(Ener1 earnings story, updated for analyst comment, Wednesday share declineNEW YORK ( TheStreet) -- Lithium ion battery company Ener1 ( HEV) reported a widening first-quarter loss with results weighed down by a $59.4 million impairment charge related to the stalled operations of its electric car market partner, Norway's Think Holdings. On Wednesday morning, Ener1 shares declined by as much as 18%, and the key question from the big earnings miss that went well beyond the numbers was related to Ener1's decision to write-off its entire investment in the electric car market, and what it means for the future path to profitability for the lithium ion battery company. The company lost $84.7 million, or 51 cents a share, for the three months ended March 31, including both the impairment charge and a $13.9 million loss related to a writedown in the value of a financial instrument. These items reduced Ener1's results by 44 cents in the latest quarter. The average estimate of analysts polled by Thomson Reuters was for a loss of 7 cents a share in the March quarter. In the same period a year earlier, the company lost $15.3 million, or 13 cents a share. Ener1 has held a major equity stake (48% stake) in the parent company of electric car ThinkCity, which it has now given back to the company in taking the impairment charge, and calling an end to the electric car market venture, at least for now. "On May 9, 2011, we surrendered to Think Holdings, for no consideration, all shares of Think Holdings' voting equity held by Ener1...based on our determination that our investment in Think Holdings was impaired and written down to zero," the company said in a regulatory filing. Ener1 may also face $18.2 million in defaulted loans it made to the car company, which could impact future reporting periods. Revenue came in at $23 million for the first quarter, below the average analysts' estimate of $27 million, but the dissolution of the electric car market effort is arguably a bigger headline than a few million in revenue missed. Earlier this year, Ener1 announced that ThinkGlobal had stopped taking battery shipments. The latest results show the situation worsened as the quarter progressed. The question for Ener1 now is how the company will transition to a new model in the electric car market, or will it shift gears into a completely different business model. The comments from the company on the earnings conference call made it clear that it's not giving up on the passenger vehicle market, but the industry still needs to solve issues related to price and government incentives to drive immediate growth. Furthermore, the company management stressed that it has been talking about diversification away from the light duty market since the second quarter last year, when the auto market looked "bleak," in the words of Ener1 CEO Charles Gassenheimer. The company went public predicated at least in part on the opportunity in the electric car market and Wunderlich Securities analyst Theodore O'Neill wonders what it will mean for other battery makers struggling with the slow rate of adoption and production ramp delays among electric car makers if Ener1 does switch gears. On the other hand, Ener1 is still moving on the transportation opportunity, with a focus on medium and heavy duty vehicles. In effect, the end of the ThinkGlobal deal could say more about the potential in the retail car market than the transportation sector for lithium ion battery makers, or simply reflect the fact that Ener1 chose poorly in choosing a car market partner.
Eric Rosenbaum. >To follow the writer on Twitter, go to Eric Rosenbaum. >To submit a news tip, send an email to: firstname.lastname@example.org.