Agassi, a hard-charging, charismatic software executive, launched Better Place in 2007 with a bold goal: To help end the global auto industry’s reliance on oil. Since then, Better Place has raised about $850 million -- an astonishing figure for a start-up -- from such sophisticated investors as HSBC Group, Morgan Stanley, General Electric, Vantage Point Capital Partners and the conglomerate Israel Corp., its biggest shareholder.
When analysts from Deutsche Bank took a close look at Better Place in 2008, they wrote that the company’s unique business model could lead to a “paradigm shift” that causes “massive disruption” to the auto industry, and said the company has “the potential to eliminate the gasoline engine altogether.” Renault-Nissan agreed to manufacture 100,000 electric cars, tailored to Better Place specifications.
What got many people (including this writer) excited about Better Place was Agassi’s unorthodox solution to the two big problems with electric cars: You can’t drive them very far without recharging, and they are expensive to build because the battery adds $10,000 or more in costs. David Jones, Better Place’s vice president of business development, put it bluntly when we met: “Gas cars are convenient and affordable. Electric cars -- prior to Better Place -- are neither of those things. They’re not convenient. They’re not affordable.”
The Better Place solution is to literally separate the battery from the car. To make refueling convenient, Better Place invented automated battery-switching stations; they deploy robots that slide under the car, remove a depleted battery, and replace it with a fully charged one in about five minutes. These battery-swapping stations work faster than chargers; the company has built 37 of them across Israel. By retaining ownership of the battery, Better Place is able to reduce the sticker price of the car, and upgrade the battery as the technology improves.
Like wireless phone companies that discount their hardware and make the money back by selling minutes, Better Place reduces the price of the car and charges its owners a monthly fee for the battery and electricity, based on how many miles they travel. The economics make sense, at least in theory, because electric motors are more efficient than internal combustion engines; buying electricity for an EV is the equivalent of buying gas for about $1 a gallon, says the Electric Drive Transportation Association, an industry group.
In fact, leasing a Better Place car in Israel costs about 20 percent less than a Toyota Prius or Honda Insight hybrid, the company says. “The economics of the electric car are fundamentally better, long-term,” says Mike Granoff, a senior executive at Better Place. In his heyday, Agassi liked to tell people that Better Place would eventually be able to give cars away, and still turn a profit.
Next page: Customers unwilling to take that leap of faith