: it insourced engineering and outsourced labour.

For the Transit Connect Electric, Azure purchased gliders from Ford (gliders are finished vehicles, but without the drivetrain) and had them shipped to AM General, a well-established third-party automotive contract manufacturer. AM General built and installed the drivetrains, then sent the finished electric vehicles back to the Ford factory for distribution through Ford’s commercial truck dealership network. For European deliveries, contract manufacturing was performed by Lotus Lightweight Structures.

Azure kept engineers on-site with AM General and had signed sales and service agreements with more than 160 Ford dealerships where sales occurred or were expected. The training and documentation proved invaluable, allowing customers to run and maintain the vehicles for years after Azure folded.

Of much discussion was the company’s lithium-ion battery. Azure signed a 2009 battery supply agreement with Johnson Controls. Documentation from Ford-turned-Ballard-turned-Azure executive Ron Iacobelli suggests the company purchased batteries at the below-market cost of about USD $550/kWh (USD $820/kWh in current dollars). Bloomberg New Energy Finance estimates the average lithium-ion battery pack price to have been north of USD $1400/kWh (in today’s money) in 2010. Credit is due to Azure’s leadership for negotiating such favourable terms, despite the company’s low purchase volumes. At least one Azure Transit Connect Electric still sees daily use in Metro Vancouver today, with its original, now 14-year-old, lithium-ion battery.

The pre-Nissan Leaf zero-emissions vehicle

A widely known milestone in electric vehicle lore was the delivery of the first fully electric Nissan Leaf on December 11, 2010: the world's all-time top selling plug-in electric vehicle until it was surpassed in early 2020 by the Tesla Model 3.

Widely overlooked is Ford and Azure Dynamics’ announcement from four days earlier — December 7, 2010 — of the first customer deliveries of the fully electric Azure Dynamics Transit Connect Electric commercial vehicle.

Azure joins a list of Canadian pioneers overshadowed by later innovators elsewhere. To name a few, Edwin Drake is frequently credited with digging the world’s first oil well in Pennsylvania on August 27, 1859 — but Drake’s so-called world-first came a year after James Miller Williams drilled and struck oil in Ontario (summer 1858) and established North America’s actual first commercial oil well. The first non-Indigenous person documented to have made peanut butter was Montreal pharmacist Marcellus Gilmore Edson, who received a U.S. patent for his process in 1884. But commercial nut butter production took until J.K. Kellogg (of breakfast cereal fame) entered that market more than a decade later. The marketers with the bigger megaphones took the spoils.

Azure and the Arrow

It’s impossible to turn the clock back, have the Ontario Securities Commission allow the capital raise (the funds of which had been secured the prior November), and watch how well Azure Dynamics surfed the adoption curve of vehicle electrification. But perhaps these types of what-ifs can be avoided in the future.

The company’s closure at the hands of the government is not a first for Canadian innovators. Azure Dynamics’ lost opportunity channels the tragedy of the Avro Arrow, the revolutionary late-1950s delta-wing Canadian fighter jet, whose development was cancelled as part of Conservative Prime Minister John Diefenbaker’s federal spending cuts. In both cases, a decision was made that further investment wasn’t in the public’s interest. The biggest difference is that Azure had achieved commercial production by the time of its bankruptcy, their vehicles having accumulated more than 55 million kilometers in customer hands.

What B.C. companies can learn

While the last Azure Transit Connect Electric is still running on Vancouver’s roads, there’s a case to be made for highlighting its story. Perhaps that vehicle could anchor a permanent display at Science World — with an exhibition along the lines of “B.C.’s inspiring history of clean energy innovation” — so our trailblazing companies’ stories can be taught, not forgotten.

Whether or not that comes to be, there’s hope that, someday, government entities from British Columbia and beyond figure out how to help more of our startups grow into the 800-pound gorillas (8,000-pound orcas?) of their respective sectors, and roam the world as the acquirers instead of the acquirees.

Matthew Klippenstein’s engineering career has spanned hydrogen technologies, wind energy, EVs and EV infrastructure. He has written for National Observer and provided commentary for local and nationally syndicated radio, CBC and Radio-Canada, NPR, and BBC. He has contributed to local comic book anthologies, and a national competition finalist theatre play he wrote was produced in Surrey in 2007.