Wiring the World
Oil man Ofer had an environmental epiphany, and it led him not only to drive electric cars but to become, through his Israel Corp., the largest single shareholder in Better Place, the company (headed by Israeli-born Shai Agassi) that is trying to wire the world for EVs.
“The world will move eventually to electric mobility,” says Ofer. “I am convinced of it. And I have resigned my position as chairman of Israel Corp. to spend more of my time working on this issue. My sole official role now is as chairman of Better Place.”
Ofer was an early and enthusiastic investor in the five-year-old company, which has a unique business model that includes offering consumers “electric miles” at a fixed monthly price. They buy the car, lease the battery, and then have access to a nationwide network of 1,500 charging points and battery swapping stations. Battery switching is key to Agassi’s vision, because it takes away the range anxiety inherent in cars with 100-mile ranges. Israel will eventually have 40 fully automated swap stations, which can slot in a fresh battery in five minutes flat.
Better Place has started selling the Renault Fluence Z.E., a five-passenger sedan with Nissan Leaf-like performance, to Israeli consumers and a mass marketing effort is coming soon. Right now, the Fluence is the only car in the world with switchable batteries, but the company is trying to persuade other manufacturers to join the party. According to Jean-Christophe Pierson, who directs Middle Eastern affairs for Renault, the new Zoe electric car, appearing this autumn, could be switch-friendly. Renault is waiting to see how Better Place does marketing both for its concept and the Fluence. Actually, the whole world is waiting to see if Agassi’s dream takes flight.
Flinging a Fluence through Tel Aviv at 80 miles an hour, it was easy to share Agassi’s vision that the traffic around me (as well as that of the rest of the world) will soon be electric. He’s one of the world’s great convincers, and his confidence is catching.
“When Shai first came to see me,” Ofer said, “I was already concerned about oil as a finite resource, the environment in general and China.” When an oil magnate worries about peak oil, then we know we’re in trouble. Ofer’s concern about China is well-placed—the world’s most populous country is swiftly moving from two wheels to four, and if its vast middle class starts adding tailpipes, the whole world will be bathed in a rich plume of greenhouse gas. China is already the world’s biggest emitter, surpassing the United States.
Although Better Place hasn’t yet announced China as a partner, it’s quite likely to become one. The company is currently looking for partners, including an automaker that can build an EV with switchable batteries. The implications are vast. China is already offering some of the world’s richest subsidies for EV buyers, totaling as much as $19,000 per car. It’s encouraging the country’s approximately 70 automakers to electrify, and plug-in models were rife at the Beijing Auto Show. As Ofer pointed out, “Most Chinese auto buyers are acquiring a car for the first time—they’re not resistant to going electric.”
Ofer already has an arm and a leg in the Chinese auto market. His Israel Corp. is in a 50-50 joint venture with Chery, in the Top Ten of mainland carmakers, to produce what has been described as “China’s Lexus.” The new company, Qoros, hopes to begin producing cars next year. Like Better Place, it has a unique business model. “We want to create a brand with western levels of quality, but at a lower price than comparable European cars,” Ofer said.
Think about this: We buy everything else from China, why not cars? The answer is simply that Chinese cars lack cutting-edge design (many resemble 1985 Toyota Corollas) and would miserably fail U.S. or European safety tests. But what if a joint venture brought western engineering to Chinese cars for export?
That’s Qoros’ billion-dollar idea, and the company has already recruited former Volkswagen honcho Volker Steinwascher as vice chairman, and has hired engineers from both VW and BMW. Engines are to come via Austrian firm AVL List. Qoros plans to be building 150,000 cars a year by 2016, all priced lower than German cars now on the Chinese market. Ofer said the product line-up (reportedly including three compacts) will also include electric models. What’s more, Qoros is looking beyond China’s home market to sell vehicles in Europe. The U.S. could be next.
Chinese government officials have said they want to have five million electric vehicles on the road by 2020, and while that goal may be somewhat ambitious there’s no questioning their authority to steer what could become the world’s biggest car park towards electrification. “Every mayor in China wants to be the first to do this [plugging in transportation] well,” Ofer said.
China already has some limited battery swapping operations, but with nothing like the automated sophistication I saw demonstrated in Israel. The stations are like giant car washes, rolling cars through in a few minutes, as the battery drops down and another, recharged, is slotted into place. What the consumer doesn’t see is a large underground holding area, with as many as 32 batteries ready to roll. Better Place insists that its stations can handle multiple car models and multiple battery packs—responding to one of the biggest criticisms of its business model.
China is the sleeping giant, but meanwhile Better Place is moving ahead in its second market, Denmark. Johnny Hansen, CEO of Better Place Denmark, said that his country is “two to three months behind Israel.” Hundreds of charging stations are installed, he said, and 20 swap stations will be running by the end of the year. Denmark has five million people, so it’s a good small-scale test bed for Better Place.
Denmark aims to be the greenest country on earth. It’s already at least 25 percent wind-driven, and seeks a 40-percent cut in carbon dioxide (from 1990 levels) by 2020. It wants to generate 50 percent of its electricity from wind by 2020, and 100 percent from renewable energy by 2035. Transportation is supposed to be 100 percent sustainable by 2050.
Danish drivers pay no taxes on electric cars, which can park free in downtown Copenhagen. Despite these perks, only 900 have been sold so far, Hansen said. That could change dramatically if Better Place is a hit with its “electric miles” and plug-in Fluences.
Better Place isn’t neglecting North America. It has beachheads in San Francisco (where a pilot project involving electric taxis is gearing up) and Hawaii. Ofer wants to see other North American markets open up.
Better Place has raised $750 million from an impressive list of investors, but Ofer said its biggest challenge going forward is, well, “money.” The robot swap stations are huge investments, and they all have to be in place before the company takes in its first dime. I saw big computer and call centers designed to run Better Place’s sophisticated in-car and cellphone-based communications, and impressively futuristic showrooms for the Fluence. All that is built on spec; Better Place is still pre-revenue.
“We need to put money in the ground before we can start selling,” Ofer said. “So far, it’s gone well, but we’re going to need more money to grow the business.” And that includes expanding into China and North America and changing the world.