Lessons from the Demise of Better Place

By · May 27, 2013

Better Place

The Renault Fluence Z.E. was the only car available to Better Place customers, as seen in Better Place's retail location in Copenhagen, Denmark. (Photo: Brad Berman)

Over the weekend, Israeli electric car infrastructure company Better Place filed for liquidation. In its short life, the company fiercely argued that five-minute battery swaps were critical to the future of electric cars—as an alternative to the charging of vehicles with fixed batteries. Better Place had been beset by poor sales and high financial losses.

With Better Place now searching for a way to keep the existing 1,000 Israeli and 200-plus Danish electric car customers on the road, what lessons can we learn from Better Place’s crash-and-burn existence?

1The Car Comes First

Academics, industry analysts and electric car advocates have for years argued at length over what needs to come first for the EV market: the cars themselves, or charging for them? Better Place’s fate suggests that car shoppers care about cars first. Complicated charging infrastructure, technology and businesses models are more remote, and hard to understand for consumers.

Instead of explaining how electric cars already meet 95 percent of most people’s needs, with a simple single nightly charge, Better Place focused on the infrastructure. By doing so, it reinforced the idea that its chosen car—the Renault Fluence Z.E.—could only drive 80 miles or so before it needed to refuel, and that users would have to make detours to go to dedicated battery swap stations.

A better approach would have been for Better Place to promote EV ownership, especially to early adopters. Then, when the second-wave of buyers started to enter the market, introduce battery swapping and ownership services. In other words, get a foothold in the EV space before burning through hundreds of millions of dollars for complex infrastructure in the hope that consumers would understand and be motivated to join.

2People Want Choices

Despite saying its technology would work with all compatible electric cars, Better Place only had one car to offer its customers: the Renault Fluence Z.E.

The least-inspiring of Renault’s electric range, the Fluence Z.E. seats five, is modestly appointed, and has passable driving characteristics. But with the battery pack located vertically behind the rear seats, it wasn’t entirely practical for large families. It isn’t exactly exciting to drive either. It’s functional. Hardly the sex and sizzle you want when introducing a new product.

Like Henry Ford’s choice of Model T Colors however, if you wanted an electric car in Israel, the Renault Fluence was your only real choice. In a country where SUVs, station wagons, minivans and pickups are just as popular as sedans, offering just one electric car was bound to leave potential customers on the sidelines.

Better Place

3Charging Needs To Be Simple

Better Place’s failure proves that when it comes to electric cars, simpler is better—especially when it comes to refueling. At the most basic level, every home already has the one thing an electric car needs to recharge overnight: an outlet. Granted, in the U.S., charging at 110 volts is a slow process. However, In Israel, electrical service is at 220 volts, and at power levels high enough to easily charge a car like the Renault Fluence overnight in eight hours. And that's without the use of an expensive residential charging station.

Yet instead of using the lowest common denominator, Better Place lobbied to outlaw charging an electric car from a standard domestic outlet. The company pushed its home charging stations, instantly adding complexity and cost to owning an electric car.

What about the battery swap stations that were the company's secret sauce? They are indeed easy to use, but unfortunately not economically simple or cost-effective. At the cost of approximately three million dollars each—as reported by PluginCars.com's Brad Berman for The New York Times in 2011—the cost of Better Place’s battery swap stations were way out of whack compared to recharging systems.

4Deep Pockets Don't Ensure Success

Better Place’s support from the Israeli government and from big business gave it an aura of power if not invincibility in the marketplace—giving company executives the courage to make huge gambles on expensive battery swap stations.

Like every other automaker or electric car infrastructure company to receive assistance from big companies or governmental bodies, the true test of a business’ success is its ability to eventually earn customers, build revenues, generate profit, and operate with financial independence. Over-reliance on governmental bodies, special incentives and deep-pocket investments can be deadly.

5Start Small, Get Bigger

Better Place’s biggest failure is the fact that it had fantastic global desires to rid the world of oil, attempting to install massively expensive technology and infrastructure to entire countries and multiple continents. That's even before the first handful of customers were in place.

As the Charles Dickens character Mr. Micawber famously points out in David Copperfield, the amount of money one spends should be less than the amount of money coming in, else misery ensues. Of course, a start-up company almost always needs to invest money before it can achieve revenues and profits, but in Better Place’s case, optimism and hubris were dwarfed by reality.

Perhaps Better Place could have focused on one or two key cities. And once it had proven its methods successful there—or if encountering difficulties, modified its approach—the company could have slowly extended battery swapping technology to cover wider regions.

By contrast, Tesla Motors started with a niche-market car, rather than trying to change an entire nation of drivers from Day One. Tesla is now building on its success, and while it still only offers a single car, it continues to expand its unique approach to the areas of automotive retailing, quick charging, service plans, etc. In fact, Tesla is hinting that it might offer battery swapping. But it took one step at at time, rather than trying to change an entire nation’s driving habits before proving its first level of success. The facts speak for themselves.

Comments

· · 4 years ago

I've read all these articles over the years, and its a much simpler issue.

People want their own control over things they've purchased themselves. A battery lease is the only way a battery swapping program could possibly be successful. I and almost everyone else will not swap out a battery I have already paid in full for.

