At Better Place's offices in Kiryat Atidim in Tel Aviv, there is no room for cynics or doubters. Anyone who crosses the threshold of the electric car infrastructure venture must adopt the faith and join in the songs of praise to the rosy future awaiting the planet Earth, the State of Israel, the venture, and its investors.
Better Place Israel CEO Moshe Kaplinsky ("I came because of Shai's enthusiasm," says the former deputy chief of staff, referring to Shai Agassi, formerly of German software giant SAP, and the moving spirit behind the venture) is ready to expatiate on the vision, and also to talk in minute detail about how the cars will be charged in the future. But when he is asked to provide answers on business details and other matters of substance, Kaplinsky becomes vague and oblique, and listening to him one cannot decide whether this is a smokescreen obscuring brilliant moves from the view of unknown competitors, or colored carnival smoke covering up for the lack of a definite plan and for unsolved problems.
Then again, Better Place proudly presents a series of collaboration agreements, with countries, with private companies, and with local authorities, agreements that cover broad areas of the planned activity, from deployment of infrastructure to technological development. International interest is also high, especially after the election of the "green" Barack Obama as president of the US, and the list of investors is impressive.
So why the skepticism? Perhaps because we recall how, when the project was launched a little over a year ago, its leaders scattered many promises that turned out to have no cover. They talked about an Israeli car industry, promised electric cars that would flood Israel's roads in 2009, and so on and so forth. Now, it is clear that some of the blithe promises --- technologies, jobs, timetables, and suchlike --- will not materialize. The car factory that Renault was supposed to set up in the Beit She'an Valley will not be built. The cars will actually be made in Turkey, and Better Place will "collaborate on developing various systems for the vehicle." And when will be able to get around without benzene? Certainly not this year. Idan Ofer, in an interview with "Yediot Ahronot" last month, did tell the reporter to sell his car "during 2010" to free up the parking spot for the new wonder, but he refused to give a commitment that it really would happen that year. Even a prototype of the car has not yet been unveiled.
Better Place isn't worried. They are convinced that in a little while all the mockers and doubters will, like everyone else, hook up to the venture's charging cable. Meanwhile, they continue to inform the media about rapid progress, and the media rush to report: Israel Electric Corporation has signed a collaboration agreement, as has one of the largest energy companies in Denmark; dozens of Israel's largest companies, including Teva and Bank Leumi, have signed up to participate in a pilot program; and local authorities have expressed readiness to allow installation of the infrastructure. Even the prototype of the socket that will be used for battery charging merited a press conference.
Will the skeptics really have to bite their tongues in 2011? We met Kaplinsky and some of the Better Place team to find answers to the hard questions. So this is an updated assessment of the prospects for the electric car vision.
The technology: can it be done?
When it comes down to it, the key question about the electric car venture is whether it can be done. In other words, has Better Place managed to overcome the technical hurdles which have so far stood in the way of mass production of electric cars.
Moshe Kaplinsky, is that it? Are all the technological problems solved?
"We still have very interesting challenges ahead of us."
But you are already signing agreements, setting up a visitors' center, and everyday you announce more countries that will join in trials. Isn't it too early for all that?
"Do I look ahead today to 2010 and see a huge technological gap with a question mark over whether it can be closed? No. Everything's clear, and progressing at the pace we set for ourselves at the start."
To understand the technological problems that the venture faces --- or challenges, as Kaplinsky puts it --- it is important to understand the technical background. Electric cars were produced a century ago, but because of the restricted range that the batteries allowed, they never succeeded in conquering the roads. Even today, after a considerable leap forward in battery technology, the range of an electric vehicle, in laboratory conditions and with a generous dose of optimism, is estimated at some 160 kilometers. Turn on an air conditioner, load up the car, travel fast or in difficult conditions, and that distance will shrink substantially. International automobile giant General Motors, which shortly plans to launch the Chevrolet Volt, the first electric car that will be produced in large numbers, promises a range of just 60 kilometers. Add to the short range the need to charge the batteries, which takes hours, and it becomes clear why there has never been demand.
Agassi's idea went to the heart of the problem: the range would be extended by changing battery during the journey, just as one does with a cellphone or portable computer. "A logistical solution to a technical problem," sneered someone who knows the automobile industry well. The entire venture rests on this idea. The venture is supposed to provide a complete solution for operating and charging electric vehicles --- public and domestic charging stations, provision of service and electricity, and battery exchange stations. But even the "logistical solution" is fraught with technological difficulties. The first problem is producing a very powerful battery that is also small and light enough to be removed from the vehicle easily. The next requirement is an installation for changing batteries. And so on and so forth.
