In July, I had the opportunity to test Europe’s first electric car battery-swap station just outside Copenhagen. Many of our readers are familiar with Better Place, the start-up company with the grand plan to knock out the world’s addiction to oil by installing networks for EV charging and battery swapping. As I wrote in the New York Times, the Better Place robot worked—replacing the Renault Fluence ZE’s battery pack in less than five minutes. Better Place also has a working swap station in Israel.
The bigger question all along has been if Better Place’s business model will work as smoothly as its robots. Better Place customers buy the electric car—at a reduced cost of about $20,000—but the battery packs are leased for a fixed subscription fee of about $350 a month. That fee includes access to the batteries, swap stations and charge points.
Two weeks ago, I had the opportunity to meet Shai Agassi, the dynamic founder of Better Place. He was the keynote speaker at the luncheon during the Asia-Pacific Economic Cooperation conference in San Francisco. The audience for Agassi’s talk included Energy Secretary Steven Chu.
It’s a longer than our usual posts, but I thought our readers would like to see a full transcript of my conversation with Agassi.
Brad Berman: Have you been surprised by how long it’s taking electric vehicles such as the Nissan LEAF and Chevy Volt to roll out in the United States?
Shai Agassi: We didn’t have different expectations. The first flight after the Wright Brothers took off in the air, for about 10 feet, wasn’t to the moon. You don’t jump up, and say, “We can get airborne, so let’s go to the moon.” What you do is slowly move up, gradually.
If you’re a Nissan or GM, and you have an electric car, you’re not going to produce a million cars in Year One. You’re going to produce 10,000 and see what happens. Everybody has to pace themselves, vis-à-vis, what if a recall happens? What if one of the parts doesn’t last that long? You can’t expose yourself too far.
We’re doing a similar thing in the sense we are pacing ourselves on how many [Renault Fluence ZE] cars we put in the market. Our first quarter will be up to five cars a day; second quarter up to 10 cars a day; and third quarter up to 20 cars a day. You don’t put out 80,000 cars on Day One.
What’s your view on the competing technologies, such as…
Oil?
No, plug-in hybrids and quick charging. How many DC quick chargers can be installed for the price of one robotic battery swapping station?
Two things. That’s not the competition. You have to define competition from the perspective of the consumer. If I have a plug-in hybrid that’s priced at $42,000, that’s not competing against a $15,000 Corolla. That’s a different category, price-wise and segment-wise. If I can afford a $42,000 car, I’m looking at a very different type of car.
If I’m driving a car that requires a half-hour stop on the side of the road, fast charge, that’s also not competition for a three-minute switch. One is a car, and the other one is a vehicle.
When I’m competing against gasoline, I have to be better than gasoline. No gas station in the world will stay in business if it offered a half-hour fill-up. It doesn’t exist. Nobody advertises: “We do fill-ups in a half hour.” So we don’t see that as competition. My competition is a three-minute fill-up at a ubiquitous gas station across the country. And we can beat that. Now, if somebody thinks they can do better than that, with any technology, they’re my friend. Because they also end oil.
Yet, Better Place is also offering quick charging and home charging, and home charging could be 80 or 90 percent of the type of charging on the Better Place network.
The Hewlett-Packard pad could do 80 to 90 percent of what the iPad could do. It just didn’t have apps. And I love HP, but it shows you that if you end up with 80 or 90 percent of something—and that something is not good enough—you’re not there. Now, sometimes you do something revolutionary. The iPad didn’t have a keyboard. It did 80 to 90 percent, but it was the right 80 to 90 percent that people wanted, and the right price. So, you could define a product that does 60 percent, but it’s the right 60 percent for the right price and the right segment. And it kills laptops.
What we figured out is that I don’t need a 300-mile battery. What I need is a home charge and a work charge. I need an operator that will guarantee me that when I plug, it will actually charge. If something goes wrong, somebody will call me and tell me that I forgot to plug my cable.
I need a solution that will allow me to drive any distance I want, without thinking that I have to plan [my trips]. That’s a complete product. Now, is it the right complete product for every customer? No, God forbid. If every single buyer in the market wanted to buy the [battery-swappable] car, I don’t have enough supply. But it’s a great product to offer to all the early adopters.
Better Place owns the batteries. What are the economics of owning that many batteries, and ensuring, at scale, that all the drivers have to something that can swap batteries that you know are in good shape?
Think about the Bay Area, even at $4 a gallon. It costs $150 million to put a [battery swapping/charging] network across the Bay Area. [We will offer] a car that will be sub-$20,000 and about $300-and-change to drive all you want.
We have four exponential curves working for us. Energy density of the battery is about at 10 to 15 percent improvement every year, and has been like that for the past 35 years. It’s pretty predictable, given the amount of money that’s invested. The longevity of the battery is a similar 10 to 15 percent improvement every year. You know it because the cell phone, ten years ago, would last for about a year until you have to replace the battery. Today, you don’t have to think about it. They make them without replaceable batteries. The third is the battery cost per kWh goes down by 8 to 10 percent every year. The fourth is the price of oil.
