Switched-On Highways

The all-electric automobile is not a new idea: in 1900, a quarter of the cars produced in the United States ran on batteries alone. But when Henry Ford debuted his cheap, gas-powered Model T in 1908, oil quickly became the industry standard. Shai Agassi, 40, a former president at software giant SAP, thinks the electric car deserves to be salvaged from history's dustbin. With his new venture, Better Place, he plans to jump-start the fledgling electric-auto industry by building an entire infrastructure—cars, recharge stations and more—from scratch. Governments in Israel, Denmark, northern California and elsewhere have signed on. NEWSWEEK'S Fareed Zakaria spoke to him about the company. Excerpts:

ZAKARIA: What's the idea of Better Place?
AGASSI: We looked at the problem of transport from a very different perspective than the automotive sector has in the past. They've all looked at it from the perspective of how to build the car. We looked at it from the perspective of how to run an entire country without oil. You've got to put the infrastructure ahead of the cars. In our case, the infrastructure is a combination of a massive amount of charge spots and the ability to switch batteries in less time than it takes you to fill up with gasoline.

But by building the infrastructure before you have electric cars on the road, aren't you putting the cart before the horse?
We wouldn't build the infrastructure if we didn't have a massive carmaker to build cars. Renault-Nissan is the first to build the cars for this infrastructure, and we've coordinated so our infrastructure will be in place when their cars hit the market.

How else have you altered the old transportation model?
The second [change we decided on] is that the car and the battery, ownershipwise, have to be separated.

Why is that?
You never want to be the guy who bought the previous [year's] battery. We say, you never buy the battery. What you buy is the car. The third change is in the business model. You buy the commute by miles, and commute miles include the battery, the electricity, access to the network and battery-switching. You [sign up for] a contract on a per-mile basis, and you get a rebate based on the length of your contract. That makes the electric car cheaper to acquire than the gasoline counterpart.

Does government have any role in this?
Our model is not predicated on government subsidies. What governments can do is they can accelerate adoption. Every government creates a different policy. Israel, our first site, created a tax differential of 60 percent between buying a gasoline car and an electric car. Denmark went up to a 180 percent difference—180 percent tax on gas engines, zero tax on electric.

This all sounds very complicated. What's the status report from Israel and Denmark?
Our goal for Israel and Denmark is mass-market access by 2011. In 2010, we have a systems-wide test where we have about 100,000 [recharge] spots already installed, a few thousand cars, a few switch stations already in location, the software's already in place, people are driving on customer contracts and are paying. In 2009, we have a smaller systems test with about 50 cars going around Israel and about 50 cars going around Denmark.