Israeli electric car pioneer Better Place shuts down

It was an audacious idea that came to symbolize Israel's self-described status as "Start-Up Nation," a company that believed it could replace most gasoline-powered cars with electric vehicles and reduce the world's reliance on oil and all within a few years.

But it all came crashing down.

The company, Better Place, started out as a source of pride and a symbol of Israel's status as a global high-tech power, but it suffered from a local brand of hubris and overreach. On Sunday, it announced plans to liquidate after burning through almost a billion dollars and failing to sell its silent fleet of French-made sedans to a skeptical public.

"This is a very sad day for all of us. We stand by the original vision as formulated by Shai Agassi of creating a green alternative that would lessen our dependence on highly polluting transportation technologies," the company said. "Unfortunately, the path to realizing that vision was difficult, complex and littered with obstacles, not all of which we were able to overcome."

It capped a stunning fall from grace for Better Place and its founder Agassi, a former high-tech whiz kid who sought to change the world by building a revolutionary network of battery-swapping stations.

Battery swaps for long distances

Agassi, 45, believed that in an era of global warming and rising oil prices, environmentally friendly electric cars could be the wave of the future, if only a way could be found to overcome the limited range of their batteries.

Better Place offered an elegant solution. The vast majority of travellers who commute short distances could plug in their cars at home or work each day to keep their batteries recharged. For longer distances, customers could stop at the swapping stations, remove their used battery and replace it with a fully charged one in a matter of minutes.

Agassi's native Israel was chosen as the company's main laboratory, and a network of several dozen stations was installed, offering travellers nationwide coverage.

Israel was a particularly ideal testing ground, thanks to high fuel prices, a supportive government, its relatively small size and dense population centres. The cars were expected to appeal to Israel's tech-savvy population, and the ability to weaken the political clout of its oil-rich enemies was an added plus.

The project won the support of President Shimon Peres, received generous financial incentives from the Israeli government and an endorsement from former U.S. President Bill Clinton.

Star CEO stepped down last year

Agassi, a former top executive at software maker SAP, became a celebrity CEO. He was a central character in Start-Up Nation, a bestselling book about Israel's high-tech industry, he was named to Time Magazine's list of the 100 most influential people in 2009 and became a fixture at international conferences such as the World Economic Forum in Davos, Switzerland.

In roughly five years, Better Place raised some $850 million from investors like General Electric Co., HSBC Holdings PLC and the European Investment Bank. Israel Corp., controlled by billionaire Idan Ofer, was the largest shareholder. Agassi persuaded French car maker Renault to make a customized electric version of its Fluence sedan.

Agassi promised to 5,000 of his cars on Israel's roads by the end of 2011 and predicted that a majority of cars sold in Israel would be electric by 2016.

"The end of the oil era will not come because we ran out of oil it will come become we don't want to use oil any more to drive," Agassi told The Associated Press in a 2011 interview. "I can guarantee you that we will finish the need for oil as an energy source for cars before we run out of oil in the ground."

The numbers never panned out. Only about 1,000 Better Place cars are on the roads, and the company ran into trouble with investors. Last October, Agassi was forced to step down, and the company never gained its footing. Reached by the AP on Sunday, Agassi declined comment.

Better Place claimed to be the first nationwide network of battery-swapping stations. Other countries, such as Germany, have public networks of charging stations, while in other places, travellers typically recharge their vehicles at home.

'Range anxiety' scared off customers

Among Better Place's mistakes, the company misjudged consumers' willingness to embrace the new technology. There was the issue of "range anxiety," the fear of some that the batteries, with ranges of about 160 kilometres, or 100 miles, would conk out in inconvenient places.

Others balked at the price. The cars sold for roughly $32,000, comparable to other sedans in Israel. And the pricing plans, roughly $300 to more than $500 a month depending on mileage, did not provide enough savings to overcome the doubters.

Sunday's announcement left many questions unanswered, especially what will happen to its cars and charging stations. Better Place has also installed a network of stations in Denmark and has operations in Australia, the Netherlands, China, Hawaii and Japan.

Several hundred workers in Israel are expected to lose their jobs, and stunned customers said they did not know whether they would be able to continue driving.

In its court motion Sunday, Better Place said it was seeking the appointment of a temporary liquidator. In light of its failure to raise additional funds, the company asked for the court's assistance in protecting the rights of its employees, customers and creditors.

"On a personal level, this is one of the hardest moments of my career," CEO Dan Cohen said Sunday. "The feeling this morning is one of loss because we didn't reach the finish line, the finish line is still far away."

Tesla Motors a rare e-car success story

For the most part, electric cars have not enjoyed their expected success anywhere. The battery alone in an electric car costs as much as a new gasoline-powered car, and electric vehicles are not selling nearly as fast as once projected. General Motors expected to sell 60,000 Chevy Volts globally last year, but sold just half that many. Sales of Nissan's all-electric Leaf grew 22 per cent around the world last year to 26,000, short of Nissan's projected 50 per cent growth.

One exception has been American electric car maker Tesla Motors, which recently posted the first profitable quarter in its 10-year history and whose share priceexceeded $100 USfor thefirst time Tuesday. The price of Tesla shares has almost tripled this year, and its Model S sedan gota near-perfect ratingfrom Consumer Reports in May.

The company, whos elargest shareholder and co-founder is the SpaceX entrepreneur Elon Musk,is currently fighting lawmakers and auto dealersin North Carolina over the way it sells cars to customers. The state senate has passed a bill that would oblige Tesla to sell cars through dealerships, which it does not currently do, opting instead to sell its cars directly to customers online.

Unlike other car manufacturers, Tesla allows people to view different car options in a showroom but they must order the car direct from the company online rather than from a salesman.

Tesla says this approach allows it to cut out the middleman, but lobby groups such as the National Automobile Dealers Association say it allows Tesla to bypass state laws regarding franchised dealers, which have been in place for decades.They argue thatfranchise dealers invest more into localeconomies and provide customer service that Tesla cannot.

North Carolina law could prevent Tesla sales

Tesla currently operates 29 stores and galleries across 14 states and Washington, D.C. Customers can order a car online at a sales location or at home but not at galleries, which exist purely to showcase cars in states where auto dealers have launched suits or state law restricts the company from discussing sales in person.

Colorado was the first state to take action against the manufacturer's stores, passing legislation in 2010 that halts their expansion. Since then, Minnesota lawmakers unsuccessfully pushed for a similar measure. In New York and Massachusetts, dealers have unsuccessfully sued to shut down the dealer's stores. In Virginia, a judge recently rejected Tesla's request for an exception to laws that prevent manufacturers from operating dealerships in most cases.

But the automaker can sell in every state because transactions legally take place in California. The North Carolina law, however, prevents customers in the state from making electronic purchases directly through manufacturers, said Diarmuid O'Connell, Tesla's vice-president of business development.

"This would be the first place, to my knowledge, that internet-based communications with our company would be circumscribed," he said.

The company, which has sold about 80 cars in North Carolina to date,is set to sit down with the North Carolina Automobile Dealers Association to discuss a compromise that both sides say is unlikely to be reached.