Better Place is alive, but not well

A Better Place battery switching station

A Better Place battery switching station

I’m driving a Better Place Renault Fluence all-electric car from Tel Aviv to a kibbutz in the northern Negev, about a 60-mile trip. I can’t decide whether to keep my eyes on the road, on the GPS system to make sure I don’t miss my exit or on the data flowing out of my 22 kWh  battery, telling me how much electricity I’m using at any given moment, how much remains and how much, in theory, I’ll have left when I reach my destination. A wrong turn or two, and I could run out of juice–and without an internal combustion engine in the car, a nearby gas station will be no help at all.

Suddenly, I understand “range anxiety.” Breathe slowly and deeply, I tell myself, trying to recall a meditation DVD I’d listened to a few days before.

Eventually, I relaxed and, by the time I’d made it to the kibbutz and back to Tel Aviv, I’d thoroughly enjoyed the trip. The Renault all-electric car ran smoothly, and silently, and it was fun to drive.. The ingenious, fully-automated battery-switching technology that the company has designed to make long-distance driving easier worked (almost) flawlessly. Better Place’s customer service, which I called upon on couple of times, was first-rate.

Having said that, Better Place appears to be running out of gas, er, electricity, well, actually, money and time. That’s a shame. This is a very cool company that set out to change the world.

Shai Agassi

Shai Agassi

You remember Better Place, don’t you? The company was one of the really big clean tech ideas back in 2008, when oil prices were high, as were hopes for US climate regulation after the election of Barack Obama. Shai Agassi, the Silicon Valley startup’s charismatic founder, was a regular on the green conference circuit, telling people that electric cars had such compelling long-term cost advantages over gas-powered vehicles that he’d eventually be able to practically give them away and charge people for the miles they travel, just as mobile phone companies subsidize phones and make their money by selling minutes. Shai was nothing if not a bold thinker–he was not only going to change the way millions of cars around the world were powered, he was inventing a whole new business model to change the way they were sold. He won over Carlos Ghosn, the Renault-Nissan CEO who agreed to supply Better Place with cars, and Shimon Peres, the Israeli prime minister who decided that Israeli, a small country with no appetite for Arab oil, would be the ideal place to test out the Better Place model.

Shai is gone now, ousted last year as Better Place’s CEO, after raising and spending a big chunk of change — the company has raised an astonishing $850 million — but finding customers harder to come by. His successor as CEO, Evan Thornley, resigned last week after a wave of layoffs. Today, Better Place has about 500 customers in Israel and another 250 in Denmark–not nearly as many as forecast a few years ago. The company recently held a customer meeting near Tel Aviv; the good news is that customers love the company, the bad news is that 25% of them fit into one room. Insiders tell me that Better Place may have to return to the market to raise money this year, and you can be sure that won’t be easy.

Still,  I wanted to experience Better Place for myself on my trip this month to Israel. The company kindly loaned me a car and, for the most part, I came away impressed by what Shai and his associates have built. I also came away with a better sense of why the uptake of electric cars has been so slow, not just in Israel but in the US where in all of 2012, General Motors sold about 23,000 plug-in hybrid Volts and Nissan sold fewer than 10,000 all-electric Leafs.

There are two big problems with electric cars, given today’s battery technology. The first  is their limited range. The second is their capital cost; a battery adds as much as $10,000 to the price of the car.

Essentially, there are three ways to deal with the range problem. One is to build a gasoline engine into the car along with the electric power train, adding expense and weight; this is the  approach that GM has taken witht the Volt. A second is to deploy a network of so-called quick charging stations that aren’t really that quick–perhaps 20 minutes for a charge.  No one wants to interrupt long-distance trip for a 20 minute charge. The third is Better Place’s battery-switching solution, where the company takes out your nearly-spent battery and replaces it with a full-charged one. The company owns and charges the batteries, and will upgrade them if and when better technology becomes available.

So why even bother with electric cars? One reason is that electric motors are dramatically more efficient than internal combustion engines, with fewer moving parts, and that fuel costs are much lower, depending on the price of gasoline and electricity. In Israel and Denmark, where Better Place is also rolling out its infrastructure, the per-mile operating cost is as much as 80% less than the per-mile cost of an equivalent internal-combustion car. Electric cars also have lower emissions than gasoline-powered cars, and the emissions are much lower if some or all of the electricity comes from low-carbon nuclear,  wind or solar power.

The paradox is that electric cars are perfectly suited for short trips–charge your car at home overnight or at the office during the day and you’ll drive worry free. But the economics make sense only if the car is driven a lot.

The Better Place infrastructure–the company has built 35 battery-switching stations and 1,400 charging states across Israel–is designed to solve that problem by giving customers the freedom to go wherever they want. The economics look favorable, too. A Better Place Renault Fluence, with a four-year contract including unlimited miles per year, sells for about the same price as a Toyota Prius, before fuel costs, the company said. But Israelis have resisted the pitch, perhaps because it’s complicated and untested. No one wants to be the a frier, the Yiddish word for chump known to every Israel.

