Shai Agassi: Electric Cars Are Better Than Hybrids

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.

With oil under $50 a barrel, does your business plan still make sense?
The cost of the battery [averaged out over its lifetime] roughly translates to about four to six cents per mile. The cost of clean electricity translates to about one to two cents per mile. So [our costs are] somewhere between six and eight cents per mile. If you look at the average miles per gallon a car gets in the U.S., [those costs are in line with oil at] $25 a barrel.

Denmark and Israel are small, densely populated countries. How do you make this work in the sprawling American Midwest?
If you look at the North American continent, you actually have about 50 urban centers, which are, on the East Coast, so dense that at least half of them overlap another center. If you look at California, the California area is actually covered with four of these dense circles. Imagine a hundred-mile circle around San Francisco, and another hundred-mile circle around Sacramento, and again the same thing in Los Angeles and San Diego. In between those you have three freeways connecting [northern and southern California]. On these freeways, if you put switch stations at a distance of about 30 miles from one another, you would have full coverage across the entire state, which is effectively the most prolific car state in the nation.

We still don't seem to be where we need to be in terms of battery technology. Is it improving?
The Moore's curve for batteries is about 8 percent to 10 percent improvement per year. Do we need to wait for the best battery? We didn't wait for the best chip technology to start the PC revolution, and we didn't wait for the best communications chip to start the cell-phone revolution.

But you're saying the car is viable with current batteries? Many have said that they're too expensive or too heavy right now.
We have a battery in the car today that weighs 550 pounds and takes you 155 miles without air conditioning. It gives you a car that weighs less than any hybrid in the market today, costs less than any hybrid today, and actually drives faster than any hybrid today. What we were missing was a business model. Once we put in place the infrastructure and the business model, batteries beat fuel on efficiency, affordability and convenience. Nobody will send you a Chevron truck to fill your car at night, every night. I can fill your car at night, every night.

We don't produce batteries in the United States. With your plan, instead of sending money to OPEC, aren't we just sending it to battery-producing countries?
[That statement] is painfully right. The U.S. is in a very, very dire situation vis-à-vis battery manufacturing. The government should come up and say, "We're building a battery reserve, much like the national oil reserve, and to build that battery reserve we're willing to take the risk of a loan guarantee to manufacturers."

So in this you do see a role for government?
This doesn't happen without government. This is Silicon Valley meets Michigan meets Washington, D.C.

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