By on April 10, 2014

BP_Renault_Fluence_ZE_Israel_Jan_2012

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.

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30 Comments on “Shai Agassi’s Dream Has Gone To A Better Place...”


  • avatar
    FormerFF

    There may come a day where battery technology is in a place where highway driving on battery alone is practical. This is not that time. For now, battery only cars make sense for urban situations, but if you’re going a long distance, you’ll need some sort of an internal combustion engine.

  • avatar
    SCE to AUX

    Better Place might have worked if it had arrived 15 years ago, and convinced all EV makers to use a common platform for their battery architecture. Without such commonality, it failed – simple. There were other complications, but mechanical incompatibility was the main one.

    I’ll again take issue with the description of Tesla’s ‘ideal’ market, since Norway’s best-selling car in March was the Model S – and it broke a one-month record for sales of any car. This means it outsold every other brand and nameplate. The Leaf has also done quite well there, and it’s not quite the ideal LA climate.

    So EVs can do well in other markets, even if they differ from the convenient narrative. You’d think all of the world’s 400k EVs are in Los Angeles, being driven by rich people, but this just isn’t true.

    • 0 avatar
      FormerFF

      Lots of them are in Atlanta, driven by middle class people, courtesy of a $12,500 per car subsidy.

    • 0 avatar
      05lgt

      The Model S is almost as common as mushrooms around Portland OR. Leafs are all over the place too. The S is setting Tesla up as an aspirational brand, not a bad strategy.

    • 0 avatar
      charly

      Norway is probably the ideal market. The weather in Norway is ideal for batteries (not to hot or cold), cheap electricity, expensive gas and it is difficult to drive very far because of the fjords. It also has no car industry so high car taxes which makes subsidies easy

  • avatar
    wmba

    With this article, I think you have passed into the realm of a serious writer on automotive matters. Well done, Derek. You have put the scene in context rather than drily reporting news.

    The Norway example and Tesla is a side issue, a complete anomaly. The country, flush with oil revenues for the last 40 years, is so nuttily “green” that it subsidizes Teslas according to some reports by $90,000 per vehicle. The Leaf sells for the price of a entry level Golf for the same subsidy reasons. So, strike sales of EVs in Norway off as any indication of a trend outside its borders. Unless you live in a country with vast oil revenues and electricity virtually all generated by hydro-power, together with politicians with cabbages for heads, you won’t be buying an EV for half-price anytime soon.

  • avatar
    Pch101

    The infrastructure play was a loser from the start. The lack of EV adoption is a byproduct of the limitations of the batteries themselves, not one of the charging network.

    Creating and maintaining the battery swap-and-store infrastructure is inherently costly, while consumers won’t pay enough to cover the expense. How the investors could have missed something that basic, I have no idea.

    • 0 avatar

      > The lack of EV adoption is a byproduct of the limitations of the batteries themselves, not one of the charging network.

      The two are the same thing. If gas range were limited to 100mi (hell, make it 50), the great abundance of filling stations for a fuel quite well subsidized would still make them better than electrics with zero stations.

      • 0 avatar
        Pch101

        They aren’t the same at all.

        It takes a couple of minutes to fill a tank with fluid.

        It takes a day to fully recharge a battery on household current.

        Charging the battery more quickly requires unprofitable infrastructure, plus it compromises the battery.

        As Better Place vividly illustates, the battery swap infrastructure is a guaranteed money loser.

        EV’s make perfect sense when (a) the flaws are ignored. A better EV is possible if (b) there is no need for profit. In the real world, those deficiencies makes EVs a non-starter for anything beyond a niche that can tolerate the former.

        • 0 avatar

          > As Better Place vividly illustates, the battery swap infrastructure is a guaranteed money loser.

          So’s building roads, yet they magically exist.

          • 0 avatar
            Pch101

            So now we’re supposed to nationalize the fuel stations, too?

          • 0 avatar

            > So now we’re supposed to nationalize the fuel stations, too?

            We already subsidize everything up to that point and past it.

            Can prolly find better things for all those gubmint employees near the gulf and whatnot to do.

          • 0 avatar

            ^ like build/man some of those stations.

          • 0 avatar
            Pch101

            So what happens when we’ve spent tens of billions of dollars on recharging networks, only to find that gasoline still dominates? Are you going to pay for the refunds?

          • 0 avatar

            > So what happens when we’ve spent tens of billions of dollars on recharging networks, only to find that gasoline still dominates?

            It’s scientific fact that fossil fuels are a dead end tech; the only question is when. If it’s a choice to subsidize something, better to do so for anything other than pour more money into a sure loser.

          • 0 avatar
            Pch101

            “It’s scientific fact that fossil fuels are a dead end tech”

            Judging from how much of it that there is, it looks pretty lively.

