U.S. auto sector needs to rethink itself: top VC exec

By Ben Klayman

DETROIT (Reuters) - The recession and high gasoline prices offer the U.S. automotive industry a chance to reinvent itself as consumers inch toward acceptance of alternatives to the internal combustion engine, a top venture capitalist said on Tuesday.

"This recession is a great reminder that the industry is changing," Ray Lane, a managing partner at storied U.S. venture capital fund Kleiner Perkins Caufield & Byers, said at an engineering conference here.

"Business as usual is just not acceptable," added Lane, whose firm is an investor in California-based electric carmaker Fisker Automotive.

He said 2011 will be seen as the inflection point for the adoption of new propulsion systems as oil prices continue to rise and more people around the world move to cities.

Kleiner -- best known for investments in Google, Netscape, and Amazon.com -- has made investments in other start-ups in the auto sector, including Finland-based Think and V-Vehicle.

Many automakers are betting that battery technology will make electric cars the environmentally friendly transportation of the future, and the switch to electric engines has drawn a wave of new companies into the auto industry, including Fisker and another California start-up, Tesla Motors Inc.

Lane said the attraction of venture capitalists like him is not so crazy in such a traditional industry like autos because of the coming disruption caused by electric- and hybrid-powered cars.

"Venture capitalists, good ones anyway, show up where disruption is about to happen," he said.

Over the next decade, the disruption caused by new technologies in the auto sector will be the greatest the industry has seen since before World War Two, Lane said.

"Our industry's business structure needs to be revamped and the recession offers the best opportunity to do that," he said. "Do we need 20,000 dealers in the United States? Do we need the incremental focus on features in the product we design today?

"There's a better way to focus on designing, building and distributing vehicles," added Lane, who said the cars of the past 10 years all looked alike to him and lacked the passion in design of prior decades.

Lane also criticized the industry for its focus on features like heated mirrors and new paint colors over groundbreaking technologies.

As for those who say electric vehicles will never amount to much, Lane said critics said the same about tablet computers before Apple's iPad proved them wrong.

Lane also said car buyers should not have to give up features or pay more for new technologies. "It's not the consumer's responsibility to pay an extra $10,000 to be green."

(Reporting by Ben Klayman in Detroit; Editing by Phil Berlowitz)