Charged Up for Electric Cars

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Interview with Shai Agassi conducted by Steven Mufson - Washington Post

Washington DC December 7, 2008:

Q. How did you end up in the car business?

A. I was asked to deliver a presentation at the World Economic Forum on "how to make the world a better place by 2020." That was in 2005. My project was to figure out a framework for how to convert an entire country from oil by the market, not by edict and not as a science project.

I put forward an idea for governments. Then [Israeli President] Shimon Peres said, "If you believe it but don't do it yourself, why would anybody else jump on it?" With that kind of challenge from a president, I had to quit what I was doing and go build Project Better Place.

What do you think of the Detroit automakers' new business plans and their appeal for federal assistance?

They've got a car that's running on only two wheels, and they're going to throw away some of the baggage.

We've had 100 years of Car 1.0. Thirty years after the Model T, we had Pearl Harbor. We've seen the value of a functioning car industry. A month after Pearl Harbor, we converted [the auto industry] into the lifeline of the world. A third of a century later, during the oil crisis, the industry had to change. But we squandered the opportunity. We let the Japanese carmakers come into the U.S. and do whatever they wanted. The oil shock came [and went], and we went on building tanks known as SUVs and Hummers.

The significance of the 1941 shock was that we converted to building tanks instead of cars and sent them to the soldiers. The symbolism of the second shock is that we actually sent tanks to the consumers. We squandered the opportunity to redesign this industry to disconnect from oil.

What would your plan for all-electric vehicles mean for the countries that adopt it and for the U.S. auto industry?

The United States cannot afford not to have a car industry. If it goes away, the economy is going to tank at speeds we haven't seen before. . . . Just as we can't have one bank bring down the entire financial industry, we can't have one car company bring down the entire car industry.

But you have to have a fundamental change in the business model of cars. You've got an industry designed almost entirely on a product that doesn't make money when it sells but only makes money when it comes back for service or resale. So they made money on financing the car. All that you needed was one pull on the oil-price lever to destroy that model. Suddenly you've got cars that nobody wants to buy coming back to the lot. You took the leveraging risk into your business model. So fundamentally, the business model collapsed. You've got production overcapacity and multiple brands you don't need.

It is almost like a falling knife. No one wants to catch it before it hits the ground. You know you have two choices. Do you extend the time before it hits the ground? Or do you design Car 2.0? I think it's time to design Car 2.0 and use the American workers we have.

If we wait, it will be like trying to save RCA while the others are building plasma TVs. We've lost the TV industry, the radio industry, the PC industry. They all went to Asia and never came back. You let the car industry go through the same cycle, and it's never coming back.

You've talked about making the purchase of automobiles more like buying cellphones. If motorists subscribe to your recharging service at a certain rate, you will give them cars for free or at a deep discount.

What you need is cross-dependence. Think of razors and blades. The car industry is selling razors and everyone else is selling blades. Or it's like Hewlett-Packard selling printers cheap and making money off the cartridges. What the auto companies need is to be in the blades business.

So what you need is a model where you're getting some revenue from the miles driven. If Ford got one cent per mile for every Ford car on the road, Ford would get $10 billion a year straight to the bottom line. That's more than the assistance check they're asking for now.

Aren't you relying on a lot of government support?

What we're trying to say is that we don't need government assistance. It's the government that needs assistance. The government cannot afford not to go off oil. Every time the price of oil goes up, the trade deficit goes north of $1 trillion. Every time the economy starts picking up, it will crash because the price of oil will go up again. So the only way to get the economy picking up is to get off oil. And the only way to do that is to get electric cars. And not one million. We need 100 million. And to do 100 million electric cars, we need Detroit, Washington and Silicon Valley.

Won't all these electric cars strain the electricity grid and generation capacity?

Hawaii drives on $7 billion of oil imports a year. And it generates all of its electricity from oil. We've [made a commitment] that every electron we buy from the Hawaiian Electric Co. will be matched with renewables. You tell people that with 20 more windmills on Maui [they'll be able to run] every single car on electricity, and I guarantee you will get that project done in two years.

In Hawaii, there's a combination of every possible mix of renewables you can imagine. It's the perfect petri dish for the nation.

You have said you prefer all-electric cars to hybrids that can use gasoline or electricity. Why?

We're happy to work with plug-in hybrids. We just don't think that the answer to how to extend the range of a battery-powered car is to put a power plant in our trunks. That doesn't make a ton of sense. The limit to the range of our cars today is not the gas tank; it's the gas station. It's the same thing here. We don't extend the range; we exchange the batteries. This is not the hydrogen freeway where you need to build an entire infrastructure.

What is it like to drive an all-electric vehicle?

It's a faster car than you've had before. You don't give up on speed, performance or comfort. You need a car that goes fast, has comfortable seats and looks and feels like a normal car. Part of the mistake in the past was that people called them EVs [electric vehicles]. It wasn't really a car. It was a spoofed up four-wheel thing. Sometimes it didn't even have four wheels.

President-elect Obama has called for a $7,000 per car tax credit for plug-in vehicles. Does that raise your hopes for his support?

You cannot put electric cars on the road without the infrastructure, just as you can't drive cars without gas stations. President-elect Obama has to say that every parking spot in America [needs] to have electric power.

This is the infrastructure project the new administration is looking for. It is a beautiful project, only made in America. And, by the way, it pays for itself quick. The cost of [installing recharging stations] is two months worth of oil. And then it pays for itself again and again and again.

All this conversation about converting to windmills or other alternatives has one problem: There's no conduit to put it into cars. We're still [eating off a] menu with one item, and it comes through gas stations fed through pipes and trucks.

Until we change that, we're stuck with the biggest monopoly on Earth: 12 countries [of OPEC].

That's our moon shot -- not to find another planet but to save the one we've got. This is the battle for the next century.

Shai Agassi, once a senior executive at the international software giant SAP, has become a proselytizer for cars that run only on electricity. He isn't selling cars, though; he's selling a business plan. Agassi wants private investors and governments to work together to build recharging stations at parking spaces and rig them so that motorists can be billed online for the electricity they use. Fully charged cars would be able to go 100 miles or so; for longer trips, motorists would be able to pull into stations resembling car washes and exchange their spent batteries for fresh ones.

As head of the Silicon Valley-based Better Place, Agassi has raised $200 million and reached agreements with Israel, Denmark, Australia, San Francisco Bay-area governments and, just last week, the government of Hawaii to establish supportive policies and infrastructure. Renault-Nissan will provide electric cars in Israel as early as 2010.

Last week, Agassi discussed the plight of the big three Detroit automakers and his hopes for his own company. Here is an edited version of his conversation with Post financial correspondent Steven Mufson.