"We will set up a first model battery changing station in May," Kaplinsky promises. This model is planned for Japan, and there is no doubt that it takes considerable self-confidence to set dates for introducing the final product when its core --- the battery changing process --- has yet to be proven in action. But, as they say at Better Place, you need vision.
What about the battery? How long a range will it be good for?
Kaplinsky: "The battery that will be here in 2011 will be able to take your car between 160 and 200 kilometers."
Is development of the battery complete?
"If Renault produces a car, they don't produce a car and then start looking for a battery."
So the answer is yes?
"The batteries are produced by very big companies."
Dr. Barak Hershkovitz, Better Place's development manager, who came to the project with Agassi from SAP, is prepared to be a little less vague and to admit, "Development of the batteries isn't complete and we haven't done final testing."
Incidentally, in this context it is interesting to note that Renault does not feel committed to the battery exchange idea. To Better Place's consternation, it is signing agreements for deployment of infrastructure for ordinary electric cars, without Better Place's involvement. Better Place does not like these initiatives by its partner, to say the least, but is very cautious over what it says about the matter.
The money: how much will it cost?
Under Agassi's model, and because of the high cost of the battery --- around NIS 50,000, according to previous reports --- the car owner will not own the battery, but will only lease it, just as gas companies in Israel lease out gas balloons. "It's very costly, and we will bear the cost," Kaplinsky stresses.
What will be the price of the vehicle?
"We're still not talking about that."
The price of the battery is only part of the high expenses facing Better Place. By their calculations, setting up a battery changing station costs about $500,000, and about 100 of those are planned all over Israel. This is in addition to the widespread deployment of 100,000 charging points and charging posts. In other words, Better Place will have to repay itself a huge investment through usage fees. Better Place's economic model could be assisted by "green taxation", which the government decided on in January 2008 (legislation is still incomplete) and which promises substantial tax breaks for non-polluting vehicles. Taxation of vehicles that do not emit pollutants will be just 10%, compared with 75% on ordinary vehicles.
What will be the monthly cost of running an electric car, compared with a benzene-powered car? More expensive? Cheaper? Or the same?
Kaplinsky: "We have business models, but we don’t publish them. We will build a model that will illustrate to our users the advantages of using an electric vehicle. It will take into account all of the consumer's desires."
At least let us know when there will be electric cars for sale.
"Cars will be available for sale during 2011. In 2010, towards the second half of the year, there will prototype vehicles for exhibiting and trials and for testing the whole system --- how it works with the system we are building in parallel."
The impression one gains is that there is a large gap between your declarations and what is happening in practice. Agassi, on whose intelligence no-one casts doubt, presumably understood that there were more technological and other hurdles, and still he set dates that were clearly unrealistic. The feeling is that this was done to cook the dish long before it was ready for the oven.
"If you are implying that someone tried to pull the wool over people's eyes, the answer is no. I think that what Shai did in warming things up was terrific. Globally, not just in Israel. A tidal wave is sweeping over the automobile industry, over governments, over big infrastructure companies, and over private individuals. Eighteen months ago, people were asking who on earth would drive an electric car. Last Spring, at a car importers convention, we sat in the audience and they were pretty insulting towards us. They said, 'There's no such car, there's no such battery.' And look, now the whole automobile industry is talking about this, without exception."
Monopoly: who'll laugh last?
Why is it so pressing for Better Place to present a picture of a mature venture? Automobile industry sources claim that Better Place's big profit isn't to be found in the specific solution it offers, but in the ownership of the charging infrastructure. The explanation: There's a high probability that over the next few decades the world will gradually switch to using electric vehicles. The fact that Better Place will be the first to set up an infrastructure in Israel, and in other places, will give it a huge advantage. Under Agassi's model, the company will sell or lease out the car, and at the same time will allow use of its charging network for a fixed monthly fee. But even someone who buys a different electric car (and there are already some sold in Israel) will be compelled to use Better Place's infrastructure. In a country the size of Israel, or of Denmark --- which is next in line --- it is doubtful whether there will be room for a competitor to set up a rival network.
