Better Place's not-so-good fate

It was a shock of sorts when I read that Better Place's CEO Dan Cohen formally announced bankruptcy.

In my seven year career as an automotive industry analyst, Better Place is the first company that I have seen from boom to bust.

It was for an electric vehicle (EV) / battery technology market sizing and monitoring study for a German luxury OEM in 2007-08 that I first came across Better Place. Conceived and started by the charismatic Shai Agassi, it was one of the most talked about new ventures. What I heard was that Shai and former Israeli prime minister Simon Perez are close friends and it was after Shai introduced Renault CEO Carlos Ghosn and Simon Perez that the whole Better Place and Renault partnership took off (with Renault investing an undisclosed amount in the now bankrupt company).

While most OEMs and utility providers were figuring out ways for the mass acceptability of EVs (which were not gaining traction due to the short driving range and long battery charging time), Shai came out with a smart alternative of replacing the battery pack altogether when an EV was low on charge. The idea seemed so appealing that Renault developed a proprietary technology called "Quick Drop" exclusively for Better Place; where Renault Fluence EV owners could drive in and replace the battery packs in around 10 minutes, the same time it takes for a conventional fossil fuel car to refill.

But Shai's solution was not well accepted by users, mostly due to the following issues.

• Better Place solely focused on battery swaps while ignoring the quintessential aspect of faster charging, which is what customers want
• Battery swaps still did not reduce range anxiety for EV owners and what really was the need of the hour was more charging infrastructure in public places and along highways
• Wrong choice of car — the markets where the Better Place - Renault "quick drop" program was launched (Denmark and Israel) prefer compact cars, mostly hatchback. Unfortunately, the pilot vehicle for the project was the Renault Fluence
• Lastly, and maybe the most crucial reason was that other EV OEMs did not follow suit. Apart from Renault, none of the other OEM bought the concept of battery swap. Even one more OEM with battery swap could have saved, or at least delayed, Better Place's fall.

A very nice article on Better Place.


UPDATE: Another very interesting article I came across today (30 May 2013)

UPDATE: Cutting import duties on European cars. Why not?

It seems like that other people within the industry hold a similar viewpoint. Came across this Business Line article, where Ford India President and Managing Director, Mr. Joginder Singh commented that the FTA between the EU and India will benefit the Indian consumer; which, essentially means the benefit of the Indian automotive sector.

Cutting import duties on European cars. Why not?

The Economic Times carried an article today on the recent "progress" on the 6-year long dialogue between the European Union (EU) and India on Free Trade Agreements (FTA) between the two economies. Among other things, one significant 'demand' by the EU is the reduction of import duties (tariff) on CBUs and engines by half to 30 percent. If this FTA were to be passed, European cars would become significantly cheaper, especially the German luxury cars, and more importantly, the Indian customer would get a far greater option of quality European hatchbacks and compacts to choose from.

Then why is the Society of Indian Automobile Manufacturers (SIAM) crying hoarse over this possible trade agreement?

Well, it seems the arguments that the SIAM puts forward are that such free trade between the two economies would reduce investments, and harm local manufacturing, local value addition and local employment.

SIAM goes on to say in a whitepaper it released just to oppose this FTA, that “Opening completely built units (CBUs) to imports/lowering import duties under the EU FTA is a retrograde step, and will have a long-term irreversible effect for the Indian economy, the auto industry and the consumer at large." (Source)

It is pretty self-explanatory that customers will not be "harmed" in any way with this FTA. In fact, no consumer is harmed by free-trade among economies. The only "harm" that I can imagine is that the Indian consumer will be spoilt for choice.

Then, what about local value addition and employment? U-mmm. Nothing. You see, this FTA, in case it comes to pass, will make it cheaper for European OEMs to bring in completely built cars (CBUs) to India. Please note, I said cheaper, not free. They still have to pay custom and import duties and in the long run manufacturing these cars in or near the market still remains a cheaper proposition for these OEMs. And most of these OEMs already have production lines running in India. The reduction in duties will only "force" the OEMs to introduce models faster in the Indian market. So, why worry.

You may have also noticed that these European OEMs mostly sell luxury vehicles in India apart from one or two odd hatchback or compact models. Luxury car buyers are relatively less price sensitive. And if I were a car maker, I would like to test-run a slightly more expensive hatchback in the highly price-sensitive Indian market before I go out all guns selling it. A reduction in import duties will exactly offer this flexibilty to European OEMs to experiment with a wider variety of mass-market passenger cars.

And as far as the issue about job-generation goes, I personally feel that job creation via trade-protection is a short-term fix.

As far as SIAM's arguments go, the only issues I foresee are, well, Mahindra having to slog out a tad harder in terms of the quality they offer, or Tata fixing up its aftersales service department...

If opening trade with the EU will affect the Indian automotive sector, it will only increase competition for domestic OEMs and suppliers, encourage consumer spending in the sector and offer world-class products to Indian consumers at competitive prices.

UPDATE: First voice in correcting the Indian aftermarket?

In my article First voice in correcting the Indian aftermarket? I had discussed how the anti-competitive practice of many OEMs (in selling spare parts only through authorised dealership at a higher price) is affecting the Indian spare parts market.

Well, the Competition Commission of India (CCI) — a body of the Government of India responsible for enforcing The Competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India (source) — served notice to 17 undisclosed carmakers in India for indulging in such anti-competitive practices (source).

If the CCI ruling holds, all OEMs will be forced to sell spare parts in the open market, which in turn would make products and services more competitive and cheaper.

Nissan NSC-2015

Nissan recently showcased its "auto-parking" car - the NSC-2015. This modified Leaf, with the help of electronic sensors, cameras, robotics and smartphone enabled commands, can drive and park "itself" after the driver has left the car.

Although nothing groundbreaking (others have been developing driverless prototypes too, for example Google driverless car, Volvo) the NSC-2015 yet again demonstrates that we are very close to having, not "driverless," but at least remotely controlled vehicles in, may be, 5 years from now. The car uses remote monitoring system that recognizes the surrounding environment through use of an all-around view camera and 4th generation (4G) mobile communications. After the driver leaves the car, it starts to park itself automatically , following the instructions given by smartphone. The vehicle looks for a vacant parking space while identifying its surroundings; once it detects an open parking space automated parking begins. The driver can also use smartphone commands to make the NSC-2015 vehicle leave the parking space and return to the place where he or she is. While parked, the car's security camera system automatically works with a camera installed in the vehicle. If the system detects suspicious behavior, the driver is alerted automatically by a report to his or her smartphone.

Imagine how convenient it would be to stand by the curb and parallel park you car in a tight spot using your smartphone, or instructing your phone to park the car in your garage everynight at 11 PM....

First voice in correcting the Indian aftermarket?

I just came across an article in the Economic Times about Mr. Jagdish Khattar, ex-MD for Maruti Suzuki, expressing his opinions about the anticompetitive practices prevalent in the Indian automotive aftermarket.

A short background — in India it is very expensive to buy automotive spare parts, because OEMs and dealers run a monopoly business in which OEM-approved spares are only available through dealers at a price premium and not freely available in the open market.

Hopefully, the voice raised by Mr. Khattar will have an impact and open up the Indian aftersales market, or at least start a drive at doing away with unhealthy trade practices. It is time that such anticompetitive practices are done away with because it is not only about the price premium, but also the unhealthy practices such as refusal of service / sharing of technology that need to go for the market to become a truly global competitive market.