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  1. Analysis
May 16, 2008

EMERGING MARKETS ANALYSIS: Charging toward a Better Place

Rapidly rising oil prices have brought battery-electric power back into play as an alternative to gasoline. Is Project Better Place the breakthrough programme that allows EVs to flourish at last? Carlos Ghosn seems to think so. Mark Bursa investigates

Rapidly rising oil prices have brought battery-electric power back into play as an alternative to gasoline. Is Project Better Place the breakthrough programme that allows EVs to flourish at last? Carlos Ghosn seems to think so. Mark Bursa investigates.

With oil at USD120 a barrel, and rising, it’s hardly surprising to see automakers once again taking a look at the pure electric vehicle concept. Unlike hybrids, EVs can be powered without gasoline or diesel – without fossil fuels at all if you generate your power from non-fossil sources, such as hydro-electric or nuclear.

It’s a safe technology too – unlike the hydrogen you’d need to power a fuel cell vehicle. There is still great nervousness about letting members of the public loose at a fuel pump delivering liquid hydrogen, as the gas only liquefies at a potentially lethal temperature of minus 252 degrees Celsius.

Of course, the problems with EVs haven’t gone away. Range remains limited, and recharging is a time-consuming process. But battery technology has advanced in the past decade thanks to the development of better, smaller and lighter batteries for mobile phones, laptop computers and other portable devices.

Battery companies have focused on these smaller batteries rather than automotive batteries because the demand was there. You can bet the R&D effort would increase if they could see a more immediate return. But past efforts to produce commercial EVs – most notably GM’s EV1 programme from 1997 – have failed.

Initiatives such as EV1 have been product-driven. But the product couldn’t do the job of a conventional car – EV1 customers generally kept a gasoline car for longer-distance use. Crucially, there was no electric charging infrastructure. Without that, you couldn’t venture too far from home – as the only way to replenish the battery was to plug in either at home or at work.

Project Better Place is the first really serious attempt to address this problem. It’s an electric vehicle project that is infrastructure-based. And its creators are setting up the first programme in an emerging market – Israel – where the effects of rising gasoline prices will be keenly felt.

California-based Project Better Place was launched in October 2007 by 40-year-old Shai Agassi, a former senior executive at computer consulting giant SAP . His concept is based on one big idea: “How do you run the world without oil?” And he’s taken a major risk in pursuing the plan – he was said to have been in line for the CEO’s job at SAP

The concept has already received around USD200m in venture finance, and has won plenty of praise. A report on the scheme by Deutsche Bank said: “We see a potential for a paradigm shift in the way vehicles are owned and fuelled. We conclude that a pure EV should not be more expensive than a gasoline or diesel vehicle.”

It has also attracted a blue-chip backer in Renault-Nissan , which is providing the cars for the project. These cars are state-of-the-art EVs: prototypes are based on the Renault Megane sedan, powered by advanced Lithium-ion batteries developed in Japan by Nissan, through its joint venture with electronics giant NEC . The Li-ion batteries will provide a range of 100km in the city and 140km on the highway – decent performance, but hardly a breakthrough in range terms

But the cars are only part of the story. The Project Better Place business model is the key to the concept. Consumers will buy and own their car – but not the battery pack. They pay a monthly subscription fee that gives them use of energy, including the use of the battery, on a basis of kilometres driven.

This business model is similar to the way mobile phones are sold, with an initial purchase and a monthly subscription for the mobility service. Under the model, Project Better Place is effectively Vodafone , Orange or AT&T – the service provider; Renault is the equivalent of Nokia – the hardware provider.

And as with mobile phones, where the service providers install an infrastructure of radio frequencies, phone masts and satellites allows users to make calls and send texts, Project Better Place will provide a charging infrastructure to allow its customers to use their cars In Israel, Project Better Place plans to install a staggering 500,000 charging points throughout the country, and customers will be able to plug their cars into any of these charging points. An on-board computer system will indicate to the driver the remaining power supply and the nearest charging spot.

A typical contract would cost USD550 a month and provide 18,000 miles a year. As well as using the Project Better Place charging infrastructure, consumers could charge their batteries at home. Scientists believe Lithium-ion battery technology could provide a small car with a range of 300km, together with a fast-charge facility that could provide a 70 percent charge in a few minutes – solving the ‘splash and dash’ problem.

Furthermore, because the customer doesn’t own the battery, the cars are designed to have easily removable battery packs which can be exchanged quickly for a fully charged pack in fast-fit style service stations.

Project Better Place believes Israel is an ideal first market for the concept. Around 90 percent of car owners drive less than 70km per day, and all major urban centres are less than 150km apart, making EVs practical for much of the population’s transport needs. The entire framework will go through a series of tests starting this year, prior to full implementation in 2010.

Already, Project Better Place has signed a second agreement, in Denmark, where it will install another large charging point network covering some, but not all, of the country. This is expected to start in 2011. Both the Danish and Israeli governments have agreed to provide tax incentives on 100% electric vehicles, in a bid to stimulate the programmes.

Other countries are likely to join the programme, and Project Better Place also wants to attract other automakers to join the programme, and while consumers will inevitably demand choice, Renault-Nissan boss Carlos Ghosn might be loath to let anybody else on board right now.

Ghosn seems to be backing the EV ahead of hybrid of hydrogen projects – though Nissan does have parallel and plug-in hybrid projects under development. He was recently reported as saying: “We must have zero-emission vehicles. Nothing else will prevent the world from exploding.”

Nissan plans to launch a battery-powered car in America in 2010, and by 2012 the Renault-Nissan alliance will offer a range of electric vehicles most major global markets. Renault has been working on its EV strategy for two years, and is intended to address all the key issues – rising fuel prices, tough emissions rules and ecological pressures, especially in emerging markets.

Shai Agassi told Business Week that he was targeting France and the UK for Project Better Place – as well as China. Such a move might have specific appeal for Renault , which has no presence in China and has missed out on the automotive gold rush of the past five years. Maybe launching Renault as an EV brand might be the differentiator that Renault would surely need – especially as a “Jean-Pierre come lately” in the market.

There’s no doubt that EVs would play well in China. Most travel is local, urban journeys – there are few inter-city highways as yet. Pollution is a major issue, and the Chinese authorities might be keen to encourage EV programmes – especially if it diverts attention from the really big pollution issues in the country – heavy industry and coal-fired power stations.

And of course, the Chinese have battery technology in abundance. BYD , the biggest maker of mobile phone batteries in the world, is becoming a substantial local automaker. Project Better Place might be well advised to get in quickly though – there is nothing to stop the Chinese from simply copying the concept.

It’s exactly the sort of initiative that could provide a real breakthrough for electric cars, and it might look like a good bet – pessimistic forecasts see oil reaching USD200 barrel, with no indication it will fall back to a more manageable level in the near future. But in order to succeed, Project Better Place will need a lot more investment. And given the weight of vested oil company interest in the car industry, it’ll be interesting to see if Shai Agassi can succeed.

Mark ‘Coolbear’ Bursa

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