Better Place was supposed to revolutionize electric cars. What went wrong?

March 6, 2013

Back in 2008, when oil prices were soaring and experts were pondering how best to make electric cars a reality, one company was frequently heralded as the industry's savior — a small firm called Better Place.

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The Renault Fluence EV, the only car that signed up for the Better Place concept. (Renault SA)

Better Place's founder, Shai Agassi, had a simple but potentially revolutionary idea. The knock on electric cars has always been that the batteries are too pricey and take hours to charge. Agassi had a way around this: Customers would buy the cars, but Better Place would own the batteries. When drivers needed to recharge quickly, they could simply swap out their batteries — in five minutes — at a Better Place station.

Agassi's vision was to make electric cars as versatile and as convenient as gasoline-powered vehicles. And he had at least one notable supporter. In 2008, former Israeli prime minister Shimon Peres invited Agassi to build a network in Israel. The hope was that Better Place could free the small nation from its dependence on oil.

But that vision hasn't quite panned out.

As Marc Gunther explains in a nicely reported story for Yale's Environment 360, Better Place has only sold 750 cars in Israel to date and is now losing some $500 million. Agassi himself left the company last year. Why? Here's Gunther's rundown of what went wrong in Israel:

Local authorities, whose permission was needed to build battery-switching stations, put up unexpected roadblocks, slowing progress, company officials said. And when employers provide the cars to their workers, which is a common practice in Israel, the workers pay a usage tax that reflects the full value of the car, including the battery, undermining Better Place’s effort to drive down costs.

Another shortcoming: Better Place assumed that other automakers would build vehicles that are compatible with its battery-swapping technology, but so far only Renault has done so. The only Better Place car available is the Fluence, a family sedan that’s too big for some drivers and too small for others.

A recent Financial Times account, meanwhile, put some of the blame on management:

But some of Better Place’s initial problems appear to be the result of management missteps. According to former employees of the company who spoke to the FT, Mr Agassi focused too broadly on future growth, at the expense of getting early details of the business right....

As Better Place expanded, Mr Agassi recruited many software specialists capable of developing the ingenious in-car telematics that route cars to their nearest battery-switching stations, but the company had fewer managers with automotive or infrastructure expertise.

Now, to be clear, Better Place is hardly finished. The company is still developing networks in Israel and Denmark (although it is pulling out of Australia and the United States). And the handful of existing Better Place customers seem to be quite pleased with the cars and the service.

And, in theory, the idea still makes sense: Back in 2009, a study by U.C. Berkeley's Thomas Becker found that an electric-vehicle system like Better Place's — in which car companies own the batteries and customers pay on a per-mile basis, as they do with cellphones — could transform the car industry. "The total cost of ownership of these vehicles is expected to be between $0.10 and $0.13 lower on a per-mile basis than gasoline-powered cars," Becker wrote, "depending on the future price of oil."

Yet there's still a very difficult chicken-or-egg problem here. Few drivers will buy electric cars unless the proper charging infrastructure is in place. At the same time, any company will have difficult setting up and financing that charging infrastructure unless customers are going to buy the cars. That means any electric-car system will likely need a policy push to get going.

Here in the United States, utilities and policymakers have pushed (lightly) to build a different type of infrastructure — a growing network of electric-charging stations that benefit conventional plug-ins like the Nissan Leaf or Tesla Model S. For the battery-swapping model to catch on, some country or state will likely need to take proactive steps to show that it can work. That hasn't happened quite yet.

Further reading: This 2008 piece in Wired is a great account of the early days of Better Place. Also, it's worth watching this short video of the battery-switching technology.

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