            We don’t need another battery boondoggle. What we need is something that can replace or greatly improve the battery.

            Battery-powered EVs have been a dead-end for over a century. The early adopters bought them in the nineteenth century; today’s EV boosters are a bit behind the curve.

          • 0 avatar

            > Judging from how much of it that there is, it looks pretty lively.

            What’s left is finite and can’t all be used due to the environmental toll anyway.

            > Battery-powered EVs have been a dead-end for over a century.

            So were horse drawn carriages before the oil runs out.

          • 0 avatar
            Pch101

            Cars offered an improvement over horse-drawn carriages.

            In contrast, EVs remain inferior to cars powered by fossil fuels. They suffer from the same shortcomings that they had 100 years ago.

            If the goal is to increase EV adoption, then the answer is obvious: improve the electric cars so that consumers actually want them.

            But those improvements will require a better battery or a battery substitute. Excuses, unprofitable charging stations and fingerpointing at consumers won’t cut it; the cars need to be better.

          • 0 avatar

            > Cars offered an improvement over horse-drawn carriages.

            Yes, electric cars will be better than the horse-drawn carriages alternative in the next generation.

            > improve the electric cars so that consumers actually want them.

            We’ve been over this before and again here. An EV with similar support infrastructure is already close enough.

            Consumers want ivory keyboards and any number of things: http://www.ft.com/cms/s/2/73d14032-088e-11e2-b37e-00144feabdc0.html , but that doesn’t mean they’re good ideas.

          • 0 avatar
            Pch101

            I wouldn’t suggest creating policy based upon your crystal ball.

            This notion that everyone is going to start loving EVs without their fundamental problems being addressed is just fanboy talk.

            Consumers want quick, easy refueling and adequate range, yet aren’t willing to pay much for them. I know enough about business to know that shouting at the customers won’t do any good.

          • 0 avatar

            > I wouldn’t suggest creating policy based upon your crystal ball.

            Policy is better based on the best crystal balls science can buy than hoping for the best. This isn’t a question of if but when.

            > Consumers want quick, easy refueling and adequate range, yet aren’t willing to pay much for them. I know enough about business to know that shouting at them won’t do any good.

            They also want to eat cheap fish and save money by dumping waste in the river. Good thing shouting isn’t method of last resort.

          • 0 avatar
            Pch101

            EV fans are like GM fanboys — it’s always the customer’s fault, not the fault of the product.

          • 0 avatar

            > EV fans are like GM fanboys — it’s always the customer’s fault, not the fault of the product.

            Where the fault lies in tragedy of the commons is mathematically demonstrable.

            If willful dislike of math or science changes the reality here, I’d be up there with the denialists.

        • 0 avatar

          I don’t think we know if the battery swap idea is a guaranteed money loser or not. Seems to me it has not been tried by a sanely managed company. The article linked to indicates pretty strongly that Better Place was doomed due to horrendously bad management and overextension, not the concept itself. Looks to me like Better Place never sold enough vehicles to determine whether the concept would work with reasonable volume.

          Fortunately, Tesla has sufficient sales volume at this point to occasionally fill up the SuperChargers, so I think their battery swap stations, which are being tested in the core California market, will tell us once and for all whether this is a viable concept.

          Personally, I think it’s going to be tough to convince people to pay $60 for the battery swap when they could use the SuperChargers for free. Seems to me that only the most hard-charging Type A people are going to go for that. But I don’t consider the matter proven. I think Musk is right to open just a few of them, see how they work, and then go from there.

          D

          • 0 avatar

            > I don’t think we know if the battery swap idea is a guaranteed money loser or not.

            The question isn’t if it’ll lose money but how much. As mentioned, it’s still a good deal if the same gub employees already paid for can do something useful here instead of protecting gulf royalty.

          • 0 avatar
            Pch101

            There’s no margin in infrastructure. It costs too much to make it, and there aren’t enough consumers who will pay prices that are high enough to cover the costs.

            I would suggest that you learn about the gas station business, then try to imagine a gas station that can’t accommodate over 99% of vehicle drivers and that needs more time and labor to service the customers who can be accommodated. For anyone who understands how businesses operate, it should be obvious that this approach has losses inherently built into it — it simply makes no sense to bother.

          • 0 avatar

            > I would suggest that you learn about the gas station business, then try to imagine a gas station that can’t accommodate over 99% of vehicle drivers and that needs more time and labor to service the customers who can be accommodated.

            Still a better deal than hiring gas station security detail to sit on their ass halfway across the world.

  • avatar

    The costs don’t work for a private startup in the same way that building roads will never work for the same.

    Successful networked infrastructure are inherent government projects. Even in the tech world google has oodles of money but their fiber playground is spreading nowhere fast.


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