Jan. 21 (Bloomberg) -- Renault SA, France's second-largest carmaker, and affiliate Nissan Motor Co. said they will develop an electric car network in Israel in a venture with entrepreneur Shai Agassi as a first step toward global mass-marketing.

Renault plans to supply the vehicles, which will be powered entirely by electricity, while Agassi's Project Better Place will construct and operate a battery-recharging network, the companies said today at a news conference. The vehicles would be available starting in 2011.

Israel's small size makes it an optimal market for electric cars, which have a limited range, Carlos Ghosn, chief executive officer of Renault and Nissan, said at the conference in Jerusalem. The country, not counting the occupied West Bank or Golan Heights, covers about 21,000 square kilometers (8,100 square miles), about the size of New Jersey.

``In Israel, where 90 percent of the people drive less than 70 kilometers a day, a car with 100-kilometer range would satisfy most of the population's transportation needs,'' Ghosn said.

Israeli tax breaks will lower the cost of an electric car to the price of a gasoline-powered vehicle, he said. Over the life of the car, the cost of ownership will be ``significantly lower'' than a conventional vehicle, the companies said in a statement.

Lithium-Ion Batteries

The Renault-built cars will use lithium-ion batteries developed by Japan's NEC Corp. and Nissan, and will perform similarly to a gas-powered vehicle with a 1.6-liter engine. The cars will produce no emissions, the companies said. Lithium-ion batteries are standard in mobile phones and laptop computers.

Renault fell 1.11 euros, or 1.4 percent, to 76.05 euros in Paris trading. The Boulogne-Billancourt, France-based company's stock has dropped 19 percent in the past 12 months.

Renault, which hopes to sell 10,000 to 20,000 electric cars a year in Israel, also plans to market them in other countries at the same time, Ghosn said, without giving details. Nissan will manufacture electric vehicles as well, with the models sold by both companies varying with each market. He estimated Renault and Nissan's investment in the project at 50 million euros ($72 million) to 100 million euros.

Renault's electric car for Israel will be a ``three-box'' sedan, Ghosn said at a second news conference at Israeli President Shimon Peres's residence. The car will be manufactured in Europe, he said.

500,000 Recharging Points

Better Place will construct 500,000 recharging points in Israel, the companies said. Car buyers will subscribe to energy, including use of the battery, on the basis of kilometers driven.

``For first time, all the conditions necessary for electric vehicles to be successfully mass-marketed will be brought together in a partnership between Renault, Nissan and Project Better Place,'' the three companies said.

Better Place hopes to use sustainable ``green'' sources to generate the electricity needed for the cars, including solar and wind energy, Agassi said. He added that even if traditional sources of energy are used, carbon emissions would be reduced.

Toyota Motor Corp. the world's biggest maker of gasoline- electric hybrid vehicles, plans to lease cars by 2010 with batteries that can recharge from normal electrical sockets. Packs will come from a joint venture with Panasonic EV in Japan, run with Matsushita Electric Industrial Co.

Daimler AG's Smart, whose two-seat city car went on sale in the U.S. this month, plans to add an all-electric version as soon as next year.

Investors

Israeli-born Agassi, the former top software architect at SAP AG, said Oct. 29 he had raised $200 million in initial funding from Morgan Stanley, Israel Corp., VantagePoint Venture Partners and individual investors including Edgar Bronfman Sr. and James Wolfensohn, a former head of the World Bank.

The Better Place venture will be managed in Israel by former Major General Moshe Kaplinsky, Israel Corp. said today in a statement. Agassi will be the chief executive officer and Idan Ofer will serve as chairman. The Ofer family controls Israel Corp.

Shares of Israel Corp. fell 203 shekels, or 5.2 percent, to 3,711 shekels in Tel Aviv. The benchmark TA-25 fell 2.9 percent today.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net.

Last Updated: January 21, 2008 11:41 EST