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.

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