Don’t all four of those curves also benefit electric cars without battery swapping?
If you’re driving more than six or seven thousand miles per year, you’re not going to be served by a fixed-battery car. In Israel, my lowest program is 14,000 miles a year or above. So, I’m not in competition with a fixed-battery car.
That’s the minimum number of miles I’ll sell you is 14,000 miles a year. Now, you can drive 10,000 miles and buy the 14,000-mile program. It’s okay if you want to. But I’m looking for the guys who drive a lot. Why? Because that’s where gasoline is consumed. For fixed-battery cars, look for the guys who don’t drive [very much]. We’re not in the same sector.
What percentage of the market drives more than 14,000 miles a year?
Twenty-five percent of the cars, but 50 percent of the gasoline. That’s the beauty of the [Better Place] plan. We didn’t go after the guys who don’t drive. We go after the guys who consume all the gasoline.
[At this point, another journalist asks:] So, you can drive the Chevy Volt around San Francisco, but if you commute down to Mountain View, you need…
No, the Chevy Volt is a different issue. It’s the Nissan LEAF. You can drive the LEAF across San Francisco, but if you want to go with the LEAF to Sacramento, you can’t.
No, if you want to drive the Volt, you can drive it anywhere you want. But you need to fork out $40,000.
But there’s going to be cheaper plug-in hybrids.
Yeah, $37,000.
We’ll see. Toyota could go lower. Does Toyota pose a risk, with their scale, offering the Prius Plug-in Hybrid at $32,000, not much more than the top-tier hybrid? [Four after this interview, Toyota announced the official price of the Prius Plug-in Hybrid at $32,000, minus a $2,500 federal tax credit.]
If you’re willing to pay me what you would pay for the Prius Plug-in Hybrid, I’ll give you our car and throw in four years of free driving, just for the fun of it. The Prius Plug-in is neither here nor there. What you’re seeing with a lot of the hybrids coming in right now—again, we’re not in the same game—they’re trying to position it as an answer.
But if you look at a $32,000 price car to the consumer, and you segment what percentage of the average American household buys a $32,000 car—and not the guys who go into the dealership, but the entire American households—you’re at sub-1 percent. Only 15 percent of the households can even afford a new car, of which 90 percent can’t even get to $25,000. You’re looking at all of the 250 to 300 million drivers in the U.S., maybe 3 million can afford $32,000.
But of the 12 million or 15 million who buy new cars every year?
One million. You know what? I’ll give you 100 percent of that market. 100 percent of those who can afford $32,000 will buy the Prius.
And when you think of total cost of ownership, and being able to resell it?
Well, great. Have you driven the Prius? We see it all the time, because my other car is a Prius. You go into the Renault Fluence ZE, and you drive it for two weeks. Then, you go into the Prius, and after about a minute, you’re looking for the handbrake. [You’re asking] why is the brake pressed on? I keep pressing the car and it’s not moving.
What most people don’t get is that you’re buying a $32,000 Corolla. The alternative is a $12,000 car. I’m not selling you an alternative to a Corolla. I’m giving you an Audi A6 for the price of a Corolla. That’s a very different experience. I get non-greenies to want this car.
Postscript
After leaving the interview, I thought of some follow-up questions, which I posed via email to Joe Paluska, Better Place’s V.P of Communications. First, I wondered what would happen if a queue forms at a battery swap station, which resembles a drive-thru carwash. Won't a five-minute switch take more like 10 minutes if there's a car in front of you? And if there's two or three in the queue, then it might take 15 or 20 minutes—coming quite close in refueling time to a quick charger.
Paluska replied that there won’t be a queue, because “the in-car software will direct you to either the closest battery swap station or the next one where there is no queue.” He described Better Place’s software and related network like this: “There is nothing else out there like it.” My response was that it still didn’t sound scalable—because if/when there are as many as 10,000 battery-swap EVs in Denmark (or in any market) that a queue could form. Also, re-routing 20 miles away when you're low on juice doesn’t sound practical.
I asked, “The BSS can serve one car at a time, but a gas station or a suite of quick chargers can process a lot more people. Are there any plans to allow BSSs to process more people at a time?”
“In Denmark, there will be more than 20 at full nationwide deployment," replied Paluska. "The BSS you saw in Denmark was a single-lane design. We are able to add a second lane on the other side of the battery storage area at little extra cost. And we believe that most charging will take place at home or at work. The BSS is the exception to the rule, not the predominant charging method.”
I also asked about the exponential cost curves that Mr. Agassi mentioned: lower battery cost, more range, and longer life. I asked if technology and cost curves won't also mean faster charge times, making battery swapping less critical. Paluska passed the question to Better Place’s battery expert, Michal Vakrat Wolkin., who replied that increasing power is possible, but that it will quickly degrade battery life. "There may be a breakthrough coming up, but over the past three years, we have not seen any," she wrote. In our Eight Tips to Extend Battery Life article earlier this week, Patrick Connor writes, "Regular use of fast charging will cost you about 1 percent of capacity per year."
Great article. Thanks for posting.