Electric cars of the future at the Web 2.0 Summit

SAN FRANCISCO-- While most of this week's Web 2.0 Summit has centered on trying to find business models that work in today's slumping economy, two of the most exciting ventures are also the least affordable--at least for now.

Those two companies are Tesla Motors and Shai Agassi's Better Place. The two have completely different business models, but are joined by the idea that gasoline vehicles are something that will not last. Tesla, which is the creation of PayPal co-founder Elon Musk, is creating expensive sports cars that run off nothing more than electricity--and a large bank account to afford the six-figure cost of the vehicle. Meanwhile, Agassi's Better Place is aiming to change the paradigm in the automobile industry to the point where everything is electric; instead of filling up at gas stations, we'll simply be getting our batteries swapped out in less time than it would take to go through a car wash.

Both Musk and Agassi, who spoke at separate sessions Friday at the conference, face huge financial hurdles on the way to seeing their visions become as ubiquitous as the business models they're trying to replace. In Musk's case it's infrastructure as much as it is improving the actual technology.

Tesla's current model, which is a two-door roadster, costs consumers in excess of $100,000, and the company cannot produce them fast enough. The waiting list, which is currently at a little over 1,200 people, matches that of Tesla's current yearly production. "We're making 1,200 a year," said Musk, "and eventually 1,500 a year."

Musk hopes to drive production numbers up with future models, including a four-door sedan that will be unveiled early next year, followed by an economy car that will cost consumers "below $30,000." All of that hinges on improvements in Tesla's production techniques and other advancements in technology; Musk hopes to achieve production in the hundreds of thousands per year--basically enough for them to make it to most dealerships, and more importantly to get potential customers off long waiting lists.

Agassi's vision is much wider-reaching. Instead of focusing on building the cars, it's more about making a pivotal change in battery technology and getting existing car makers to adopt it in place of the traditional combustion engine. Agassi has already begun to build that infrastructure with Israel, which invested in Better Place earlier this year. Automaker Renault-Nissan, which is currently developing a Better Place-compliant vehicle, will have it out to customers sometime in 2011--in time to match the Israeli government-aided system of battery swap locations.

"Israel realized it doesn't have oil, and shouldn't need oil," Agassi said. He believes President-elect Barack Obama will be more open than President Bush to his company's plan. Agassi also believes that if something is not done soon to wean the U.S. off its dependency on oil then we'll have chaos when there is no longer gas to fill our country's fleet of vehicles. "This is a problem that has a lead problem of eight years to resolve. If you're not ready with a solution you're not going to be able to solve it when it comes."

CEO and Co-founder of Better Place, Shai Agassi discusses his company's plans to take the automobile industry beyond gasoline.

(Credit: CNET Networks / Dan Farber)

For both companies one of the biggest hurdles is going up against the aged business models that dominate the world's automotive landscape. Musk said action had to be taken by someone, since waiting for Detroit to come out with its own solution would take too long--especially when they're facing a sharp downturn in sales and having to lay off large numbers of employees. He also noted that Chevy's upcoming Volt hybrid vehicle is a great start, but that companies like his could come in with new ideas that could push innovation that much further.

Agassi looks at it being more as a problem with the auto industry's transparency of its own innovations and trying to bundle old systems with the new. "It's the perfect Osborne 2. You always hear about the next new magic battery and nobody wants to buy a new car with the old battery."

Old or new, in both company's visions the battery is the piece of the puzzle that Detroit--and the world--is missing.

[mikeyaj]

Every such car should be subsidized by the Gov. to make them available to everyone.

[bob1xxxx]

more socialist pie in the sky feces

[marc_90292]

It appears that you do not understand that we MUST become energy independent especialy from hostile nations.
The cost saved by not buying oil from foreign nations makes richly up for the cost invested by the U.S. if needed.

[ericyen]

Forget saving the Big 3 American Auto manufacturers . . .. the government should put its money into Tesla Motors. Why do we still continue to hold on to the old ideas of the combustion engine. Its dead like the dinosaurs.

[marc_90292]

The answer is simple, Big Oil used to and still holds large amounts of stock in the automotive inductry as was evident when Wagoner recalled all electric cars and had them squsched (is that a word?)

