Case Abstract 

In a bold bid to dramatically reshape the automotive industry, start-up company Better Place is attempting to shift transportation from reliance on the environmentally destructive internal combustion engine to electric power from renewable sources.  In order to overcome the limitations of current technology and utilize off-the-shelf hardware, Better Place is rolling out an extensive infrastructure to provide ubiquitous charging opportunities in the hope that this would satisfy virtually all driver requirements.

In pursuing this massive transformation, Better Place is promoting a paradigm shift in the business model for personal transportation, by shifting sales from products (cars and gasoline) to services, by selling its customers “miles”.  The end goal is to truly make the world a better place by substantially reducing the environmental and social impacts of the transportation sector’s reliance on petroleum.

The case highlights the challenges of transforming a mature industry which is central to modern society.  It includes a brief history of the automotive industry to date, illustrates various unintended consequences of its expansion, as well as provides overviews of various competing automotive technologies (hybrids, hydrogen fuel cells, etc.)

The case surveys the various aspects of the Better Place model, and probes its advantages and shortcomings.  It also examines the Better Place rollout strategy, as an upstart entrepreneurial company attempting to grow and expand internationally at a very rapid pace. Besides a complex economic business model specifying large upfront investments in multiple dispersed international locations, key challenges include: How to convince established automotive producers (or newcomers) that EVs are the way forward? Whether and how to coordinate infrastructure and standards?  And, not least, how to convince consumers to make the leap of faith and switch to an electric car.

Case Abstract

Shai Agassi started Better Place with the ambition of setting up an ecosystem – including a ‘smart grid’ of charging stations and battery swapping facilities – for electric vehicles. These charging stations were to be powered by electricity generated from renewable sources to eliminate indirect emissions due to the operation of electric cars. Better Place also partnered with governments, parking lot operators, and companies to install charging stations. This ecosystem was expected to eliminate the barriers to the mass adoption of electric cars for personal transportation. This case discusses the innovative business model of Better Place, which proposed to offer transportation services to consumers through miles per month subscription plans, with the cost of the electric car being subsidized based on the tenure of the plan.

The software used in the electric cars, which was designed and developed by Better Place, provided the information necessary for the drivers. The company, which positioned itself as a ‘premier global provider of electric vehicle services’, was able to raise US$ 200 million by convincing a few investors. It tied up with select automakers to manufacture cars which would be compatible with its charging infrastructure and battery swapping facilities. It also received support from the regulatory authorities in Israel, Australia, Denmark, Japan, and some states of the United States and Canada. However, it remained to be seen whether the proposed ecosystem and business model would encourage widespread adoption of electric vehicles, reduce the dependence on fossil fuels, and contain the levels of environmental pollution. While the company intended to make the world a better place by accelerating the transition to sustainable transportation, was its business model sustainable in the long run?