Why carmakers say no to battery-swapping

PARIS -- There's a strange disconnect surrounding Better Place, the company best known for its plan to extend the range of electric vehicles by relying on speedy battery swaps.

Automotive executives are nearly unanimous in dismissing the idea. With the conspicuous exception of Nissan-Renault CEO Carlos Ghosn, rarely does an executive express interest.

Yet Better Place is getting increasingly credible support from governments, banks and major corporations. So far this year, it has signed an extensive deal with General Electric and picked up $350 million in financing.

In an interview at the Paris auto show, Shai Agassi, the Palo Alto, Calif., company's founder and CEO, attributed his cool reception in automotive circles to "a lack of belief that something that big can happen in the industry."

Chinese automakers are more receptive than traditional industry powers, he added.

"Incumbents in an industry that is slow to change tend to believe that the speed of change will remain constant," Agassi said.

Agassi, a trim, intense 42-year-old native of Israel who made a fortune in the software industry, is out to increase the speed of change dramatically. Two major deals this year validate his vision, he said:

-- Last month's alliance with General Electric calls for cooperation in four areas: technology development, battery financing, fleet programs and consumer awareness. Agassi said making GE chargers compatible with Better Place equipment will expand the reach of both companies.

-- In January, Better Place raised about $350 million from investors led by HSBC. The London-based financial services giant put in $125 million of its own money and took a 10 percent stake and a board seat.

"What you're starting to see is a trend," Agassi said. "It's not just the crazies anymore. It's the leaders."

The new funding is being poured into Better Place demonstration projects in Israel and Denmark. Both government-backed efforts will set up nationwide networks for rapid recharging and battery switching.

Ghosn's support has been crucial for each. The Renault Fleunce sedan, a purpose-built EV, will be the first vehicle using the network. Interestingly, though, Renault partner Nissan chose to use an enclosed thermal management system for the battery pack in the Leaf EV in the United States, meaning the car's battery cannot be swapped.

In both Israel and Denmark, Agassi expects to have a thorough evaluation of the Better Place system by the fall of 2011. He wants answers to three questions:

1. Does the system work?

2. Do consumers like it?

3. Can it be duplicated?

"If the answer is yes to all three, then we replicate it around the world," Agassi said.

Better Place has another project beginning in Australia and, at the behest of the Japanese government, is testing battery swaps with Tokyo taxis. So far, the company says, the average swap time is 59 seconds.

The tough nut to crack is the United States, Agassi admitted. The core issue there is the relatively low cost of gasoline.

Better Place's basic model is to replace the gas station, he said. Investors look at $3-a-gallon gasoline in the United States and figure their return on investment will be better in Europe, for example, where fuel costs twice that.

Nevertheless, Agassi said he expects Better Place to penetrate the United States eventually. He added that he has no interest in the path taken by EV makers that focus on small, limited-range "city cars."

"An American buyer doesn't want to drive a small city car," Agassi said. "You've designed a car for a guy who doesn't have the ability to buy the car. Most of these guys in Birkenstocks, they don't have the $35,000 to buy a third car for the family."

Instead, he wants to persuade an automaker to make an electric, battery-switchable SUV for American buyers. With such a vehicle, Agassi said, there would be "no gasoline, no stigma."

"You've got the Diet Coke of cars," said Agassi, clearly eager. "You've got all the taste and none of the guilt."