First All-Electric Subscription Plan: Car 2.0 Pricing

Published August 8th, 2011

August marks the true premiere of electric vehicles to the world.

Tesla, a trailblazer in revolutionizing the current era of electric cars announced the end of production of the original Roadster. Tesla is phasing out the Roadster, which cost over $100k the past few years, and phasing in its new Model S, which will have a version as low as $57,400. As Tesla spokesperson Khobi Brooklyn explained in a Fast Company article titled “The End of an Era” that the Roadster made huge advances in the all electric vehicle (EV) industry as a whole by proving that an EV can outperform traditional combustion vehicles as well as by moving along the research and development process to drive down the cost of EVs. This transition towards the cheaper and more family-oriented 4-door Model S represents the larger industry move towards electric vehicles for the mass market, not just the rich sports car enthusiasts that also happen to care for the environment.

Better Place is at the heart of the movement for affordable EVs with the technology we currently have by separating the ownership of the extremely costly lithium battery with the vehicle. One of Better Place’s slogans is “we don’t make electric cars, we make electric cars convenient.” As explained in my previous article, Car 2.0 Overview, this new infrastructure of battery-swapping stations allows buyers of EV vehicles to pay significantly less for the vehicle because the user pays for the amount of usage, similar to how a traditional driver pays for gas. Since the battery is separated from the vehicle and no longer needs to be built within the car, the user does not have to worry about the high upfront costs that come with a lithium battery.

A similar example is how cell phones are sold. The cost of a cell phone is heavily subsidized by the companies selling them because they do not make money in selling the actual device, they make money off of people paying a monthly subscription. When you purchase a traditional combustion vehicle, you pay for gasoline as you need it, not the entire oil well, Shai Agassi points out (inventor of the battery swapping system). He claims these innovations in the production, operation, and business models of electric vehicles are arguments against the high costs and impracticality critics cite in an all-electric solution.

Back to the cell phone analogy: One may only pay around $100 for a phone that would normally cost $500 without agreeing to a 2-year term. Many may complain about the two-year term, but at the same time, it is rare to come across a person these days without a cell phone. According to this system of subscriptions, Better Place will make EVs affordable to the masses in a top-down business strategy, as opposed to companies like Tesla, that started out with a very costly solution and are trying to work their way down.

August marks the true premiere of electric vehicles to the world with the first commercial launch of Better Place to the world. In May, Better Place released its subscription prices for its August launch in Israel, claiming a 20% cost savings in annual expenses with EVs vs. combustion engines. This will be the first commercial launch of Better Place; all of the other locations across the world — Denmark, Japan, Hawaii, the US, and so on — are conducting feasibility and taxi tests, or still planning their launch timeline, like in Australia, where there will be massive launch ($100 million of the federal government’s money has already been funded in order to prepare smart-grids) and Renault, another true innovator with a “cradle to cradle” approach to operating, will be supplying the 115-mile range EVs.

There are two types of membership packages. With the special package, Better Place claims up to a 35% cost savings and provides the user with about 46,603 miles worth of energy for free. The special package is for three years and costs $45,092 for the car, membership, and services (maintenance, navigation, road side assistance), with a limit of 15,500 miles per year. Without the special membership package, the car costs $35,299 with a monthly subscription of $313 for up to 12,427 miles/year, $373 for up to 14,292 miles/year, $422 for up to 16,156 miles/year, and $459.42 for up to $18,641 miles/year. The complete list of what the basic membership package includes is:

  1. A four year, fixed-price membership package
  2. Installation of private charge spot
  3. Unlimited access to Better Place’s network of public charge spots
  4. Unlimited access to Better Place’s network of automated battery switch stations
  5. Personalized energy management and navigation services via on-board and network software
  6. Access to an inventory of batteries with a guaranteed service level agreement
  7. 24-hour access to customer service and support, roadside assistance
  8. Energy usage

A 20% — 35% cost savings between EVs and combustion vehicles is a bold claim to be made, especially since the overwhelming perception of EVs is that they are far more expensive. Taking a look at the U.S. national average of $3.65 per gallon, it would take $230 per month to pay for driving a regular combustion vehicle in the US (source: Solar Power for Electric Cars). With Better Place’s cheapest subscription, the consumer would only get around 12,000 miles a year for $313 a month. That’s almost $1,000 more a year!

However, intrinsically, with electric cars and with Better Place’s service plan, consumers will have lower maintenance costs and insurance costs, which may make the cars price equivalent. Also, keep in mind that this is the first consumer EV launch in one of the world’s smallest countries. In order for EVs to be successful, they must come in scale. Moore’s law of technology means: every 18–24 months, a technology will become twice as powerful at the same cost, or half as expensive at the previous level of technology. Shai Agassi explains how the electric “eMile” will follow Moore’s law in his TED talk in California with the “eMile” graph. One will have to wait and watch for the EV system to be launched in Australia. This massive launch will be a clearer indicator of whether the battery-swapping system is going to be more economically and systematically feasible than the August launch in Israel.

What if all we do is sell more cars and trucks — Bill Ford

In an optimistic long-run scenario for EVs, if they deliver a clean and affordable solution that introduces personal transportation to a growing number of our world’s population, the overcrowding of an already heavily-congested system would be a whole other monumental challenge. Ford has been thinking about this scenario, as explained by Bill Ford in his “A future beyond traffic gridlock” Ted talk.

Social media as well as nano-technology will help us work to conquer this next horizon. With a combination of wireless technology built into our roads and cars, such as haloIPT’s wireless charging in our roads, and EZ pass‘ toll payment system in our cars, combined with social media tools, traffic could be coordinated much more sensibly. In a perfect system, if all of the cars on the road are interacting with each other, accidents could be eliminated and lane management based on priority or payment could be created. The bottom line is that all-electric vehicles could have just as large of an impact on transportation as Henry Ford’s assembly lines.

We are just beginning to see the horizon of the inevitable clean revolution with the first commercial launch of the battery-swapping technology in Israel this August.

Tel Aviv, Israel

Originally published at cleantechnica.com on August 8, 2011.

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