OCT 08

Shai Agassi, may have just walked off the deep end...how much are his Project Better Place electric cars? FREE FREE FREE!!!

"Do you want a $40,000 car, a $20,000 car or drive this car off the lot for free?" he asks. Uh...yeah, I'll take the free one! It's a bit of a jab at current electric and hybrid vehicles...but there is no shortage of places to jab PBP either. So let's get started.

The economics of Project Better Place (which leases batteries out to drivers, and then swaps them out for charged batteries when the charge runs low) have always seemed a little dubious to me.

Agassi quotes his electric cars as costing about seven cents per mile to drive around. Assuming that his cars will live as long as the average American car and be driven the same amount, we can expect the cars to cost PBP about $8,400. (the math: 12,000 miles x $0.07 x 10 years = $8,400.)

So that's the cost of driving...now you have to include the cost of the free car (probably the next biggest piece) the cost of the infrastructure, the cost of research and development, battery replacement, advertising, etc. So where does the money for that all come from?

Well, first, raise the cost per mile up to around the level of a gasoline car, $0.35. Then you get about $40,000 from the customer over the life of the car. Knock off the cost of the car and you just might have enough to run this system...as long as lots of people sign up...and those people keep driving a lot.

But the big question is how will Agassi sell the plan to consumers. If he simply sells it at a per mile cost, then this would be a great thing for the environment...keep the costs of driving high but emissions lower (because the cars are electric.) If, on the other hand, Agassi only gives you a free car if you promise to drive (and pay for) 100,000 miles per year, then that gives Americans huge incentives to drive more...bad news for everyone even if the cars are electric.

The question becomes, would it be better to buy an electric car yourself, charge it at fast charging stations and spend less over the life of the car, or do you want to hand your money over to Shai Agassi so you can pretend your car is free.

I hate my cell phone already...I'd rather not have to hate my car.

Comments (4)

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Assuming the cars are leased to the driv
written by Hank, October 08, 2008

I'd have to say I like owning my car, however we have two drivers in our household and having a free leased ev as a second car to take all the miles and wear-and-tear would be great.

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written by Rmachuta, October 08, 2008

There is no extra incentive to drive 100,000 miles per year. The price would be lower because the lessee pays back the lessor sooner. Its just like making larger payments on your home loan. You pay less interest over the life of the loan but you give up the opportunity cost of the extra money.

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written by nicster, October 08, 2008

the 'free' car is just marketing hype. it gets people to think. it puts the lower 'fuel' costs for ev's into perspective.

the math above is incorrect. it's actually 12,000 miles x $.28 per mile x 10 years = $33,600. the $.28 figure is the difference between the cost to operate the ev versus the cost to operate the gas car. on that basis, the ev really would be 'free.'

of course, that math doesn't work if any of the assumptions are wrong. the biggest is the cost of the battery at $.07 per mile, which includes the battery's useful life, the electricity to charge it and the charging/swap stations. my gut reaction is that that's a pretty low cost.

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written by Eddy De Clercq, October 09, 2008

Hi,

As more and more details become available, I don’t think Agassi’s scheme is for free. As mentioned in this blog, as such I find this a really interesting idea, but I have some (practical) reflections though.

Eddy

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