The monopoly would be much weaker if there were alternatives, that is, if everyone could choose whether to use Better Place's infrastructure or to charge his or her car independently at home or in the parking lot at work. But, at Better Place's behest, Israel Electric Corporation (IEC) carried out a study that found that if all drivers were to charge their vehicles whenever they wanted, the corporation would have to build no fewer than eight more power plants to meet demand. On the other hand, the study found, if the solution chosen is managed battery charging under Better Place and IEC's control, regulating charging to avoid peak hours of electricity demand, the existing number of power plants will suffice. Most conveniently, this suits the interests of IEC --- and suits the customer's interests slightly less.
Promises: 50,000 jobs shrank to 400
It was hard to remain unmoved when Shai Agassi, Renault president Carlos Ghosn, and President Shimon Peres presented the vision to the nation. At a ceremony at the president's residence, there was talk of Renault producing the special car for the Better Place venture here, in the Beit She'an Valley. Around that there would spring up support industries, providing 50,000 jobs, no less.
They promised us a car industry in Israel. What happened?
"Short sightedness on the part of the state," they say at Better Place.
"We brought Carlos Ghosn here," Kaplinsky stresses. "Shai tried to take his connections and through them to give Israel an advantage as well. Unfortunately, it didn't get off the ground. All kinds of people in this country who, in my opinion, should have leapt onto this bargain, failed to do so."
Which people?
"Mainly the Chief Scientist., Dr. Eli Opper, but there were a few others. When an enterprise this big comes to Israel, you have to offer them all kinds of proposals and benefits, but our kind media wrote that these people --- Shai Agassi and the Ofer Brothers --- were once again seeking state aid, aid that Better Place never sought. As an Israeli, I find that deeply regrettable. But as a company, it makes no difference to me where Renault makes the cars."
Opper's response is that support of the kind required for setting up a factory on this scale cannot come from the Office of the Chief Scientist, certainly not only from there. A Ministry of Industry Trade and Labor spokesperson said, "It isn't clear why they think at the company that the ministry undermined the project. The Investment Promotion Center never received any request for setting up a factory like this."
"I won’t try and sell you the idea that the Ministry of Industry Trade and Labor went out of its way to promote the matter," Opper adds, "but you have to distinguish between the ministry and the Office of the Chief Scientist. Ever since Agassi met Shimon Peres and aroused his interest, I have been involved in the matter, even personally. His is a fine idea and very original, and goes in the direction that the world is moving in, from the point of view of research and development. Over that period it became clear that what was at stake was not the development of a vehicle, but a charging business plus some substantial technological problems. From a commercial point of view, it’s a very complicated business. I estimate that it has a more than reasonable chance of succeeding."
Importing the car: more revenue
If the battery exchange solution gains momentum, Better Place will gain a double monopoly. A vehicle with a changeable battery, or in the annoyed car importers' neat description, "a car with a hole in the middle", must be produced according to a certain specification, and it will therefore be designed for Better Place. With a model like that, what could be more natural than that the company should become an importer and distributor as well? In their nightmares, the car importers see a Better Place showroom with all the electric car brands, just as a Partner Orange subscriber buys mobile telephones from Nokia, Samsung, or LG through that company.
For that to happen, of course, the car makers have to adopt the solution. According to Kaplinsky, two more of the world's big automobile manufacturers, in addition to Renault-Nissan, have already expressed interest, but since they have not signed agreements their names cannot be revealed. Better Place is maintaining its famous vagueness about its ambitions of becoming a vehicle importer. It's hard to obtain a definite answer even to the question whether they intend importing the car that will be produced in Turkey.
"We have an agreement with Renault that we are willing, and would be happy, to buy cars, or to enable the cars they bring to be charged and travel using our infrastructure," Kaplinsky says. "We won't necessarily buy and sell. These are things that we will decide about as we go. The important thing is that Renault responded to the challenge we set before them to produce a car with a replaceable battery."
Do you have an import concession from Renault or not?
"We have an MOU signed in January last year. Now the matter is at the advanced stages of negotiation. The rate of progress is still reasonable. The launch is in 2011, so there's still plenty of time for these processes."
According to the MOU, you were meant to have signed an agreement last September
"September was one of the milestones. We had several meetings with them around that date. But the delay in signing an agreement isn't holding anything up. Renault and Better Place are leading something new, a new concept, so we analyze things together and check them out. Research and development links are of course being maintained regularly."
Are they negotiating with someone else?
"Not to my knowledge."
Published by Globes [online], Israel business news - www.globes.co.il - on May 11, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009