Better Place has failed?

Electric car company Better Place has failed to market their amazing product in Israel correctly. They can still turn it around and become a huge success.

While Israel is the Startup Nation, the vast majority of Israelis are not early adopters of new technology. They want to see something in the hands of millions of Americans before they will commit. And a completely new kind of car in Israel is a huge commitment.

A Startup Nation exists because Israel has a slightly high proportion of motivated people willing to take a chance. But those people willing to start their own companies and take chances are still a tiny proportion, even in Israel. You can’t make a business selling just to them.

So while it seemed obvious to start selling in Israel, those who live here see a more nuanced picture.

What they did right

In Israel and Denmark Better Place has rolled out to a few, early adopting, eager customers, such as myself, the world’s only way to make driving an electric car practical as a direct replacement for oil fuelled cars. Customers driving the car today are overwhelmingly delighted.

Customers of Better Place invited to a meeting with senior company management – October 2012 – Photo: Brian of London

In partnership with Renault they’ve delivered a full size, practical, comfortable car that feels like a luxury car costing twice the price. The price is kept reasonable by removing the battery (more than $10,000 alone) from the car’s price and leasing that along with all the electricity needed.

In comparison a battery powered, electric Tesla Model S luxury sedan is more than three times the price of the Better Place Renault. The Tesla garners rave reviews, yet every aspect making the Tesla so good is present in some measure in Better Place’s much cheaper Renault Fluence ZE. Silence, strong acceleration, a sense of amazing calm; the Renault has these even though “it’s only a Renault” as Israelis are prone to say.

Backing up the car, and included in the price, is home installation of a charge point, in car navigation and range estimation, astonishingly good customer service by phone and the headline grabbing battery switch stations. Despite the seemingly limited range of the Renault (130 km or 80 miles is realistic), the switch stations make this number irrelevant. Get in the car, punch in your destination anywhere in Israel or Denmark and, only if it’s necessary, the car will tell you where to stop for a 5 minute battery switch.

But I can’t stress this enough: the majority of driving with an electric car is on one battery charge and fuelled completely by power delivered at home while the owner sleeps.

I read convoluted tales of electric car drivers in other countries who try to make longer trips: hopping from one charge point to the next whilst praying these precious spots will be working and not blocked by regular cars. In comparison Better Place have delivered completely on their promise of “drive, switch & go”.

The deal seemed good

Better Place took initial orders from “Startup Nation” early adopters and people who had bought into the green ideology. Personally, I was intoxicated with the amazing driving feel of the electric car and forsaw the positive long term impact that diversifying our transport energy sources would have. Whatever our reasons, customers started driving the cars in April 2012.

Better Place are selling something a little more complicated than just a car. You buy the car while leasing the battery and the electricity to fill it up. In effect buying a car and all it’s fuel at the same time. Imagine if you could fix the price of your gasoline today for the next 4 years. Would you take the bet that gasoline prices will rise and fix your price per km today? This business model is much more like a subsidised cell phone with a commitment to buy cell service for a number of years.

The initial price seemed very reasonable to me: trying to get people to pay a price premium for “green” has had very limited success the world over and doesn’t wash in Israel either.

However there was a 20,000 km per year minimum. It turns out the average for private cars in Israel is around 24,000 km per year but still this number seemed high to many and was roundly criticised by the Israeli press: criticism stuck in the mind.

Electric cars are cheaper per km to own over a few years, even with today’s high battery prices. But, and this is the big but, only if you travel enough. Without a network of battery switch stations or rapid chargers, its hard to cover enough km’s in today’s electric cars to realise any lifetime cost saving.

In the USA with gasoline priced at less than half the price in Israel, the savings are very slim and hard to realise because covering more than 100 km in a day is not so easy. In Israel, however, with battery switching and expensive fuel, the economics make sense.

I had learnt all this following a social media inspired invitation to visit the company’s visitor centre at Glilot. Out in the wider public, however, Better Place were astonishingly quiet.

But who knew about the deal?

Existing customers waited and waited for a massive marketing campaign to help us with all the questions we were being asked every single time we stopped at the traffic lights or parked our cars.

