In the last time we heard from Better Place – a little less than two months ago – we’ve witnessed the unfolding of the company’s first functional battery swap station. And yet we were left with one big question mark hovering over the entire project: the price for the end customer.
This question is particularly crucial for the Israeli market, where the vast majority of people owns a car and uses it for their daily commutes and where gas prices are amongst the highest in the world – about $8.3 per gallon. And while the company has already unveiled its prices for the Danish market, it hasn’t revealed the price of the car and monthly subscription for the Israeli market – until now.
As expected, Better Place is pricing their only automotive offering as of now – the Renault Fluence Z.E. – quite similarly to the similar, gasoline-powered competition: $35,326 at current conversion rates [full English pricing release in .doc format here]. The basic trim level features a satnav (as part of Better Place’s on-board software), dual-zone climate control, auto headlights and wipers and cruise control – add an extra $2,000 in case you want goodies like leather seats and alloy wheels.
Yes, I can hear the muffled gasps coming from our readers across the Atlantic. Why so expensive? Due to the complex Israeli car taxation system, which brings taxation on some cars to over 70% of their value – car prices in Israel are exceptionally high. Electric cars, however, get a (temporary) reduction and are only taxed 10% of their value, which, according to Better Place, made it possible for the company to price the Fluence Z.E. similarly to other competitors in the segment.
The most crucial part of Better Place’s price scheme is, therefore, the monthly subscription rate. As in Denmark, Better Place has chosen to offer several plans based on annual mileage. The basic plan, offering 12,400 annual miles, will set you back about $310 per month. Other plans offer 14,300 miles for $370, 16,100 miles for $420 and 18,600 miles for a monthly payment of $460. The company will also offer a prepaid plan – including the car itself and 15,500 annual miles for 3 full years – for about $45,300.
Better Place commits to maintaining the same subscription prices for a period of 4 years and assures us that the all plans are without obligation (except for the prepaid plan), so you can cancel at any time (but be left with the car itself literally being idle in your garage). The price also includes one Better Place charging spot that can only be installed in a parking spot legally belonging to the owner.
As the average mileage for a privately-owned Israeli vehicle is about 11,300 miles annually, the most relevant plan for the individual customer would be the most basic 14,200 mile plan. Let’s break it down and compare it to the monthly spending in the local gas station each month as would be with a gasoline-powered competitor – for example, the long-running Israeli bestseller – the 1.6 liter Mazda3.
Assuming a realistic combined fuel consumption of about 29 mpg for a Mazda3 which travels 14,200 annual miles, the payment for Israeli gasoline will set you back about $330 each month, while the comparable Better Place plan is only $20 less. With competing hybrid and diesel-powered vehicles – even the Renault Fluence diesel itself – Better Place is even put in a considerable disadvantage.
Now, of course, Better Place’s PR hasn’t arrived unprepared for this battle. They point out that the insurance for the Fluence Z.E. is cheaper by about $350 per year compared to that very same Mazda, and that the less-complex electric motor will reduce maintenance costs by an estimated $215 per year. The handy comparison tables Better Place have prepped on their launch-market websites (Israel and Denmark) point to savings of about a $1,000 annually. They’d also be right to point out that the Fluence Z.E also comes more equipped in base trim than its direct competitors.
While the greater mileage plans offer better value on the cent-per-mile front, the difference is not substantial and they are not applicable to the majority of customers in a country in which the two farthest points are a full 300 miles apart. And let’s face it – when choosing between similar vehicles in the same segment, the average Joe – or in this case, the average David – usually does the rough gasoline-price-per-mile calculation we did here and doesn’t necessarily weigh in long term and less recurring factors such as insurance and maintenance costs. And then he learns that in order for Better Place to install a charging spot for his future car, he has to have a registered parking spot in his name (and in Israel – and especially in larger cities in which the majority of Better Place’s potential customer base lives – it’s not a trivial requirement).
But by far the biggest turnoff for the average consumer is Better Place’s refusal to introduce any sort of a buyback scheme – which means that in four years’ time – when the warranty and contract expire – the car could be worth nearly nothing. Better Place claim that by then EVs will become regularity on Israeli roads – and as a result, their value as used vehicles will be similar to competing, conventional cars – but what if they don’t?
There are two unanswered questions that can potentially make Better Place’s Israeli venture work despite all these drawbacks. The first is future gasoline prices. We all know that they’re headed up – but we don’t know exactly how tall the climb is going to be. A natural disaster or political instability in one of the chief oil producing nations can bring gasoline prices up to an extent that the difference between gasoline and Better Place’s EV will convince customers into biting the bullet of uncertainty and choosing the Fluence Z.E. over its conventional competitors.
The second question – left unanswered by Better Place – is lease pricing. To understand why, you need to know how Israel’s car market works.
More than 60% of all new cars delivered in Israel each year are leased – and most of these are company cars for which the employees pay by a monthly reduction in their salary and by waiving several social benefits. These cars are usually leased not from the dealers themselves but by car rental companies such as Avis or Hertz, and in most cases come with a complete maintenance package and are returned to the leasing company within 3 years in exchange for a new car (or a termination of the contract). The employing company usually pays for the fuel, and in most cases the allowed mileage is greater than the Israeli average or – in some case – even close to unlimited.
In this scenario, the customer may not even care whether the car is powered by fossil fuels, electricity or by the power of love – and the uncertainty is covered by the knowledge that within 3 or 4 years, the car will be someone else’s problem. In order to convince leasing companies into purchasing large quantities of their cars, Better Place is likely to heavily discount the Fluence Z.E. for those companies, while keeping the official sticker price intact to attempt to preserve the car’s value when the cars go on sale once the lease ends. And Better Place wouldn’t be the first to do this. In fact, Hyundai has used this technique to get to the top of the charts. But despite signing memorandums of understanding with Better Place, no Israeli leasing company has announced intentions of offering the Renault Fluence Z.E. to customers as of yet.
At the end of the day, Better Place’s unveiling of its pricing scheme still hasn’t answered the bold question mark hovering over the project’s viability, but rather brought about several new question marks into the game. In the current state of affairs and for most Israelis, the company’s electric car – be it a noble concept as it may – is still not a real alternative to the traditional automobile. The price difference is not enough to lure a wide customer base into electrifying their main method of transportation. And that’s without even taking into account the issue of range anxiety and the fact that while in construction, only a handful of battery swap stations exist as of now.
If Better Place wants to appeal to that wide customer base – and not be a niche choice aimed at the environmentally-conscious and early adaptors – it needs to make its product more attractive and less risky. Rising fuel prices may make the Fluence Z.E. more financially attractive from month to month, but the company also needs to provide peace of mind to its customers by introducing some sort of a buyback program and by leasing the car through third-party vendors like the vast majority of its competition. Until then, the electric car for everybody will remain just what it is now – a vision.