[Joe Real]

Tesla is tanking, as well as GM and other US Car manufacturers. Toyota are not fan of plug-ins, and their plug-ins are guaranteed to drink gas if you need accelaration or power or freeway speed. Project better place business model will go against the grain and would need inordinate amount of capital.

The best car out there with the greatest potential for California Condition is the Aptera from Aptera motors. Google has invested on this company. Very efficient car whether pure electric (produced now) or hybrid mode (model produced later). And they don't carry the MBA executive kinds of pay rates, retirement pays, massive debts and other other entitlement payments that are bleeding the likes of GM and Ford. No union contracts either, and not a lot of overhead. Aptera is poised to succeed.

[NiraliSherni]

The Electric vehicle business model does not have to be so capital intensive; ZAP is one EV manufacturer that has hung in there for the past 13 to 14 years, and shown how to do it. In a market environment that has been distinctly hostile in the past, ZAP is producing a range of EVs for all requirements: cars, trucks, scooters, bikes off road vehicles. It will also be rolling out the much awaited sports model Alias next year.

[willdryden]

No they are not. They have one 3 wheeled car slightly better than an NEV (40 MPH) and a bunch of junk scooters. I own one and wish I didn't.

[shera89]

You know, ZAP cars aren't exactly comparable to freeway vehicles. The top speed is about 40 mph if you are on completely level ground. AND, show me any safety tests that hev been done on them. They are a great idea, as are all electric cars, but for having been around since 1994, you would think that they would have improved a bit on the glorified go-cart design, not to mention safety.

[marc_90292]

Tesla's business model, i.e. selling electric cars only to the rich, will not help us become energy independent, a national priority.
If Tesla cannot build cars fast enough and in large enough quantities, give me a no-luxury model and I will organize production in under 18 months, if needed in Koreo, China or any place where people understand that the profit from low cost cars can be higher than those of luxury models, given that the the latter has production figures of a fraction. We have done it with GM's German Opel division and can do it again!

[willdryden]

You have to start somewhere. Right now, only the rich can afford the cost of the battery pack. As the cost of the batteries comes down, the cheaper models of cars will become available. That is the problem with the Chevy Volt. They wanted the price of the car to be "around $30,000", but the current cost of the battery pack is still $32,000. GM may get a break on cost in quantity and the price may go down by 2010, but not enough to make a profit at $30,000. so they have upped their target to $40,000. moving it out of general population consideration into the yuppy status symbol market with BMW. It could be a hard sell for a Chevy.

[kevinskrause]

@ wildryden

Yuppy? Seriously? You must have confused BMW with Mercedes. I have always said there are two types of BMW owners; "those that have an unequivocal passion for driving" and "those that should have bought a benz." I will admit, there are a number of posers on the road that use a car like this to flex their capital muscle. But don't forget the select few who fully understand what these cars are; "The Ultimate Driving Machines."

[carbon_14--2008]

You say Tesla Motors faces an infrastructure challenge, but it?s Agassi?s Better Place that has the big problem with infrastructure. They have to build battery swapping and proprietary charging stations everywhere, just as dense as gas stations. With Tesla?s plan, the vast majority of charging occurs in the home, or at any standard 110V or 220V outlet, and a much smaller number of charging stations are needed for longer trips. A charging station can be as simple as a dryer outlet, or maybe four times that power level for quick charging.

There are about 150,000 gas stations. Since 78% of all driving is less than 40 miles in one day, which requires about an hour of charging from a dryer outlet, nearly all charging can occur at home overnight. Even a more extreme 150-mile commute can easily be handled with an overnight charge. So, charging stations are only needed for long distance road trips.

The US has about 42,000 miles of interstate highways, so with just 500 charging stations, the maximum distance between charging stations could be under 100 miles, which would easily enable cross-country trips in EVs having a range of 200+ miles.

That?s a tiny fraction, a third of a percent, of the existing gasoline infrastructure and far less than what Better Place would need to enable ubiquitous battery swapping stations.

Also, Elon Musk did not ?create? Tesla Motors, that was done by Martin Eberhard and Marc Tarpening. Musk came along later with a big checking account and is now running the show.

[picoallen]

Better Place cars will give you the best of both worlds. You'll be able to plugin your car to recharge to keep you going for short trips, or swap batteries at exchange stations for longer trips.