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Better Place…Better Business Model

January 4, 2009

Great Video outlining the vision and business model of Project Better Place.  Here’s a summary.

Four factors coming together enabled the business model:

  1. Policy
  2. Cars
  3. Network
  4. Money

Policy


Better Place needed a government to first support the program, and second to develop robust tax policy.  Israel volunteered first.  Here’s how the deal works.

Right now Israel taxes gasoline cars at 78%  When the electricity network is completed and the cars are sold, Israel will tax oil consuming cars 72%, and and non oil consuming cars 10%–creating a 60% delta. Israel will lose roughly $150 million per year in tax revenue from this deal over five years.  However,   as demand increases for non oil consuming cars, Israel will raise the taxes on both types of cars to fill the tax revenue gap (on top of that they will import less oil). This tax policy of a 60% delta from oil to non oil consuming cars will be locked for ten years.  After ten years, it won’t matter because everybody will be driving electric cars by then.

Cars

Renalt-Nissan volunteered to manufacturer the cars.  As Agassi says tongue in cheek the cars will be:

  • Affordable to buy off the lot
  • Affordable to fuel and maintenance
  • Affordable to own (cool factor is huge)

The cars will go from 0-60 in 7 seconds. They will have 5 seats.  They will have all the safety features we have in conventional cars today.

Network

Better Place is building the electrical charging network that makes it possible to recharge the car.  90% of parking spots/recharge locations are in four places:

  1. Home
  2. Work
  3. Retail
  4. Downtown

The cars run for 100-120 miles per charge.  It takes about 2 hours for the current lithium battery to completely charge.  Most of the time, people will rarely need to replace a battery because most people don’t drive that far in one trip.  In fact,  the average American drives over 100 miles in one trip 20 times per year.

When consumers do drive over 100 miles in one charge, they drive into a better place battery replacement station and get a new battery in under 5 minutes and continue driving.  Better Place guarantees that their customers will have a more convenient experience driving battery operated cars, and have also guarantee that they will pay any consumer that needs to swap a battery more than 50 times per year (the average number of times a consumer today fills up with gasoline.)

Common Question: Where do you get the electricity from, and can the grid sustain it, and doesn’t the electricity come mostly from oil and coal anyways?  When all of Israel (or the USA or any country) converts 100% of drivers to battery driven cars,  it will demand 6% more national electricity capacity per year. However, if you draw that out over a 10 year roll out, that’s roughly 0.5% incremental electricity per year, which Better Place intends to generate the energy for their cars from from solar and wind energy. In affect all the cars in the Better Place network will switch from running on oil to running on wind and sunshine.

Money

This is a crazy idea.  It’s also expensive.  The risk of building the network without any consumers is  high.  Better Place raised $200MM from venture capital and other private investment.

This allows Better Place to develop the infrastructure to make the new transportation sector possible.  As soon as consumers see the cars are

  1. cheaper to purchase and operate than oil consuming cars
  2. safe and reliable
  3. convenient and enjoyable and fashionable to drive
  4. good for the environment
  5. good for the domestic economy

they will purchase right away.  When they start signing up for Better Place energy charges everyday, the economics will pay out over a few years.  The investors will get their return, Better Place will have a robust profitable cash cow business, participating regions will be less oil dependent and will have set up a lasting clean transportation industry.

Now, that’s a better business model.

Check out the Wired feature for even more details:      http://tinyurl.com/59sxmm

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7 Comments leave one →
  1. January 4, 2009 9:57 am

    Thanks for the heads up. This is really cool.

  2. January 4, 2009 1:13 pm

    Great video. Definitely worth watching. Project Better Place is definitely on track and I hope they can get the suppor they need. Thanks for sharing.

  3. January 5, 2009 11:43 am

    Better place intends to make attractive and accessible the whole concept of the electric car to people who had hitherto thought of it is as a concept unsuitable to them. It envisions a world where autos are powered by renewable and sustainable sources of energy.

  4. elliottgarlock permalink*
    January 5, 2009 11:20 pm

    Hi ZAP Xebra,

    Thanks for the reply to the post. I checked out your company website. Very cool stuff. Cool of you to share the investor presentation on the front. I’d love to learn more. Do you have any other documents you could share?

    Also, will your cars be compatible with the Better Place system? Or, do they have an exclusive contract with Nissan-Renault? I wasn’t sure. Do you know of any other businesses attempting to develop a battery charging infrastructure similar to Better Place?

    Looks like you guys are leading the way in what will be a very competitive market. Best of luck to you and your team!

    –Elliott

  5. elliottgarlock permalink*
    January 5, 2009 11:27 pm

    Hi Home Solar Energy,

    Thanks for taking the time to check out my post. I hope Better Place nails it as well. My gut tells me they will. They’ve got great people, a great idea, a lot of money already, a global economy on the verge of eruption, and democratically elected politicians who are going to need to create policy to help companies like Better Place improve the world or they’ll get booted out. I’m going with the optimists on this one.

    I checked out your website. Great content. Looks like you’ve got an adwords business running along with it. How’s that going for you?

  6. elliottgarlock permalink*
    January 5, 2009 11:37 pm

    Thanks for the note, Dee. I checked out your Biz analysis site. Pretty cool. I’ll use it as a reference next time. I liked your decision making model section. Do you have any other recommended reading on decision making?

    I’ve been giving a lot of thought to decision making recently since it is basically what business people do all day long. I wrote a post on my current thoughts on decision making. Do you have any thoughts about it? I’d love to hear your take and get some reading recommendations.

    https://elliottgarlock.wordpress.com/2008/12/04/indecisionits-really-bad-and-it-really-good/

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