Shai Agassi's Plan to Make Buying an Electric Car Easy

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Shai Agassi says that for the cost of a week's worth of gasoline in America, we could build the electrical infrastructure to jumpstart a real alternative transportation system, engineering around the technical and commercial problems of today's battery technologies.

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In the last decades, technological change has transformed virtually every aspect of life, from commerce to politics to culture. Exponential technological breakthroughs, combined with new business models revolutionized every segment of our lives from mobile communications to health care, creating new industries and growth opportunities. Yet, in the world of energy, and especially as it relates to transport, we have not seen dramatic change. 

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If Henry Ford opened the hood of a modern car bearing his name he would recognize the basic architecture of the internal combustion engine from a century ago. He would also relate to the efficiency - the Model T he debuted in 1908 went just about as far on a gallon of fuel as 2011 Ford Fusion. At the same time he would recognize the business model, sell the car for no profit and make up for it in spare parts over the years.

Even before the Model T, there was a real battle in the market between propulsion systems; oil-based versus electric. Every taxicab in Manhattan in 1900 was electric -- with switchable batteries to boot. But soon the sheer abundance and energy density of gasoline, suffering from a sharp demand drop as result of electrification proved too much for early 20th century batteries to compete with. Decades went by without any investment in batteries and the electric car was sent to museums.

A turning point came quietly over the last two decades as the popularity of consumer electronics, starting with radios and expanding to laptops, cell phones and other devices provoked the development of increasingly advanced batteries. Embedded medical devices forced the next generation batteries to become safe and long living. At the same time, the steady expansion of global development, especially in emerging markets like China and India, coupled with the near-monopoly of oil on global transport, have taken a toll on the abundance, and therefore the affordability, of oil.

Just one decade ago, oil cost around $10 per barrel, and the most advanced batteries had a life of around 200 cycles. Today oil costs over $100 per barrel, and batteries go 2,000 cycles. Consequently, with little fanfare, the cost of a mile on electric, including depreciation of the battery plus electricity is now below the cost of a mile on gasoline -- and these two cost curves continue their opposing trend in favor of the electrons.

So why then have we not seen the market tip toward the electric car? Because the acquisition cost of the car plus the battery is still too high for most consumers and the lack of wide spread infrastructure means the range of an electric car with a bolted battery inside is not enough to satisfy most drivers accustomed to refueling once a week, every 300 miles.

At Better Place, our answer to this challenge lies with the infrastructure, not the battery. By separating the ownership of the car and the battery and providing consumers with the network and infrastructure to conveniently charge the battery when parked -- or switch the battery in less time than it takes to refuel on longer drives -convenience is attained. Price the car without the battery at purchase, and the rest as you drive and the electric car enjoys the same buying model as a gasoline car - and the electric car proves cheaper today and progressively cheaper to own and operate with time. As an electric car is mostly a consumer electronic device, we know the trend line on its cost, much like we know where oil is headed. They are headed in opposite directions in favor of electrons.

Conventional wisdom holds that the electric car will only succeed if and when the "cheap magic battery" is invented. But just as drivers do not concern themselves with exploration, drilling, refining and shipping of crude oil, neither should they have to be concerned with purchasing a $10,000 battery, maintaining it, warranting it, and reselling it. What's needed is an operator, like Better Place, taking on those immediate and long-term burdens. We are building the network and infrastructure that gives electric car drivers the freedom of unlimited range and a more affordable car.

Many in the industry express concern around the cost of such an infrastructure project. For the cost of just one week's worth of gasoline in any country, enough infrastructure can be deployed to serve the first 10 percent of all drivers in that country who switch to the electric car -- and the profits from those consumers then finances the continued expansion of the network till full coverage is attained. One week of gasoline use!

The underlying economics make the switch from gas to electric inevitable. The idea of separating the car and battery makes that switch happen much faster. With our partner Renault, we aim to deliver the first 100,000 switchable battery, electric cars to normal commuters in our first two markets; Israel and Denmark, starting later this year. This will be the first, mass market program for electric cars in the world.

The impact of this shift towards electric will be felt first in Europe, where gasoline is heavily taxed, and in China, which is actively incentivizing electric car through central government planning and directed development guidance to its car industry aiming to leapfrog gas-burning vehicles.

The U.S. is caught in the middle, with low gasoline prices, and no central planning, the playing field is shifted against US manufacturers and towards the world's other two leading car markets.We have seen similar effects in the past, when oil reached the highs of 2008 and the U.S. makers lost market share internationally and in the US to Asian and European carmakers.

The geopolitical issues created by oil dependence, the fact that it represents more than half the U.S. trade deficit, as well as the environmental impact should prove reason enough for the U.S. to join and drive the race for the electric future.

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Shai Agassi is the founder and CEO of Project Better Place.

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