Terra Incognita: Myth, reality and the electric car

An Israeli company pioneers electric car battery technology, but questions remain about the industry itself.

In the 16th century the Spanish believed in the fountain of youth. As in those days, today people believe in the curative effects of alternative green energy; effects the existence of which is not proved. But every year reports come back that we are just around the corner from some new miracle, like having affordable electric cars and places to charge them. In small countries like Israel, these ideas seem especially appealing.
To understand the story of the electric car, it’s important to know a little history. The first automobiles were experimented with in the 1860s and 1870s in Europe and the US. Only in 1893 was the first gasoline-powered car driving on America’s streets, and there was only one prototype. In 1899, Olds Motor Vehicle established a successful production line, and by 1904 were selling 5,000 vehicles a year. The first cars could only be purchased by the elite. Ford’s Model K of 1907, for instance, was priced at $65,000 in today’s currency.
By 1909, Ford’s Model T was selling at around $18,000, and by 1920 the company was selling more than a million a year. But owning a car was one thing; fueling it another.
The first gas station was built in St. Louis in 1905, but it took a decade for them to become common. The first cars couldn’t drive very far either; the Model T could only go about 150 miles on its 10-gallon tank of gas. When considering the failure or success of the electric car industry, one must to keep in mind the length of gestation from the invention of gasoline cars to their widespread use.
Some people will tell you that electric cars have actually existed since the 19th century. While that is true, the reality is that their modern incarnation only appeared in the past decade. The REVAi (GWiz) Indian-made car was launched in 2001, but had only sold 4,000 vehicles by 2011. The Nissan Leaf has contracted to supply 4,700 cars to customers in the US, and expects to produce 50,000 worldwide this year. Mitsubishi had only made 5,000 of its MiEV electric cars by the end of 2010.
The Chevy Volt, which is a hybrid rather than a pure electric car, had only been delivered to 2,029 customers by April 2011, and costs a minimum of $40,280.
The cost of the car itself is only part of the story.
The Nissan Leaf costs $32,000, but with current tax rebates in the US and especially in California, the price can end up being as low as $20,000.
Other electric cars tend to be pricey as well. One component of the cost is the electric battery. The Tesla roadster battery costs $12,000 and is expected to last seven years. That’s quite a steep charge, and buyers of other electric cars – even if the battery is included in the initial price – must plan on spending a hefty amount to replace the battery.
The battery raises further problems. There is no infrastructure to support electric cars. For this reason, most electric cars being launched in Europe, China, Japan and the US are being sold only in small urban markets. Because the electric car has a limited range, consistent with the early range of the Model T, it must be charged frequently. Electric cars take several hours to charge. Because of this, companies have pioneered the idea of battery- switching technology that allows a person to stop at a station and switch out his or her dead ,battery for a newly charged one. The Israeli company Better Place is a pioneer in this field.
Better Place, launched in Israel this year, provides owners of the Renault Fluence electric car with the ability to switch batteries. It isn’t cheap.
In Denmark, where the company also operates, the cost is between $300-600 a month for a “subscription.”
The owner can choose a plan that allows unlimited switching of batteries, or allows them to drive around 10,000 km (6,200 miles).
When the costs are added up, the savings are only 10-20% compared to buying gas for a regular car.
Better Place estimates the cost of driving 40 miles would be about $3.20. Another cost comparison performed on the Tesla by PG & E claimed that the cost of charging the car to drive 40 miles would be between .56 and $3.18. If you drove that far each day then your cost per month would be $60.
Another question deals with what affect mass ownership would have on the electric grid. If Better place’s prediction of an $11 trillion industry came true, then that would mean, in my calculation, almost a doubling of residential electricity use in certain urban markets. That means countries must immediately begin investing in new generating infrastructure to boost capacity, but given that people are gun-shy about nuclear power after Japan’s earthquake, that’s not likely. So the result will be a doubling in the cost of electricity and, perhaps, rolling brownouts.
The cost of charging the cars, rather than going down as many predict, will actually go up. Even if the costof the cars themselves go down to a reasonable price (currently only government rebates make them affordable), the infrastructure behind the battery, its cost and the ability to switch it out or charge it remains unresolved. This may be the Achilles heal of the industry, and it means the modern search for a fountain of youth is still on.
Onward, ye modern Conquistadores, onward!
The writer has a PhD from Hebrew University, and is a fellow at the Jerusalem Institute for Market Studies.