Electric Vehicles; The Future of the Car Industry?

Tesla Electric Car

Shai Agassi, who has made the majority of his money from his software company, wanted to create an electric car in 2007 which each person could afford.

In 2007, the all electric vehicle was considered to be very unpractical. Up to that point there was only one type of such vehicle on the market, the EV1 from General Motors. It was released in 1996, but in 1999 they stopped making it, as they said that it was unpractical. There were electric cars on the market, but they were electric-gasoline hybrids. However, even these cars were considered to be unpractical, as they did not satisfy the clients from various points of view. The Tesla Roadster was also released but the problem was that it was very expensive: $109,000, and because of that not too many could afford it. The company that released it stated that there are only 1,200 such vehicles on the road. There were other such vehicles planned to be released, but all of them could only achieve a maximum speed of 100 miles per hour, so people decided to stay away from them.  People were worried that they might travel with their cars to a certain destination and that the battery might die on them when they are in the middle of nowhere. That is when Agassi came with the concept of replaceable batteries.

He wanted to create cars which would require a battery change just like the regular cars need an oil change. In 2009, at the Frankfurt Auto Show he announced that Better Place, the company which he founded has singed a contract with Renault, the French car manufacturer in order to produce 100,000 all-electric vehicles. The cars would be sold in Denmark in Israel. According to him, the battery would be replaced in 3 minutes, which is very fast. In the past, these cars were seen as jokes, as a weaker version of the regular cars, but that might change in the future. The governments from all over the world have stated that they want to reduce the pollution and what better way to start than with the cars.  It seems that there are various companies which want to release such vehicles by 2013: Nissan, Mitsubishi, Daimler, Chevrolet, and Tesla. The majority of the governments want to make the switch, and in order to prove that they mean business; they have invested lots of money into them. The Obama administration for example offered $2.5 billion for the research and the development of these cars. The developers want to improve the battery situation of these cars, as it is the only inconvenient about them. The Chinese government has stated that they want to put 500,000 hybrid cars on the market by the end of the second financial quarter of this year.

Agassi said that at the 2007 Frankfurt Auto Show, there were very few electric car concepts, as people were not interested in them, and the manufacturers decided to stay away from them as well. Agassi has a well established plan, and a very different plan I must say. Instead of manufacturing the cars, he only manufactures the batteries, and the robots which replace them at any gas station. He also wants to create garages for these cars where the owners could leave them overnight in order to restore their power. In case they do not want to wait for such a long time, they could choose to replace the battery. Agassi said that the costs for the battery replacement or recharge would not be higher than the ones for the gas. He is confident that his business will become very lucrative, and when it does, he would like to offer his customers various advantages. He might seem to be overconfident, but if you take a closer look at what he achieved during his lifetime, you will realize that he is not. He was interested in computers since he was a child, and at the age of 7 he started with the computer programming. In his late 20s he created Top Tier, a software company which created programs for sorting computer data. The program was aimed at the large corporations, and when he was 33, he sold the company to SAP, which is a very big software company from Germany, for $400 million. He then worked at SAP as the chief of technology. That is when he started to become interested in the well-being of the planet, and he decided that one of the best things that he could do from this point of view would be to create a car which does not run on fossil fuels. He had various options for this, as there are many various types of fuels which can be used: hydrogen, biomass, hybrids, and electricity. He decided that the energy would be his best option, and in 2006 at a conference he had in Tel Aviv he stated that he would like to become involved in this business.

Shimon Peres, who is now the president of Israel called him soon after the conference, and told him that the government was interested in the concept. He connected him with the president of Renault in 2007, and that is when they started talking about the concept. Renault was already working in order to create a hybrid or an electric car, and Agassi was just the right man for the job, as he offered them exactly what they wanted: a fast way of charging the batteries, a cheap way of charging them, and a way of making them last more. Agassi created his new company, Better Place, in 2007. He managed to gather $700 million investment money since then. Israel is one of the best places in the world where these types of cars could become successful, and there are various reasons for that: the country is small, and the borders are rarely crossed. The government from Israel wants to create numerous switching stations by 2011. Renault stated that they want to create 100,000 such vehicles in Israel and in Denmark. They want to create these vehicles with built-in GPS devices that will pinpoint the locations of these switching stations all around the world. Renault has stated that one vehicle will cost between $25,000 and $30,000.

