After a 70-year hibernation, Detroit Electric lumbered from its cave on Tuesday and tossed its Stratoliner hat into the electric-vehicle ring. What was old is new again, and Detroit Electric might just breathe new life into an ailing city and an uncertain industry.

A rose by any other name ...
It's hard not to glance at Tesla Motors to see her reaction, considering that Detroit Electric showed up to the party wearing basically the same dress. Detroit Electric's first product to market will be a limited-edition, two-seater sports car that will cost "in the neighborhood" of $135,000. That sounds a lot like Tesla's now-discontinued Roadster!

But the similarities don't end there. Detroit Electric will use Lotus platforms for at least its first two vehicles. What other car was based on Lotus' Elise platform? That's right: Tesla's Roadster. 


So on the face of things, it looks as though Tesla's dominance of the high-end EV market may have just come under serious threat. Interestingly, though, Tesla's shares are trading noticeably up since Detroit Electric's announcement. Investors seem encouraged, not panicked. Why might that be?

While Detroit Electric is starting with a sexy new sports car, it plans to offer a "diverse family of all-electric production cars," which seems to suggest that the company won't confine itself to the expensive top of the pyramid. EVs' success will live and die on the development of a battery-charging infrastructure to support them, and such development will be spurred only by broad adoption of EVs. Investors may be betting that high-end purveyors like Tesla will be buoyed by Detroit Electric's potential offering of more affordable vehicles.

Pistols or swords?
Detroit Electric plans to announce "a major partnership with a global carmaker" at the Shanghai Motor Show on April 20. The company's CEO of North America operations, Don Graunstadt, said this mysterious partner is a "much larger Chinese OEM," or original equipment manufacturer.

I can't help speculating that the obvious suspect is BYD. If that were the case, it would constitute Warren Buffett's indirect throwing down of the gauntlet to Elon Musk. Pistols at dawn, gentlemen! Still, as my colleague John Rosevear astutely cautions, "There are probably several other possible candidates, and one should be prepared to be surprised."

The economic ecosystem
It's worth pulling back a bit for a broader view. In a brilliant recent article, Bloomberg New Energy Finance Chief Executive Michael Liebreich laid out his case for analyzing our energy future in terms of a complex ecosystem. As I mentioned, EVs are dependent on infrastructure development. They're also complementary to renewable-energy deployment, particularly solar. As Liebreich observed in his article, "The value of a solar rooftop in a world of electric vehicles is very different from the value of the same solar rooftop in a world without."

Tesla has a partnership with SolarCity -- another Elon Musk vehicle -- to provide Tesla drivers with solar-fueled battery-recharging stations. SolarCity also announced a deal in February with Honda , whereby Honda drivers will receive discounted solar rooftop installations in SolarCity's service area. A Forbes article observes, "going solar accelerates the return on investment for drivers of cars like the Honda Fit EV ... and owners also get to zero out their carbon emissions by fueling from the sun."

This isn't the first deal between a solar developer and an automobile manufacturer. In 2011, Ford teamed up with SunPower to offer Ford Focus EV drivers a deal on a custom rooftop solar system. The Ford/SunPower team offers the educational "Drive Green for Life" program for Focus EV drivers. SunPower has also partnered with Nissan to provide Leaf owners with education and systems that will provide solar power.

Potential ecosystem pitfalls
There are a few risks to electric vehicles in the broader energy picture of the future. A recent McKinsey analysis of the Japanese market found that roughly one-third of early EV buyers say their next car may not be an EV. Early adopters lost enthusiasm when faced with higher electric bills and a lack of charging-station infrastructure. McKinsey cautions that manufacturers "should adopt retention and education programs to avoid negative market feedback that could 'poison the well' for new buyers."

Detroit Electric should analyze the cautionary case of Better Place, which was seen six years ago as the world's most innovative EV start-up and has hemorrhaged $500 million and sold only 750 cars since then. Some analysts think the issues that have dogged Better Place won't affect other EV manufacturers. Others say the case underscores fundamental problems with the EV model, including limited range and long charging times.

Author Marc Gunther concludes his analysis of the Better Place story perfectly.

[T]he industry has yet to provide a clear answer to a simple question about electric cars and companies like Better Place: What, exactly, is the consumer problem that EVs are trying to solve? Are they about saving money in the long run, not having to worry about rising gas prices, reducing the environmental impact of driving, or just enjoying the ride? Put another way, if electric cars are the answer, what's the question?

Detroit Electric and Tesla may just answer that challenge together. Near-faultless execution has led Tesla Motors to the brink of success, but the road ahead remains a hard one. The Motley Fool answers the burning questions in our most in-depth Tesla research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.

The article As Detroit Struggles, a New Auto Emerges originally appeared on Fool.com.

Sara Murphy has no position in any stocks mentioned. Follow her on Twitter @SMurphSmiles. The Motley Fool recommends Ford and Tesla Motors and owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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