A Viable Electric Car Business Model?

I like new business models, but sometimes it isn’t a new business model at all, just a new industry to apply it to. That is what Shai Agassi is trying to do. He has a project called Better Place, which is trying to create a viable electric car platform.

The business model Mr. Agassi is using is the same one as cell phone carriers. Instead of buying minutes of use on the network, you buy miles. And just like you need a cell phone to access the network, you need a battery to drive the electric car. That is what I really like about the model, it assumes that battery technology will improve and probably at a fast pace, so why saddle the consumer with that churn? It disincents them to buy an electric car and you never get the scale you need.

David Pogue of the NY Times highlighted Mr. Agassi in a couple of pieces recently. One was in the paper and it’s called Electric Cars for All! (No, Really This Time) and the other was on CBS Sunday News and it is called Making The World A ‘Better Place’

There are still many hurdles to overcome, but two major obstacles have crumbled recently.
    The first is cost. The cost of the electric car was too high for any serious adoption to happen. The cost has to be slightly under the cost of a gasoline car because of the initial hassles and learning curve. This model equates a driving mile to $0.06 to $0.08 whereas a gasoline based mile is $0.10 to $0.12. This cost savings adds up. For instance, if you take the $0.08 for electric and $0.10 for gasoline and drive a typical 12,000 miles over a year then your numbers look like $960 for electric and $1200 for gasoline. A $240 yearly savings.
    The second is the US Auto Industry and their pull in Washington. But it wasn’t just because they are hurting financially. It also is because the variability of the price of oil creates constant management of the decision making process. How do you plan when in June of 2008 the price of a barrel of oil was $143 and by December it was $40. There are significant costs in just managing the what ifs.

I still see two major hurdles in the way though. Infrastructure and Culture. Mr. Agassi is addressing the infrastructure element by working with state governments like Hawaii and California in the US, Israel, and European nations and partnering to cover the cost of installing devices that are similar to a parking meter, but act as a recharger. Many people are habitual with what they buy and a product or service has to be a real differentiator to get people to change. I think this idea is that significant. But good ideas have to leave no doubt and if I’m a 68 year old man in Texas I’m probably not interested.

I recommend looking at Shai Agassi’s resume. He’s the type of person who shapes the future. By 30 years old he was financially set after selling his first start up and before he was 40 he was shaping one of the worlds largest software companies – SAP. Although things didn’t work out for him to become the CEO, he did expand his knowledge of integrating different components for success. In software it could be the business rules, the programming code, the database, and the tech infrastructure. With electric cars it is the battery technology, the fill up behavior, the cost model, and the government. Integrating each of these with scale and timing is a tough task, but it looks like he knows it.

I believe there is an earnest desire in the US to move to an electric car platform. Just make it easy on consumers.

Working Thoughts 03-20-08

Interview Question: How much sleep a night do you get? Part 1


Three Requirements for Entrepreneurs

Anthony (Tony) Tjan  is the founder/ CEO of Cue Ball, a a venture and early growth
equity firm investing in the information media and consumer sectorswrote a recent blog entry for the HBR.com site called Great Entrepreneurs’ Secret: Smarts, Guts, and Luck. On the surface those are three secrets we’ve heard before, but I like some of the lines he has. I pulled some out:

Regarding Smarts:

The best self-made entrepreneurs possess outstanding street smarts, intuition, emotional and conceptual intelligence
as much as–and often more so than–book smarts, analytics, and
managerial intelligence. It is why founders are usually very good
getting companies to a certain level, but usually less good at scaling
their idea. The CEO who scales a company probably did could not have
founded the business and, vice versa, the person who founded it
probably could not have scaled it. The exceptions of Michael Dell,
Steve Jobs, Bill Gates, and Howard Schultz are just that: exceptions.
They possessed the rare capability to bridge across the analytical and the creative,
across the left and the right side of the brain. For our early stage
investments, I am biased toward the right side- the more creative,
conceptual and street smarts. “Visionary Skills 101″, just does not
seem to be on many MBA curriculums.

Regarding Guts:

Great entrepreneurs have the guts to go after big ideas. They are
willing to put themselves out there when most worry about, “What will
others think?” The definition of entrepreneurship that Harvard Business School Professor Bill Sahlman made
prolific- “the relentless pursuit of opportunity without regard to
resources” forms the center of the entrepreneurial mindset. Entrepreneurs don’t worry about the resources they lack, but about the resourcefulness required to get the big idea done.

Regarding Luck:

Recognizing that luck is part of the success formula helps maintain the
necessary and important humility during the entrepreneurial journey and
beyond. Circumstances beyond one’s control will always occur. Accepting
this vulnerability and understanding that sometimes you just need the
cards dealt in your favor is necessary to maintain the conviction,
courage, and momentum of entrepreneurial enterprises.

Working Thought 3/18/08
A Brief Answer as to “Yes” and “No”