Agassi stated that he intends to obtain some of the electricity from an Israeli company which manufactures solar generators as that would reduce the prices for recharging the batteries. He wants to create as many recharging spots as possible, and he even wants to create mobile ones. Denmark has been invested in the domain as well, as they have invested $130 million in the construction of these charging stations. The ones who buy these electric cars will receive a $40,000 tax break and a free parking spot in downtown Copenhagen. Better Place started to collaborate with Japan as well, as they want to construct charging places in that country too, and they even tested the electric vehicle concept on four taxis. Agassi stated that it would like to create such switching places all over the world, but that would happen only happen sometimes in the future. In the immediate future, Agassi said that he started talking with Gavin Newsom, the mayor of San Francisco, as he would like to construct the charging stations there as well. He is convinced that he will be successful in the American market as well, and that he will sign with the big three U.S automakers: Chrysler, Ford, and General Motors.

He does not believe that he can fail, but the other people do not share his enthusiasm. They have stated that there are certain problems with his plan, and one of the biggest is the fact that the battery he has created together with Renault might not be accepted by the other car brands.  Because of that he would either have to create a different battery for each different type of car, or he would have to limit the number of vehicles in which he wants to use the batteries. Both of them would mean that he would lose money: in the first case scenario he would have to invest more money than he first estimated, and in the second case he would make less money than he estimated. His batteries are lithium-ion, and the charging stations cost $1 million each. There are many who believe that these batteries will be replaced in the following years, and if that happens, then his charging stations would be useless. They also believe that his company will have a very tough job breaking into various markets. They say that the United States of America would be very difficult to reach because the people from that country do not receive tax deductions if they make the switch from a regular car to an electric one. People will not be willing to invest into an electric car if the costs are exactly the same, or higher than the costs of the fossil fuel cars.

United States of America is the biggest importer of gas in the world, and in that country the price of fuel is very cheap. People will not be willing to spend more money on these types of vehicles even if they are beneficial for the environment. They are interested in green, but in the money, not in the environment. If you think about it, they can not be blamed. Why should they make the change if they do not receive support from their very own government? The price of oil in Europe is much higher than in the United States of America and even under those circumstances, the progress Agassi has made so far has been very slow. Agassi said that by 2010 he will have 100,000 charging spots and thousands of electric cars in Denmark, but there are 55 charging spots and there are no cars. A spokesperson for the company said that Better Place intends to increase its productivity in 2011, and that is the year when Agassi’s plan will start to take place. Terry Tamminen, who is an adviser on energy policy to California, said that Agassi is overconfident when it comes to his trust in the electric vehicles. He said that the batteries could be a huge problem as Agassi might not be able to create affordable and productive batteries. On top of that there is also the issue with the charging stations, as there would have to be tens of thousands of them in the United States of America alone. That would cost way too much money, if the price for one would remain $1 million. Tammien believes that the future of the auto business is represented by the hydrogen vehicles, and not by the electric ones. The hydrogen cars are much more effective than the electric ones, as they are able to generate more power, and they are able to last for a longer period of time.

There are problems with the hydrogen cars as well, as they are expensive, it is believed that they do not lost for a very long period of time, as they break very fast, and they are polluting the atmosphere, which is exactly what they should not do. Agassi said that there is no point in using a hydrogen car, as the entire infrastructure should be changed, and that is not required in the case of the electric cars. Agassi believes that by 2020, 50 percent of the cars from Europe and the United States of America will be electric, but there are many who do not believe it. They say that such a thing is not possible in such a short period of time, and the only reasons for which these people would make the switch would be if the electric cars would be very cheap, or if they would receive lots of tax deductions. Even under those circumstances it is not sure that they would be willing to make the change. They say that it is likely that 10 percent of the cars will be electric. The 50 percent might be achievable only in 50 years or so, or it might be never achieved if a new and more advantageous type of fuel is discovered. However, it has been estimated that even if only 10 percent of the cars will be electric, Better Place could make serious money. Agassi said that now all he needs to do is to install the recharging stations, and wait. He is confident though that his wait will not be in vain. The situation is interesting because many people expect him to fail. They say that these types of vehicles will not be very popular, as the world will still rely on the fossil fuels for a very long time.11