9 999 EV — Shai Agassi’s Formula For A Disruptive EV Takeover Apple Style

CleanTechnica has a series of articles from Better Place founder Shai Agassi on the process for electric vehicles replacing petrol powered cars - Part 1 Part 2 Part 3 Part 4.

In the previous three parts of this series we have looked at the lessons the auto industry can learn from Tesla. I identified four key takeaways all carmakers should use as the foundation for their electric vehicle plans. The lessons all add up to the following principle:

Design a desirable Electric car that is upgradable over the years. Separate between car ownership and the battery, since batteries continue to improve exponentially. Finally, don’t force this new category of product through a mixed channel selling both ICE cars and EVs.

The recommendation to mass volume carmakers, those making more than 1 million cars per year, was not to try and beat Tesla in the category it created and dominates – Luxury electric cars. Tesla predicts it will make 21,000 cars this year – Nothing in the scale these massive carmakers operate enables to make any meaningful profit when they make a model at such low volume.

Instead, my recommendation was to make a desirable electric crossover, with space and power, then equip it with enough of a battery to get great range – say 150 to 200 miles. Most crucially of all – do not sell that battery. Instead, partner with an operator that owns the batteries, the one you buy with the car, the ones available on the road, and the ones drivers will use over the life of the car. The operator will package batteries together with electricity and offer those as “electric-miles” offered for a fixed monthly fee. For the sake of argument, let’s make that monthly fee equal to the cost of a weekly stop at the gas station today – roughly $300 a month.

Picture a great car serviced through an energy model that allows you to drive it unlimited miles but pay a flat monthly fee as you do so. #Like

The last remaining question was the price point that will make this electric crossover so disruptive as to drive demand through the roof. We pegged “infinite demand” at the imaginary market size of 1M cars worldwide. Mind you, that is only 1% of cars sold each year.

The final claim of Part III was:

If the market leader priced such a car starting at $9,999 after all incentives, without the cost of the battery (remember there is an operator that owns that battery) – a new category will be born, with demand far surpassing any imagination.

The metaphor I used was the iPad. At launch the first iPad was priced at $499, far below the price point for a powerful laptop. Compare that with Windows’ TabletPCs that asked for a premium above the price of a laptop, due to the “Tablet features”, such as touch. The result – TabletPC was always considered a niche segment where meaningless numbers were sold over the first 5-10 years in the market. Apple’s genius pricing of its first iPad at sub $500, combined with the fact that it was “an object of desire” disrupted the laptop market and shifted non-buyers (people who didn’t consider the need for a tablet before) into “Tablet devices”.