Thinking about Better Place's free car strategy
Better Place's Shai Agassi is all over the map, and I don't mean because his company is talking about unleashing electric cars in Australia, Israel, Denmark and other places. Back in October, he claimed that the Chevy Volt would be a "niche product." Whatever accuracy that statement has, it certainly doesn't seem to jive with the message he gave to the Web 2.0 Summit in San Francisco recently, where he once again proposed giving people free electric cars if they signed up for Better Place's electric car plan (when it becomes a reality). BP would then make money off of the usage fees. He calls it the cell phone model, but I don't see how handing someone a big car with expensive batteries that costs way more than a RAZR to make and then taking their $50 a month will result in a profit. Especially if he thinks that EVs will be niche-y. Of course, his dissatisfaction with the Volt was that'd it be too expensive, but isn't making the cars free going too far in the other direction?
[Source: WIRED]
Reader Comments (Page 1 of 1)
Mike Z 4:58PM (11/10/2008)
Because as well all know, everyone just loves the business model of the cell phone industry!
I fail to understand Project Better Place's business model. Basically they have to hold on their books a ton of battery packs that are likely to continue to drop in price in the coming years.
Basically you get 10 minute rapid recharge battery packs or $300-$500 per KwH batteries and their out of business.
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paulwesterberg 6:47PM (11/10/2008)
Monthly service fees would probably be 300-500 per month depending on car model. Many people pay that now in car payments + gas so this is much like leasing.
The service agreement probably stipulates an early termination fee so that pbp gets their money if you jump ship and buy one of the newer "cheap" electric cars.
Cars are expensive to make so even if the price per vehicle drops substantially they wont lower the price unless they need to stimulate demand. The volt will probable be over 30 for the base model and I expect well made electric cars with a decent range will be quite expensive for the next couple of years given that your fuel cost for electricity is greatly reduced. Expect car makers to institute a tariff on new green cars such that you will only break even on the extra cost in 10 years if gas goes to $5 per gallon.
People will still buy these cars because they would rather pay a car payment via direct withdrawal than to pull up to the pump and bend over to fill up their tank with imported oil.
I plan on switching to electric or plug in hybrid in the next few years regardless of what pbp does.
gorr 5:42PM (11/10/2008)
This futur bankrupcy project must cost a lot of taxpayers money.
I hope they're not coming in canada where fool's that spent billions for nothing are numerous and will like to lose some others millions dollars with this gang of illegal traders. They are dangerous talking incompetants and they are talking and interfering and questionning and dealing with regular manufacturers with a state mandat. They are allergic to normal commerce with normal products.
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Chris M 2:03AM (11/11/2008)
Oh, Gorr is just throwing a snit because they aren't promoting his beloved hydrogen!
As for "costing the taxpayers a lot of money", I have yet to hear any government funds going into that project. On the other hand, H2 fuel cell projects have already squandered billions of taxpayer dollars, with little more than a handful of expensive prototypes to show for it.
GoodCheer 6:12PM (11/10/2008)
"I don't see how handing someone a big car (...) and then taking their $50 a month will result in a profit."
The service fee would clearly have to be commensurate with the cost of the product. It would be like a car lease or car payment, or maybe a bit more since EVs will have a price premium. The respect in which it would be like a cell phone plan is that you get the hardware for free, not in that it only costs $50/mo.
"Basically you get 10 minute rapid recharge battery packs or $300-$500 per KwH batteries and their out of business."
They don't think so. They are pretty convinced that it is exactly that uncertainty about the future that makes theirs an attractive option. Whatever batteries cost in the future (and however long your batteries last in real-world driving), you the consumer don't have to worry about it. Their service fees will have to compete with the payments on the car you might want to replace it with, but again: With them you always know your battery will get you there.
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!!D 7:09PM (11/10/2008)
I believe the reason a typical U.S. driver doesn't get the Better Place business plan is because he views his automobile as a personal extension or living-room-on-wheels rather than a utility for transportation. The BP model relies on 100% EV and, as such, is not intended for distance drivers or heavy haulers. It is meant for the daily commute of reasonable distance, translating kids to a nearby school and running the neighborhood errands.
Sebastian Blanco says "I don't see how handing someone a big car with expensive batteries" When, in fact, BP EVs should NOT be big (implying heavy), but rather lightweight; and the batteries shall come down in price when they are mass produced by competing manufacturers.
Saying, "making the cars free," is also a misnomer because the Transportation Utility may recoup the cost through the service plan (which shall be made large enough for the utility to achieve profit) or the Transportation Utility may reclaim the vehicle for refurbishing at the end of the contract term.
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Schmeltz 8:18PM (11/10/2008)
Gentlemen:
Recommend everyone to visit Shai's website: www.betterplace.com and take a primer in his vision. I think there is a good deal of misunderstanding occurring judging by the comments. His idea is pretty thought provoking really. I think if you are a Country that is possibly considering his system, you best should jump in completely or it may fail.
