Electric-Car Company ‘Better Place’ Fails To Make It in the Start-Up Nation
Israeli battery-swapping venture burns through millions in capital without changing the world. What went wrong?
Computer importer Brian Thomas has been racking up the miles on Israel’s roads. Thomas, 43, is one of 950 Israelis who drives a Better Place electric car with a battery that can be swapped within five minutes at one of nearly 40 stations across Israel. He bought the car in what he called a political move to help Israel overcome its dependency on oil from hostile countries. The price included power for about four years of driving. But after the company filed for bankruptcy in May, Thomas has been hauling friends across Israel for fun, trying to maximize his cheap electric driving before the network shuts down.
“I have all these extra kilometers I’ve paid for, and I’m going to use them,” Thomas said last week. Thomas—who goes by his blogging pen name—is part of a small group of Israelis who took a bet on Better Place, a company with an audacious goal to switch the automotive industry over from gas to electric power. Six years ago, Israeli software engineer Shai Agassi announced that he had solved the range limitation of electric vehicles by pioneering cars with removable batteries that could be swapped at robot-operated stations. Israel would be the pilot for his idea. But after raising $850 million from A-list investors in the United States, Europe, and Israel, Better Place and its early adopters are now facing the worst-case scenario that scared off scores of other potential buyers. And Agassi, who was forced out of Better Place in October 2012, is being painted as both a megalomaniac who badly managed an over-the-top mission and a visionary who got caught in a web of bureaucratic hurdles.
Better Place was founded with the goal of being a game-changing company. Agassi predicted he would sell 5,000 cars by 2011 and that electric cars would be the majority on Israel’s roads by 2016. He built 38 swapping stations across Israel. He held court at press conferences and test drives in Israel, Denmark, the United States, and Australia, promising to change the way we drive. He had the ear and support of Israeli President Shimon Peres and was interviewed by a host of major U.S. publications.
Agassi, 45, fit, well-dressed, and charismatic, became the embodiment of the phenomenon described in Start-Up Nation by Dan Senor and Saul Singer, who argued that, when it comes to technological inventiveness, Israeli nerve and innovation more than make up for its sparse natural resources. Foreign Policy magazine named Agassi one of the 100 top thinkers of 2010.
The drum roll of the international press made Agassi’s vision seem inevitable, and it was matched by the exuberance of Better Place’s marketing. I reported on one of Agassi’s press events in 2011, a demo of Israel’s first battery-swap station just outside Rehovot. Israeli press conferences usually offer dry wafer cookies and instant black coffee. In this event, I peered at Agassi from the standing-room-only back section of the white press tent, while piles of quality pastries, smoked salmon sandwiches, and trays of juice lined high tables between us. A barista made fresh espresso in a corner. The only more lavish press events I have attended were orchestrated by Google. At that point, Agassi still had not sold one car.
You could say he was faking it to make it—after all, Better Place aimed to change the driving infrastructure in Israel and then the world. But the number of cars sold stubbornly refused to follow Agassi’s narrative arc. By May 2013, there were nearly a thousand Israeli Better Place drivers—not even a fifth of what Agassi had predicted for 2012. Potential buyers went to the gleaming white visitors’ center north of Tel Aviv, and most were put off by the US$40,000-plus price tag, the lack of choice in models available, or the uncertain future of driving electric. Corporations didn’t take up EVs for their fleets.
For the few early adopters, Better Place inspired a tribal loyalty. Translator Yaara Di Segni, from a suburb of Tel Aviv, said it’s her family’s only car. A month before Better Place folded, Di Segni had filed the paperwork to create the Association for the Advancement of Electric Transportation in Israel, which would lobby the government to give tax credits to electric drivers and to secure public parking spots with chargers.
“We love it, and we love that it doesn’t directly pollute,” she said. “Electric cars are not just a solution for someone who wants a little runaround in a city, but also for the person who wants to go from one end of the country to the other.”
Yet even Better Place’s most ardent fans say the company failed to reach out to most Israelis. Thomas, the computer importer, said he paid 160,000 shekels (about US$44,000), the same as the price of a new Toyota Prius, for his car and 80,000 kilometers of driving.
“Why wasn’t there a billboard in Tel Aviv showing a picture of a Toyota Prius for 160,000 shekels and a picture of this car, for 160,000 plus fuel for four years?” he wondered. “They never sold that way. It was always complicated.”
This slow sell eventually cost Agassi his job. He was forced out in 2012, after his company had posted $490 million in losses. By May 2013, the Israel Corporation conglomerate that owned about 30 percent of the company saw Better Place as a sinking ship and refused to inject more cash, and the company folded.
“This is a very sad day for all of us,” the company’s board of directors said in statement. “We stand by the original vision as formulated by Shai Agassi of creating a green alternative that would lessen our dependence on highly polluting transportation technologies. Unfortunately, the path to realizing that vision was difficult, complex, and littered with obstacles, not all of which we were able to overcome.”
Electric-car expert John Gartner works at Navigant Research, a clean-tech consulting firm. He said Better Place had fantastic marketing and raised the profile of electric cars worldwide. But he smelled problems early on. There were a lot of staffers in North America, even though the business plan called for an American Better Place rollout years down the line. There would be only one car manufacturer, Renault, making only one car model, the Fluence Z.E. family sedan. After the initial lightning bolt of an idea, Better Place couldn’t deliver, he said. “They became inconsequential a few years ago when it became obvious to many of us tracking the EV industry that they were no longer leading a successful change,” Gartner told Tablet.
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