The death of the Renault Fluence ZE earlier this year marked the final chapter in the story of Better Place, the failed Israeli start-up that attempted to bring battery-swappable electric cars to the mainstream.
The Fluence ZE was supposed to be the vehicle that launched Better Place in Israel, the home country of CEO Shai Agassi, who envisoned the country as an ideal trial market for his vision of all-electric motoring. Given Israel’s contentious relations with its OPEC neighbors, the relatively short driving distances and the high cost of both vehicles (largely through exorbitant taxes) and fuel, it seemed like an ideal location to roll out Better Place.
But as Fast Company‘s wonderful post-mortem feature shows, what should have been a challenging but conceptually straightforward play was doomed to fail via a deadly cocktail of hubris, nepotism and incompetence.
The launch of the network was met with the kind of hyperbolic spin typical of venture-backed startups. “Disruption” and a desire to change the world, driven partly via ego and partly via socially conscious motivations, were important parts of the Better Place narrative. From my perspective, there are parallels to the founding narrative of the modern State of Israel – Agassi sought autonomy and independence from petroleum products and the often hostile countries that produced them. He wanted to “make the desert bloom” (to steal a quote from David Ben-Gurion, Israel’s first Prime Minister) with Better Place swap stations, that would enable users to swap out their dead batteries in a matter of minutes, and be on their way, criss-crossing the tiny country without any carbon emissions or range anxiety. Aside from the ill-fated Sabra, Israel had no tradition of automotive innovation. But at the time, start-up culture, and Israel’s success in the tech world, were popular narratives, and Agassi’s venture was primed to ride that particular wave.
The infrastructure that created modern Israel was rooted in a mix of both Jewish communal values and a healthy dose of collectivist agrarian ideology. Agassi, on the other hand, is painted as a narcissistic showman, an Israeli Steve Jobs, but without the wherewithal that Jobs possessed, one that allowed him to overcome his massive character flaws and change the consumer electronics space forever.
Author Max Chafkin paints a picture of nepotism (Agassi’s brother was in charge of building the battery swap stations, despite having zero experience or knowledge), arrogance (Chafkin details how BMW and Mercedes “gave [Better Place] the finger” after bad encounters with Agassi) and overall poor judgement. A meeting with GM was even more disastrous, with Agassi walking out after GM executives relentlessly picked holes in his logic.
Fast Company is a tech focused publication, and Chafkin’s piece strays more towards that audience than an auto-savvy one, but he still manages to touch on a major point that few have been able to discuss: the sometimes oil-and-water relationship between tech and autos.
Carmakers, especially German ones like Daimler and BMW, tend to be conservative, and Agassi’s attempts to force them to adopt Better Place’s model caused them to recoil. “Shai correctly wanted to create a situation where the automakers would move quickly to electric,” says Amit Yudan, Better Place’s Austria-based business development manager. “The carmakers are used to a totally different ecosystem. Somebody from another industry trying to treat them as an equal partner is not in their DNA.”
While this may be an easily digestible pill for tech types, the fact is that there is extremely limited congruity between tech and autos. Chafkin inadvertently paints a vivid picture of what happens when Agassi, who worked for Apple and came very close to being CEO of SAP tries to force tech paradigms into the world of autos, which Chafkin eloquently describes as missing “cultural and human connections.”
Agassi’s central thesis–that people wanted to buy car service the way they buy phone service–was flawed. “Nobody loves their wireless carrier,” Amit says. “They love their iPhone.”
Throughout the rest of the article, we see other mis-steps that would only serve to doom Better Place even further: profligate spending on vanity projects, elements that should have been outsourced, wanton contributions to further degrade an already poor culture.
Ultimately, we come back to the crux of the story, which is the failure of a start-up that could have and should have been a success. Chafkin’s article leaves one with the feeling that the traits that helped Agassi – a total outsider to the automotive world – launch his ambitious, and heavily backed start-up, ultimately did him in.
Chafkin relates a story that neatly shows how Agassi’s lethal mix of hubris and ignorance served to kill his vision.
His deal with Renault would require Better Place to pay close to $32,000 for every car and battery that was delivered. Even if Renault had offered its car at a substantial discount, it’s hard to discern how Agassi arrived at that $20,000 figure–and even harder to understand why it was taken seriously. The car would ultimately retail for $37,000 in Denmark, not including the cost of the battery; in Israel the after-tax price would be roughly $35,000, plus $12,000 for the first four years of access to Better Place’s charging and swap-station infrastructure.
Agassi privately conceded to Better Place executives that the Renault deal was a bad one, but he was attempting to play a game of poker with the entire auto industry. “What Shai had in mind was that once we get a second car company, we could renegotiate with Renault,” says someone who was privy to pricing discussions. Better Place’s second car deal, the thinking went, would force Ghosn to come back to the table begging for new terms. “Because Shai’s an optimist, he was willing to sign anything Renault put in front of him. He didn’t think the price was an issue; it was an interim number.”
Although Chafkin ends his story with a mention of the success of the Tesla Model S and its swappable-battery capability. One can’t help but wonder how similar both Agassi and Elon Musk are: both rely on their boundless self-confidence and the adoring cadres of media, venture capitalists and tech enthusiasts to build their profile and lend legitimacy to their seemingly impossible aspirations. Both are able to tap into the relatively recent desire on the part of many to participate in disruptive social change, generally related to helping the environment upending the very nature of personal transportation.
The ironic tragedy is that while Agassi intended his cars to be a mass market replacement for gasoline vehicles, Tesla’s products are, for now, a luxury good, affordable only to wealthy individuals who live in the kind of climate ideal for EVs – the gilded communities of the Bay Area or Los Angeles, which are rife with extraordinarily affluent people who imagine that an electric car is perfectly acceptable for the rest of the country, regardless of weather conditions, charging time or driving distances.
Agassi’s solution could have mitigated those factors, but ended up a failure, while Tesla appears to be succeeding. Musk may very well be able to avoid this fate, but he is sure to face just as many challenges. The story of Better Place provides a road map on how not to go about this.