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Arnold Schneider 12:21AM (11/11/2008)
Oh man. Is it really that hard to grasp?
Shai wants to get the world off of oil. A Volt for 30000 is not going to make that in the next 5-10 years, because only very few people are going to buy it (the LOHAS, environmentalists, rich people - but not the mass). But electric cars combined with swap stations + affordable for everyone who drives a car today: Thats a huge game-changer. I have done the math: The make a profit very soon. And people will buy their cars like crazy. I mean you would be stupid if you don't (free car vs. normal price car - it's a no brainer).
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Toni 6:24AM (11/11/2008)
I now understand Project Better place. I could not see before why it was needed the government involved, just to make an infrastructure of charging and exchanging batteries points. I can see the benefit for the governments. Governments will need a new source of taxes that currently are getting from the petrol.
Now it has sense for me. The electric car is too expensive, therefore you get one free from Project Better Place-Government, but you are going to end paying what you pay now anyway.
Forget to spend less in the future charging with cheap electricity. We will keep spending the same but to different providers.
Clever Project. Pretend to distribute all-in-one except taxes (car, energy, maintenance)
It can take a good part of the market, mainly if electric cars are very expensive (or make them expensive for non Better Place-Government customers).
I would prefer to have my own electric car and batteries, and find my own sources to charge electricity. (expecting to pay high price to recharge in a Project Better Place-government charging point)
I guess that if Governments help the automotive industry in the current financial situation, the deal is nearly done.
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mister nomer 12:58PM (11/11/2008)
So, let me see if I have this...
Instead of paying money to several different oil and gas companies and one of several different car companies we will instead pay money to project happy place, er, project better place.
I see how this makes sense to (and makes money for) Shai Agassi, but I still don't see how this makes sense for us.
Is it really that easy to get money from people these days?!? Just say, "Trust me, I'm going to get your country off of oil" and governments fork over our cash?!?
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better place 1:47PM (11/11/2008)
Read the entire plan before you criticize any plan.
we say 3 simple things:
1) you need a widespread energy network to deliver electrons to cars. we have built that network for oil, but have gotten addicted to it at every expense. time for a second network
2) we should not ask consumers to buy batteries up front. while battery + electricity is much cheaper than oil per mile - paying up front for the battery is a scary proposition, especially when we keep hearing about them magic batteries that charge up in 3 minutes and go 300 miles.
3) if we pay per mile, less than we do for gasoline, and still get to drive a car that is a fun experience people can be enticed through various models to jump from gasoline to electric. The more you drive the more we can entice you.
The example shai used at the web2.0 presentation said "Europe/ 25K miles+ a year/ entry level sedan". The financing cost on that car is roughly $200 a month and better place will give you a rebate of $200 a month on your energy bill - free car.
read the entire plan on the www.betterplace.com website. and amazingly no government paid for this post or for their plan.
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mattW 12:23AM (11/13/2008)
I am a big fan of PBP and think it makes a lot more sense than a lot of readers are giving it in the comments. The key is while the upfront cost of batteries is large, charging them is dirt cheap and so over time (5-8 years life) they are much cheaper than gas/petrol. For those talking about servicing, it would consist of changing the brake fluid and rotating the tires. EVs have about 4 moving parts and especially with AC there is not really much that can wear out.
My major concern is with making the cars free. While the Renewable Energy charging infrastructure is awesome making a car free means it will be incredibly disposable. After the contract runs out the car will have no resale value because other people would have to be on the contract with PBP infrastructure to use it and would be able to get the new version 'free' car anyway. So instead of cars lasting 20 years through the second hand market, they would just get scrapped since they have no inherent value. The way in which phones are made now and disposed off every 2 years is a scary prospect with something as large and energy intensive as a car. Excellent short term marketing, major potential for green-washing backlash.
DavidG 7:08PM (3/22/2009)
Misunderstandings abound here.
First, noone is talking about giving people free cars. What BP has proposed is a tiered system in which people who purchase more miles save increasingly more money. Those who drive enough to pay for an unlimited mileage plan can end up receiving a discount equal to the typical monthly payment for a car, resulting in a net free car. However, those owners will be driving a lot and that freeness is being paid for by their volume energy discount.
Lower-volume drivers would choose an a la carte plan (pay at the charging station) or buy a fixed mileage / month plan.
Second, this isn't a one source system. The energy will be sourced from multiple suppliers, with the requirement that they are green/sustainable. In addition, multiple vendors have been approached about building cars.
While the infrastructure may initially be from one source, a key part of the dialog between BP and the governments that have invited it to build the first infrastructures is, in fact, the need to make all the standards, both electrical, mechanical and regulating software, open and thus able to interface with competing equipment that chooses to enter the same marketplace according to those standards.
All this is described very clearly in multiple places.
David
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