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Is “Better Place” the future of Car industry?
Sunday, May 3rd, 2009As I predicted earlier this year, Chrysler on last Thursday filed for Chapter 11. U.S Car Sales continues to decline in sync with the weakening consumer confidence and the economy.
GM is not far from it, I think it will follow suit with its own bankruptcy plan within a month. I strongly deplore U.S government’s financial support for the U.S auto majors. We need to stop throwing good money after bad companies/plans.
While the American Car industry is on a verge of a major collapse (technically on life support thanks to American tax payers), some new innovative business models are taking roots in the automobile sector that will fundamentally redefine our driving experience in the future. I strongly feel that we will see hybrid and pure Electric cars (atleast in the developed countries) on our roads within the next decade. There is significant interest in the Venture capital community. There are many plans and ideas on how to build the Electric car infrastructure.
Among all the plans, Better Place, started by the former Israeli software entrepreneur Shai Agassi, offers the most promising solution because it addresses the root of the problem - building the core infrastructure to support electric cars. Agassi is leveraging his experience building software companies in the car industry as this Economist article describes
“his novel approach is to look at electric transport as a system in which cars, batteries, recharging points, electrical utilities and billing systems must all work together.”
As Japanese Auto makers are proving to be pioneers in this space by introducing the new generation hybrid/Electric cars, one also needs to consider the importance of building the necessary infrastructure to support these new Electric cars (if the solution needs to be realistic and scalable in the future).
Here is an excerpt from “The Economist” magazine on Better Place model.
“Better Place’s business model involves selling electric cars (provided by its partner, Renault-Nissan) using a scheme borrowed from the mobile-telecoms industry—charging not by the minute, but by the kilometre. Customers will be able to pay as they go or sign up for a contract that includes a certain number of kilometres. They will even get a subsidised car if they subscribe to big enough packages, just as mobile operators subsidise handsets for their highest-paying customers. Better Place will build networks of recharging points, plus battery-swapping stations along motorways that will, in effect, enable customers to recharge their cars in minutes in order to travel further than the 160km (100-mile) range of their cars’ battery packs.”
Understanding why there is so much buzz on Electric Cars is a no-brainer. We will eventually run out of oil sooner or later. Oil dependence on middle east and other less friendlier nations (Russia, Venezuela, Iran etc) has proven to be costlier and insecure for both America and other countries. Even Warren Buffet sees the opportunity. Otherwise he wouldn’t have bought a 10% equity stake in the Chinese battery maker BYD (short for Build Your Dream).
References:
2. Start-up company Better Place wants electric car market in California by 2012
