Better Place's Way Forward is Through Fleet Sales

By · February 18, 2013

Renault Fluence Z.E. in Israel

There are approximately 500 Renault Fluence Z.E. cars on Israeli roads, a fraction of what's needed. (Jim Motavalli photo)

Earlier this month, Better Place finally unveiled a new strategy for a company that had been in disarray since the surprise firing of founder and visionary Shai Agassi in October. BP would abandon the U.S. and Australia and concentrate on its two most developed markets, Israel and Denmark. “We need to prove to our customers, suppliers and investors that we have a sustainable, scalable model,” said new CEO Dan Cohen.

That is indeed the question. No matter who heads the company (Cohen replaced BP Australia’s Evan Thornley, who held the post only very briefly), can BP survive? Yes, but only if it bets the farm on expanding its customer base in its two remaining markets. Fleets are the low-hanging fruit. BP has an engaged customer base--"I just love the car," says former oil man and Danish BP owner Steen Fredriksen--but it just doesn't have enough consumer buy-in.

Battery Swapping Stays

First, let’s assume that battery swapping will remain central to the strategy, though skepticism that it can work is mounting. The company has obviously come too far and invested too much in its million-dollar battery-swapping stations (18 in Denmark; 37 in Israel) to abandon them now. So who are the best customers for battery swapping and BP’s Fluence Z.E. electric cars? Fleets. Retail sales to consumers are growing too slowly to sustain the company.

BP needs to de-emphasize retail customers and concentrate on fleets because they can provide the volume the company needs. Both Israel and Denmark are small countries where electric taxis, company cars and urban delivery vehicles can work with a swap model. Tel Aviv to Jerusalem is only 36 miles, and from Jerusalem in the north to Eilat in the south is only 193. The tourist trade also presents opportunities, particularly in Israel.

Better Place battery swap station

BP has a heavy investment in its 55 swap stations in Israel and Denmark. (Jim Motavalli photo)

BP is in a pilot program operating taxis between Amsterdam and its airport, and a second in Denmark. The Dutch taxis are covering 250 miles a day on swapped batteries, which is nice, but no substitute for major fleet deals.

Cohen Bullish on China

Cohen, a former U.S. resident, worked with Agassi for several years, says spokeswoman Susanne Tolstrup. In a talk last year, Cohen was bullish on expanding into China (“one of our most strategic and important partners”) and the Netherlands (“likely our next operating country”) and sour on the prospects for the U.S. “North America still has relatively low gas prices,” he said. But that was then, and expansion is off the table for “the near term,” Cohen said this month.

BP spent nearly $500 million building its networks of swap stations and charging points (1,200 in Denmark, 1,000 in Israel). An impressive network is in place, but under-utilized in both countries. Tolstrup says the company has only 500 customers each in Israel and Denmark today, but no big fleet partners. Though Agassi could be compelling about the savings from buying a BP Fluence (with the company handling all battery responsibilities), and plugging into a country-wide network, the public (and corporate networks) haven’t responded.

Thornley presented a recovery plan to the Israel Corporation, headed by Idan Ofer, who led the investing of more than $200 million in Better Place. The plan, says Israeli business publication Globes, “included sharp spending cuts, extensive layoffs, an expansion of activity in other countries, offering battery recharging services to other electric carmakers, and…a new and cheaper plan to leasing companies.” It didn’t fly, and Thornley was out.

North America, Australia Expendable

BP’s operations in Australia and the U.S. were embryonic, and included a stalled $7 million initiative to roll out 61 electric taxis with swappable batteries in San Francisco. “We were never really overhyped about this,” said Jim Gillespie, a manager at BP San Francisco partner Yellow Cab. Agassi was nothing if not international, but the company’s resources were spread thin, and a retrenchment to Israel was already underway. Given that, jettisoning those far-flung corners of the empire probably made sense. But what next?

“We’ve been in stormy weather,” Tolstrup said, “but we are finding our way out, and once that happens, we can scale to new markets. We do think that an Israeli taxi fleet can happen. Right now, getting more cars on the road is critical, because if our vehicles are visible it suggests a bandwagon and leads to more sales.” That’s true, and it may mean discounting the cars to fleets and lease customers, as Thornley had suggested.

What About Norway?

Perhaps one minor expansion does make sense for BP—into Norway, where even retail sales seem to be booming. There are 1,400 electric cars in Denmark today, but in Norway they’re a significant corner of the auto population thanks to huge tax incentives. As Treehugger reported, “More Nissan LEAF electric cars were sold in Norway than in the U.S. last year, in spite of the fact that Norway has a population that is less than a 60th of the U.S. Norway has the most Tesla Model S reservations of anywhere in Europe; sales of EVs topped 10,000 in 2012, and electric vehicle sales also were 5.2 percent of total vehicle sales.”

The LEAF is in the Top 20 in Norway, an also-ran everywhere else. In part, that’s because EV drivers can drive in the Oslo bus lanes during rush hour, park free downtown, and avoid congestion charges. There are 3,500 Level II public chargers, and 100 fast chargers. Denmark has tax exemptions and is working on the free parking, Tolstrup said. Danes who park in EV spots get fined, she said. Europe as a whole remains very enthusiastic about electric cars, and plans to subsidize them.

There are ways forward for Better Place, but none are easy. Cohen says he still believes in “the long-term potential of both Australia and North America,” so maybe the company will get international again somewhere down the road. For now, it has to hunker down and get buy-in to its model in the remaining markets. By the way, Agassi says he still likes the battery swap model, though his opinion no longer holds sway.

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