Better Place committed the cardinal sin of restricting Israeli citizens' choices. We have a somewhat simiiar situation in North America with EVSE's, which Tesla has addressed in model "s and x' by providing it with the car. Its still a tolerable situation for the rest of us, since small units which are perfectly serviceable are available for under $750.

But in spite of manufacturer's collusion, you can still recharge almost all electric cars from your standard 110 outlet without spending any money at all.

Which is what many EV buyers do, are tolerably satisfied with the performance, and don't get into the installation nonsense required of an EVSE.

Why Nonsense? Most EV's to date use much much less juice at 240 than a clothes dryer. There is no big deal made about installation of them. But you'd think an act of Congress was necessary to get a EVSE permitted.

Which again, is why many happy EV owners just skip the whole ordeal. And the companies making the cars are still in business.

· · 4 years ago

@Bill

Better Place WAS a lease system. It worked like this:

You buy the car from Renault through Better Place. And you Lease the battery as part of the 'mobility package' offered by Better Place.

You could also lease the battery directly from Renault -- but you'd end up not being able to use the battery swap stations.

In the end, I think the costs far outweighed anything else... :(

· · 4 years ago

Excellent article, Nikki. It was also incredibly mismanaged internally, from what I understand. Great idea in many ways and I can absolutely see a return in battery swap recharging methods but this time around, a little shortsighted in execution and far far too ambitious in too short a timeframe. Failure is the basis of success, perhaps?

· · 4 years ago

I have a lot of trouble getting on board with the idea of swapping out my entire electric gas tank every time I run out of juice. Plus, the whole idea is very limiting in terms of what battery technologies and packaging can be used. Plus, battery swap stations must be far more expensive to build and operate than fast chargers. I just don't see it. Maybe as a niche market when EVs are more commonplace.

· · 4 years ago

While the initial idea of replaceable batteries makes sense, once you realize that a uniform battery pack for every car is required, then it makes Better Place a very big risk. It was never likely to succeed.

If you think about it in these terms, the challenge will be clear: could every gasoline car use the exact same gas tank?

Then you get into issues of ownership and liability for the battery packs; and the infrastructure required for a large area of land. Israel or Hawaii is one thing, but even just California would require orders of magnitude more changing stations - and at least TWO batteries for each car.

Neil

· · 4 years ago

'Better Place lobbied to outlaw charging an electric car from a standard domestic outlet. '

So taking all the gains from switching from petrol from the customer, and attempting to tie them into a monopoly created in a crony arrangement with the Government.

Good riddance, I say.

· · 4 years ago

Others here have already stated the obvious: the analogy of replacing the gas tank instead of filling it up and the one-size-doesn't fit-all batteries the OEMs are going give us that would thwart an easy business model for automated battery swapping on an industrial scale.

One could also note, as Nikki's article points out, that the 3 million dollars one of these automated battery swap facilities costs could buy quite a few of even the most expensive commercial Level 3 EVSEs. And yes . . . what guarantee would you have that the battery being swapped into your car was going to be as well taken care of as the one it replaced?

I remember reading an interview with one of the Better Place officials (I think it was in Charged magazine) where he stated that his company was betting on the fact that battery/EVSE technology was not going to advance a significantly quicker charging scenario any time soon. While we still don't have a 5 minute rechargeable EV battery, Better Place apparently had enough in the way of other challenges facing them to keep afloat.

· · 4 years ago

As all of the regular commenters have already stated, battery swapping was a bad idea from day one. There are three major problems with it.

1. No one wants to swap their battery for one of unknown origin.
2. Battery swap centers are way too expensive to become ubiquitous
3. An EV battery should be structural, instead of hanging from the frame

Management at Better Place should have understood these limitations, instead of trying to force a monopoly on EV owners. The real business opportunity for battery swapping is in fleet vehicles and taxis, not for individual consumers. And, if they plan to sell swapping centers to fleet and taxi operators, they better cost way less than $3 million.

· · 4 years ago

@Nikki

People are not dumb.. They will not do things that are against their interest as long as a bit of freedom of choice remains.

· · 4 years ago

“In fact, Tesla is hinting that it might offer battery swapping.”

They might place an extra swappable battery in the front.

· · 4 years ago

Shai Agassi raised millions of dollars on the force of his charisma and his past business success. He explained that the idea for battery swapping came from the cell phone model. However there are few similarities between the two. Better Place didn't own the roads as cell phone providers own the towers. Better Place didn't own the electricity, customers know their electricity comes from their utility. Better Place didn't own the cars, a car manufacturer produced them. Given that ranges would most likely get longer on EVs and charge times much shorter over time, why would Better Place's business model ever work? Nikki and I used to do podcasts for EVcast.com. Early on I dedicated a show to explaining why Shai Agassi's model wouldn't work. I knew it wouldn't work, and I am sad that all that money that could have gone towards funding much more sound EV ideas went for naught. Investors in Better Place, there are several products that will advance electric vehicles and give you a nice return on your investment without much risk that need funding. Let me introduce you to them.

· · 4 years ago

@Bret F

I disagree that $3M is a reason for stations never being ubiquitous. One only has to look at the cost of building a regular gas station at a cool million each to realize transportation can pay for this scale of infrastructure.

However the low number of EV drivers will not support such endeavors now or anytime soon. The day may come though!!

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