Thursday, December 10, 2009

Business model example: Better Place - Introducing per-distance fees

For many years the car manufacturers have struggled with that electric cars are too expensive to sell in comparison to current cars, due to the very expensive battery. At the same time car manufacturers have been aware of the margin between what electricity costs and what is paid today per km gas. The performance of the battery has also been limited, reducing the range for which the car can be used between charging and the time it takes to charge the battery has been considered too long. While car manufacturers are waiting for battery companies to develop the technology for future cars, Better Place has developed a business model for electric cars and infrastructure that is being tested in Israel, Denmark and Hawaii - small geographical markets with special tax policies for zero-emission cars. Better Place is not focusing solely on the cars but on the system including charge spots, battery-switching stations, and grid-management software. Redefining the electric car, where customers are not allowed to purchase battery packs, the company is able to use a business model similar to how mobile phones are sold. The company then uses the margin between electricity and gas to subsidize the cost of new electric cars, providing electric cars for free, for customers signing up to costs similar to the costs they have for gas today. The costs, or per-distance fees, cover battery pack leasing, charging and battery switching infrastructure.

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