And meanwhile the Israeli press kept hammering away casting doubt and never failing to omit or confuse the actual details of the deal being offered to customers.

When the advertising did come it started with a brand awareness TV spot and a few print ads. Great, we thought, this is the scene setter: the detailed communication of the offer will follow. It never did. After a few weeks of noise, Better Place slipped from view again leaving us customers to answer a myriad of detailed, unanswered questions.

Even when company founder, Shai Agassi, had completed the amazing achievement of driving all around Israel in a day, the company’s PR department barely made use of it. I noticed this happening live via Shai’s twitter postings and put up a blog post before Better Place’s PR department mentioned it.

On the day I paid for my car and pre-paid for four years fuel and service, I paid the same price as a Toyota Prius or Chevy Malibu would have cost with NO FUEL. It’s as if my car is now free to drive for four years. How hard is it to communicate that on a billboard? They never did.

The Israeli press kept unfavourably comparing just the cost of the car to lower specified and underpowered petrol models (such as the visually similar Renault Fluence petrol version). Without company communication to counter this, people were confused.

The Israeli car market is a strange system: six large import companies which all own leasing companies exercise very tight control on prices and what is brought in. Even the car that Better Place are selling is actually imported and mechanically serviced for them by Renault importer Carasso. The majority of cars on the roads are leased by large companies and given (usually with pre-paid fuel cards) to employees. Private buyers are a minority.

The lease companies were never likely to cannibalise their own sales and sell this new thing. It’s too difficult for them to explain and it was always going to be easier to sell what they are used to.

And then, at exactly the moment Better Place announced a lease deal which cut the too high minimum annual distance with a headline grabbing all inclusive ₪2,000 per month for 1,000km lease (universally applauded as an amazing deal), they fired the founder of the company, Shai Agassi! This launched an avalanche of bad press casting huge doubt on the company’s ability to survive financially.

It’s hard to comprehend how this was allowed to happen. Had they been able to wait even four weeks between these events things could have looked very different. The momentum gained by leasing two or three hundred cars in a month and then publicising it would have been tremendous. Israelis like to follow: nobody wants to be the first “fraier”.

And still there was no communication in English, Arabic, French or Russian: English speakers had been overrepresented amongst the earliest customers yet not once did the company promote itself outside Hebrew. And still there was almost no advertising.

So what orders there were dried up. Leasing customers put orders on ice. The new CEO to replace Shai Agassi, Evan Thornley, has been cutting staff. Quite rightly he’s scaled back on development (the system works now). He also cut most of the Israeli marketing team. He’s reduced the scope of the Glilot Visitor Centre from a tourist attraction to a car sales showroom. Demonstrating a vision to bus loads of visiting tourists was great for international brand awareness and cemented Better Place’s spot in the Startup Nation book, but it isn’t top priority for selling cars in Israel.

How to fix it

One can only hope cars can be offered either with a direct lease from Better Place or with 100% backing (to ensure the lease companies feel secure). This is the only way to put confidence behind the system but it requires even more capital to back it up.

The sales people and existing customers of Better Place know, diminished confidence in the company is by far the most significant reason sales are not closing. Once people drive the cars and understand the deal, they want them.

This needs to be accompanied by a huge and detailed marketing campaign. And even if the individuals who this campaign reaches won’t buy a car privately, they will be employees of large companies like Elco or Amdocs in a position to positively request their next company car be from Better Place.

The existing goodwill of hugely positive customers should be leveraged: many of us have written or given interviews about our experiences already and would like to see the company sell more cars.

Better Place is a global company. It has also reached the status of a national Israeli icon. One successful deal in China or Europe could reduce the importance of sales in Israel, however, Better Place needs to be seen to reach a steady state at home. Even if Israel’s small market makes it hard to recoup development costs here, operating cost break even should be the goal.

Strategically Israel is heading toward true energy independence with its massive gas fields. The most efficient way to use that gas to power cars is Better Place. Having a significant percentage of electric cars on it’s roads is a massive signal to the world: ending oil starts today.

Better Place customer cars – Photo: Brian of London