Better Place Electric-Car Service: Few Users, More Turmoil

By John Voelcker

1,521 views Nov 19, 2012

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2012 Renault Fluence ZE electric car, powered by Better Place in Israel [photo: Brian of London]

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Much publicity, high hopes, and hundreds of millions of dollars have been devoted to the Better Place electric-car service.

Now, with an apparent dearth of Israeli customers to sign on the dotted line, the company is turning over its management.

Deputy CEO departs

The latest defection is deputy CEO Moshe Kaplinsky. The Israeli newspaper Haaretz reported his resignation last Thursday.

Kaplinksy had run Better Place Israel since 2008, and was promoted just last month to deputy CEO of the entire Better Place company.

In an e-mail to employees, he said he had been considering the move for a long time.

Charismatic founder Shai Agassi resigned in early October; he was replaced by Evan Thornley, previously CEO of Better Place Australia.

At the time, Idan Ofer, chairman of the Better Place board, said, "We owe Shai our gratitude for turning his powerful vision into a reality."

Minimal sales

While executive turnover is often a given at venture-funded startups, Better Place's core problem stems from its inability to convince Israelis to sign up for its service.

As of the end of October, just 490 cars had been sold after several months of marketing--making its target of 4,000 customers by next June a stretch goal at very best.

Local press reports said that many Israeli drivers, doing the math, concluded that even the least expensive Better Place plan provided more miles than they were likely to use--and cost more than an equivalent gasoline car.

in September, the company launched a new, less costly plan that includes only 7,500 miles a year.

Other potential customers reportedly express skepticism and reluctance to be the first on the block to try the service.

2012 Renault Fluence ZE electric car, powered by Better Place in Israel [photo: Brian of London]

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“I don’t want to be the sucker, the freier,” said airline employee Moshe Kretzo, 60, as quoted in Time magazine. The word also translates to "chump."

Packages of miles

The startup electric-car service vows to reinvent the way drivers pay for transportation.

It offers annual packages of miles for a set price--similar to mobile-phone plans--and includes both electric recharging and battery swapping as part of the package.

According to Haaretz, 38 of the planned 45 battery-swap stations have now been built in Israel.

Israeli drivers have to buy the Renault Fluence ZE electric sedan separately.

(Those drivers include our correspondent, Brian of London, who has covered his Better Place purchase and experiences here, here, here, here, here, and here.)

Electric car, minus battery

The Fluence ZE is the sole car built today that permits the battery pack to be swapped out at any of the Better Place network of swap stations.

Better Place continues to own the car's battery pack, which it leases to its customers.

The company agreed to buy 100,000 Fluence ZE models from Renault by 2016, but is now reportedly renegotiating that commitment.

The Fluence ZE is built only to order, in batches, and was apparently not included in a recent update of the rest of the Fluence range for 2013.

Despite its challenges in Israel, Better Place is continuing to roll out its service in Denmark and Australia. In both countries, it says the electricity it provides for recharging will be from entirely renewable sources.

Better Place Battery Swap Station

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Losses near $500 milion

But Better Place overall has now lost $490 million on investments of $750 million since 2007.

Its cashflow problems have worsened recently as it increased spending to attract new customers and support existing ones during the third quarter of 2012.

When a recent effort to raise 200 million euros from institutional investors failed, it asked for $150 million more in funds from its current investors--but was granted only $100 million.

At least one analyst, IDC's Sam Jaffe, argues that the problem is not in either the service or the cost but in the Better Place distribution model in Israel.

In that country, he says, Better Place must either take on entrenched leasing companies head-on or split more profits with them in their current role as its distribution partners.

What do you think? Does Better Place have a viable offering? Will it survive?

Leave us your thoughts in the Comments below.

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