My own test drive revealed the pleasures and pitfalls of the Better Place model. The Renault Fluence delivered a smooth and quiet ride with lots of pickup. I loved the GPS, entertainment and battery information system, called Oscar. And the battery switch worked beautifully–you drive into the station just as you would drive into an automated car wash and, in a little more than five minutes, robots remove your old battery from underneath the car and replace it with a new. I reached one of the switching stations at about 9 p.m. when it was in “pause” mode, and a quick call to customer service had me on my way. It’s better than a gas station because you never have to leave your car.

Oscar, with navigation and battery info

Oscar, with navigation and battery info

The trouble is, I had to switch batteries twice during my 120-mile round trip, and each of the switches took me slightly out of the way. Better Place has built a network of 35 switching stations, enough to cover most of Israel, but there’s not nearly the equivalent of one in every town. Another 1400 charging stations are available. The Denmark network is also fully-deployed. Both are managed from a sophisticated operations center near Tel Aviv.

The trouble ahead is that Better Place has to grow to succeed. Only scale will bring down the costs of the cars and batteries. And right now, there’s just one car available — the Fluence five-seater — and no other choices on the horizon. The Israeli press is reporting that Idan Ofer, Better Place’s chairman, its biggest investor and one of the richest men in Israel, is now in charge of the company, and that he wants to focus on the core markets of Israel and Denmark. That’s understandable if the company is running out of cash, but it won’t bring the scale that’s needed. As one analyst told The Jerusalem Post: “The investment in Better Place is beginning to look more like an investment in a roller coaster than an investment in an infrastructure for electric cars.” Ouch.

Better Place’s vision still makes sense, until and unless fast-charging times get really fast. But the company is probably ahead of its time. Without lower battery costs or higher gasoline prices or, probably, both, the economics of electric cars are challenging for owners. They will, one day, make sense for the masses, but that day could be 5 or 10 years away, or more. It’s unlikely that Better Place will be hang on until then but you never know.

Renault-Nissan CEO Carlos Ghosn, Israeli president Shimon Peres and Shai Agassi, in happier days

Renault-Nissan CEO Carlos Ghosn, Israeli president Shimon Peres and Shai Agassi, in happier days

 

Comments

  1. The problem with electric cars is the positioning is all wrong.

    Electric cars at this point are not a prime solution for long-range intra city transport. And should not be positioned anywhere near that use case at all.

    However electric cars are brilliant solutions for transport within cities or large metropolitan areas. For example, taxis or second cars in families in cities or suburbs, and even primary cars for people who take long trips maybe once or twice a month. For these people the electric car and be a very good solution. All that is needed is a simple framework of infrastructure for basic 240V chargers (not even ultrafast chargers) at parking lots, garages, workplaces etc – combined with more powerful chargers onboard the car eg the one in 2nd generation Nissan Leaf.

    Better Place is barking up the wrong tree. Their first move should be to make a proposition to Taxi owners or fleet taxi owners, corporate and industrial fleet owner and so on. Use them as the foundation customers. The urban consumer would come after that, building on the momentum. But first get your heavy users in place.

    And pitching this thing to consumers who want to travel cross country is peversely wrong – they are completely the wrong end of the spectrum in priorty of customers likely to get value from this and in terms of likelihood to believe in and adopt it. Chasing them first is basically “#$% away whatever capital this company has.

    I’d have thought this was common sense. But clearly common sense is not so common.

    • Exactly, Sam. This has always puzzled me as well. To me, the best possible market for Better Place is Manhattan and its NYC cabs. The travel is so frequent and so condensed (a large amount of relatively short trips) that a fleet of electric cabs makes sense. The same amount of recharging stations could cover many more driver miles in the Big Apple than across the countryside of Israel or Denmark.

      Not to mention, gas prices in New York are high and gas stations are limited. Cabbies would love the opportunity to dodge the cost and time of gas by just going to a battery switching station. And gas stations are rare enough as it is, that having a network of charging stations that are essentially only used by cab drivers would be fine and not really viewed as an inconvenience.

  2. Marc, great to hear from someone who has driven a Better Place vehicle and experienced switching batteries. On paper, I have always thought it the superior model for consumer electric vehicles. Switching batteries is much more akin to filling up with gas than plugging in and waiting a few hours.

    http://csrperspective.com/environmental-sustainability-2/better-place-a-better-paradigm/

    Seems to me that to be succesful, in addition to more choice of cars it needs a forward looking gas company to see the business potential and replace the forecourt car wash with a battery switching station. If there were a standard interface agreed, then car companies could compete knowing that, as with gas, their car can switch batteries anywhere. Perhaps I am expecting too much co-operation. Sad to hear about the troubles at Better Place.

  3. I live in Israel and own a better place car. Driven about 11000 miles or 19000 km so far.
    We use it and it just works….

    It is a great second car for people who commute to work less than 80 km each way which is thousands of people. You drive, you plug for 8 hours while you work, you go home,
    You use a second car if you want to make a 400 km trip.
    Bp has to identify a market and attack it . Read crossing the chasm .
    Find people who want a second car . Also note, once cars are bought, they can last 10 years or more, Bp just needs to get over the hump.
    Good luck…

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