Sherwin Pomerantz

Better Place: The Market Trumps Technology

Yesterday Better Place, the company founded five years ago by Shai Agassi to produce and market electric vehicles in Israel filed for bankruptcy in the courts here.  A sad end to be sure to a technological dream that everyone believed could be successful.

But the failure of Better Place, which has fewer than 1,000 cars on the road here when their goal was 100,000 was in marketing not technology.

I have been to their space-age demonstration facility in Herzlia on a number of occasions and what they presented was truly a revolution in personal travel.  An electric car that could travel 100 miles on a full charge; that added no direct pollution to the environment (although producing the electricity to charge the batteries does product pollution); where drivers could pull into battery changing stations throughout the country and have a charged battery inserted in less time that it took to fill a conventional vehicle with gas; and whose local taxes would be significantly less than fossil fuel vehicles making them less expensive to purchase.

In all, it seemed like a dream.  Unlike the hybrid cars similar to Toyota’s Prius, the buyer would not have to pay for the cost of the battery up front, but rather through a pay as you go system, similar to buying fossil fuel at the gas pump.  Renault agreed to build its Fluence line to accommodate the Batter Place technology and everything seemed in line for success.  Tests were run in other locations such as Denmark and with taxis in downtown Tokyo and the concept seemed workable.

But when the company began selling the vehicles 18 months ago Israeli buyers were faced with new facts on the ground.   Purchasing the cars turned out to be more expensive than purchasing a similar standard fueled vehicle.  In addition, the payment plans offered to buyers for the purchase of electricity made it more expense for most users (i.e. those that drove 10,000 km a year or less) to buy the power than to purchase regular gas.

That was on the cost side.  On the user side, charging a vehicle at home at night was also very difficult.  People who lived in urban areas where they did not have assigned parking spaces, such as Tel Aviv, Jerusalem and Haifa, could not install a charging point because they were never sure where their cars would be parked.  The long promised creation of en route battery switching stations also did not materialize as, even today, there are but 36 of them spread throughout the country.  

So, in fact, unless buyers were, in principle, 1,000% committed to electric, there was simply no motivation to buy this new product.  Last October, after founder Shai Agassi left the company, prices of the vehicles were reduced, efforts were made to approach companies to lease vehicles for their fleets, and the market plan tried to adapt to the reality of introducing a new driving model to the public.  But it was simply too late.  The horse was out of the barn and, at that point, closing the door did little to prevent a further slide in the company’s fortunes.

Warren Buffett once said “In business, the rear view mirror is always clearer than the windshield.”  This is certainly true although in the case of Better Place, my guess is that the windshield was always clear it’s just that the driver wasn’t watching the road.

This was definitely not a failure of the much-vaunted Israeli technology, but rather a failure of the management to understand the market.  It could have had a different ending, for sure. 

About the Author
Sherwin Pomerantz is a native New Yorker, who lived and worked in Chicago for 20 years before coming to Israel in 1984. An industrial engineer with advanced degrees in mechanical engineering and business, he is President of Atid EDI Ltd., a 32 year old Jerusalem-based economic development consulting firm which, among other things, represents the regional trade and investment interests of a number of US states, regional entities and Invest Hong Kong. A past national president of the Association of Americans & Canadians in Israel, he is also Former Chairperson of the Board of the Pardes Institute of Jewish Studies and a Board Member of the Israel-America Chamber of Commerce. His articles have appeared in various publications in Israel and the US.