THE BETTER PLACE BET

Will Better Place Make It?;A look at the dollars, cents and psychology behind the electric car guys
Michael Kanellos, March 22, 2010 (Greentech Media)

"…Driving a gas car costs about 12 cents a mile when gas costs $3 a gallon, says Jason Wolf, vice president the [Beter Place] North American division…Electricity, on the other hand, costs about 3 cents a mile: a kilowatt hour costs around 12 cents and a car can go around 4 miles on a kilowatt hour. A battery for an electric car, meanwhile, will cost around 6 cents a mile over a 200,000 mile lifetime.

"Since Better Place says it will supply the electricity and batteries to consumers, the company has a margin of 3 cents per mile (12 cents minus 9) before potential customers complain about the higher cost of going electric…[With the 3 cents] Better Place proposes building thousands of charging stations, hundreds of battery swapping stations, and devising software so these cars won't crash the grid when charging…There are around 200 million drivers and 254 million vehicles in the U.S. and insurance companies say the average person drives 12,000 miles a year. That comes to 2.4 trillion miles, or $72 billion of potential three-cent transactions per year. Even one percent of that would probably placate investors. And in Europe and Asia, higher gas prices boost that 3 cent margin to 9 or 12 cents. Additional revenue can come from selling semi-depleted batteries to utilities…"

A Better Place fast-switch battery-switching station. (click to enlarge)

"And with the battery separated from the car, the down payment and resistance toward going electric goes way down…In a short period of time, [Better Place] has joined the ranks of Google, Apple, Microsoft and Tesla Motors as a subject of endless debate and speculation. How did they raise over $700 million? How much have they spent? Will car dealers and manufacturers work with them?

"…[There] appear to be five big hurdles the company will have to overcome…Consumers will buy electric cars, but not the battery. Better Place will build charging networks and then charge consumers subscription fees that cover the cost of the car's battery, the electricity to run them, and ancillary services like smart charging software and charging station maps… 2.1 charging stations per car…Since the battery accounts for about one-third of the cost of an electric car, the sticker price will be far lower than competing cars sold with batteries…[Better Place] will also offer discount entertainment packages, insurance and other services."

Common driving habits mean most charging will take place at home. (click to enlarge)

"…[T]he Better Place hurdles…[1] Fear, Uncertainly and Doubt…[are] perhaps the largest looming barrier. It's just plain weird to buy a car but lease the most expensive component…[Consumers] will have legitimate questions…[2] Swapping…Consumers don't have to worry about their battery degrading…Better Place will circulate newer, longer-lasting batteries into the fleet….[B]atteries will decline in price…Better Place's battery expenses drop to 3 cents a mile and the gross margin doubles to 6 cents. The company can then add to its margins by selling the semi-depleted battery packs to utilities for grid balancing…

"…[3] The battery is one-third of the price of an electric car…[so] car manufacturers only get to sell two-thirds of a car, leaving them…[less] profit…On the other hand, fleet sales… are drawing customers, which car makers won't want to miss out on…[4] Technically, you will need to install a charger for safety reasons, but it's essentially the same outlet [as the 240-volt home dryer socket]…Your first electric car will likely be a commuter car, plowing less than 40 miles a day…If you drive 12,000 miles a year like the average American, your electricity costs come to $360 a year, or $36 a month. And if you charge at off-peak hours like the utilities will urge you to, the monthly costs drop to $24…[5] Better Place often analogizes the service to the cell phone industry. In the early days, cell phone equipment was expensive…Now, phones go worldwide and the infrastructure costs have dropped…Still, the prices of cell phone equipment and Better Place equipment aren't remotely [the same]…Then again, with a leased battery, electronics are someone else's problem…So it could work."