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Better Place electric cars need better business plan

The electric car company is one of the boldest tech startups around. Too bad it’s not working out.


(Photo: Better Place)

Better Place has to be Israel’s boldest and most ambitious technology startup—it’s just too bad it’s not working out.

Started by serial entrepreneur Shai Agassi, the electric-car company seeks to improve the world by weaning it off of oil. So far, though, such vehicles have come with a long list of problems: they’re too expensive, they don’t have very good range, it’s hard to charge them when you’re away from home and the charge-up takes too long. Better Place, however, thinks it has innovative ways around each of those issues.

On the cost front, the company has been able to lower the price of its cars—built by Renault-Nissan—to about $30,000. That’s still a little pricey for the average buyer, but it’s way cheaper than most electric cars because the purchase doesn’t include the vehicle’s most expensive part: the battery. The company actually owns it and, like a cellphone provider that discounts a phone in exchange for a long-term contract, the buyer signs up to a monthly service plan to offset other costs.

The plan includes the installation of a charging station at the buyer’s home and as much electricity as needed, based on a tiered service that depends on how much you want to drive. With Israel having some of the highest gas prices in the world, owing to the enmity of most of its neighbours, Better Place says customers can cut their montly gas bill by about 30% through going electric.

The vehicles get about 130 km per charge, which takes about six to seven hours to do. With 90% of Israelis driving less than 100 km a day—it is, after all, a tiny country—the range isn’t a major issue for most. Drivers can charge their car at night just by plugging it in when they get home. A smartphone app also connects to a SIM card embedded in the car and lets the driver see their charge level at any point in time. As an extra bonus, you can turn on your air conditioning remotely, say five minutes before driving, so the car is nice and cool when you get in. That’s important in a hot place like Israel.

But what about mobile charging? What happens when you want to go on a road trip that’s more than 130 km?

That’s where the most innovative part of Better Place’s plan comes into play. The company has built 25 charging stations around the country, none of which is more than 40 km away from another, with 15 more coming online soon. The depots resemble gas stations, except instead of pulling in to charge up—a process that would take hours—the car has its battery removed and replaced with a fully charged one. The process, performed underneath the car by robots derived from the Israeli air force, takes about five minutes and is included in the monthly plan.

So with such an innovative and potentially cost-reducing scheme in place, how is it that Better Place has only managed to sell 500 cars in nine months, a fact that led the company’s board to fire founder Agassi just a few weeks ago? The answer is that its plan is both too different and too familiar.

The biggest concern I heard voiced is that potential buyers are worried about the long-term prospects of the company. While consumers may be fine with tying themselves to a long-term contract with a giant cellphone provider, they’re not so sure about doing the same with an unproven company. And while a cellphone costs only a couple hundred dollars, nobody wants to shell out $30,000 for a car that may become obsolete or unserviceable if the company goes under. A Better Place representative said there is a plan in place in case of insolvency, but he declined to elaborate.

The entire business model is based on car owners becoming completely reliant on the company, which is something they clearly aren’t accepting. The idea of owning a car is largely associated with the concept of freedom, or the ability to go wherever you want. That ideal is already limited in Israel given its geography, so anything that introduces further restraints just isn’t going to fly.

The company’s ultimate goal of eliminating the world’s oil addiction is a good one and some of its innovations toward that end are indeed clever. But with losses mounting and drivers refusing to bite in larger numbers, Better Place is going to need to come up with a better business plan.