Supplying the Brains for Electric Cars

Shai Agassi and his Better Place startup may have a long way to go before realizing their vision of a future where electric vehicles are in vogue. But they came a step closer on Sept. 15 at the high-profile Frankfurt Auto Show when they demonstrated a system for managing data communications between vehicles, battery switching stations, and electric utilities. "This is a key piece" of making mass adoption of electric vehicles feasible, says analyst Thilo Kowslowski of tech market researcher Gartner Group (IT). "You need real-time communications between the vehicle, the charging infrastructure, and the electric grid."

Tapping knowhow from Intel (INTC), Microsoft (MSFT), and other tech stalwarts, the system makes it possible for drivers of electric vehicles to know how far they can drive on a battery charge and where they can find the nearest battery switching or charging station. It also tracks vehicles and drivers' habits so Better Place can manage battery inventories at switching stations efficiently. And it makes it possible for Better Place to manage the battery charging process to avoid troublesome electricity demand spikes.

Several major challenges remain for Better Place. It needs to win over major automakers in addition to the Renault-Nissan alliance that it has already signed. And it also needs to raise billions of dollars to pay for the batteries, which it will own, at $12,000 each, and to pay for the installation of battery switching stations, at an estimated $500,000 each.

Worth the Investment? Setting up those stations will be no mean feat. It could cost as much as $200 billion to pay for the battery switching and charging infrastructure for the entire U.S., says Mark Duvall, an analyst at the Electric Power Research Institute (EPRI), a nonprofit think tank. "It's not clear that the level of interest in pure electric vehicles, as opposed to plug-in hybrids, will support the massive investment," he says.

Better Place has addressed issues raised by skeptics before. The Palo Alto (Calif.) company has already announced plans for widespread adoption of its system with the cooperation of governments in Israel and Denmark. A demonstration conducted in Japan in May showed that Better Place's battery-switching station technology could replace a spent battery with a fully charged one in a mere 40 seconds, far less time than it typically takes to refuel a conventional auto.

Agassi, a former software industry wunderkind with Germany's SAP (SAP), has a goal of providing the communications and physical infrastructure to enable countries and metropolitan areas to rapidly convert to using electric vehicles and shake off their dependency on oil.

In his unabashedly confident style, Agassi predicts that, years from now, when electric vehicle transportation is the norm, the Frankfurt announcement will be recalled as a turning point in automotive history. "This will be remembered as the equivalent to the introduction of the Ford Model T," he says. With its affordability and convenience, Ford's (F) Model T turned automobiles into a mass market and established the gasoline engine as their means of locomotion. Agassi says his technology will be ready to be installed in cars in time for the planned late-2010 test of the complete transportation system in Israel. He hopes to have the system running for consumers in 2011.

An EV That's Competitive in Price In Frankfurt, the data communications system is being demonstrated in conjunction with Renault (RENA.PA), which plans on supplying cars for Better Place's Israel and Denmark projects. The in-dashboard piece of the system is installed in one of four EV concept vehicles that Renault is unveiling at the show—a full-size sedan. Renault predicts that its electric vehicles, which will go on sale in 2011 and 2012, will cost about the same as a comparable gasoline-powered vehicle, and that the cost of operating them will be equal to or less than that of gas-powered vehicles. Two of the four models will use Better Place batteries and work with its system, according to a Renault spokesperson.

The concept car that will be part of the Renault and Better Place demo in Frankfurt is the Fluence ZE, a five-seat-sedan. Better Place will begin importing and selling the car in the first half of 2011 in Israel and will offer subscriptions to customers buying this car from the Renault network in Denmark. The two companies are committing to a volume of at least 100,000 vehicles for both countries by 2016.

Agassi calls his technology the "information train" for operating electric vehicles—in contrast to the mechanical "drivetrain." Software and electronic gadgetry will be installed in auto dashboards to manage navigation and track the vehicle's location. Software installed at Better Place's command centers will learn from a driver's behavior and use that information to predict future driving patterns. A key element is managing the use of electricity for charging batteries in charging stations and vehicles to smooth out the impact on the electrical grid. Better Place will charge a monthly subscription for the service.

Rather than inventing all of the technology itself, Better Place formed partnerships with chipmaker Intel, software maker Microsoft, and electronics manufacturer Flextronics (FLEX) to provide key components. It's using software packages from SAP and Amdocs (DOX) to manage accounting and billing. Microsoft supplies a computer operating system for the in-dash system. "We view electric cars as roaming consumer electronic devices, which have the potential to move from niche product to mainstream, and we're delighted that Better Place is using Microsoft technology," says John Fikany, Microsoft's vice-president for commercial sector industries.

Still, an Uncertain Future This partnering approach makes it possible for Better Place to keep its costs under control. It has just 70 employees. Better Place raised $200 million in 2007 to fund its launch and the costs of running the pilot project in Israel. Its subsidiaries in Israel, Denmark, and Australia are in the process of raising funds to finance startup and expansion costs.

While Better Place is one of the electric vehicle industry's pioneers, its future is anything but certain. Agassi placed a big bet on the idea that consumers will want to buy EVs as their primary vehicles—and battery switching would be necessary for them to take long trips. But others, such as EPRI's Duvall, believe it's likely that consumers will initially buy EVs as second cars, and all they'll need is recharging stations. Another Silicon Valley startup, Coulomb Technologies in Campbell, Calif., has developed charging technology and a software system for coordinating with the grid.

Agassi is confident his strategy will prevail, however. He contends: "Nobody else has a solution that targets mainstream consumers, with a nice car and with unlimited range and capabilities."

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