How do you say Better Place in Chinese?

The Israeli public is currently preoccupied by existential questions, and it seems that the local automotive industry has more important things than the electric car on its agenda. In a survey by "Globes" among senior executives in the automotive industry about important developments expected in the industry for 2012, no one mentioned the launch of electric cars as an event that would shape the market over the next year.

However, in China, the electric car scene is teeming with activity. Recently, there have been two official launches of electric cars in China in which Israel has been involved. The launch of Qoros Automobile Company (formerly Quantum Chery), Israel Corporation's (TASE: ILCO) joint venture with Chery Automobile company, in which hundreds of millions of dollars has been invested, was the first. The second was the inauguration of the battery switch station demo center in Jiangsu, by Better Place and its local partner, the China Southern Power Grid Co. (CSG), China's second largest electric company.

Officially, these are unrelated projects, the only common factor between which is Israel Corp.'s extensive funding. In both cases, the spokespeople have made efforts to remain vague about the connection between the two projects. However, behind the scenes, these are two business projects that will be closely connected in the future.

Austrian engineering contractor Magna Steyr AG&KG is currently developing prototypes of electric cars with rapid battery replacement mechanisms for Qoros. It is easy to guess who the main customer for these cars will be.

There have also been a number of hints in interviews with the Chinese media about future links between these projects. For example, in an interview about the launching of the new demo center with "China Economic Times," Better Place VP strategic initiatives Dan Cohen said, "In the short-term, we are relying on our cooperation with Renault. For the long term, we are in negotiations with Chinese automobile manufacturers in an effort to launch cars with replaceable batteries within two or three years."

Better Place and Israel Corp's latest projects in China have caused quite a stir in Chinese media, but they are still a tiny part of the big picture. Through its second five-year plan, the Chinese government hopes to electrify the roads and to reduce the cost of oil purchases.

As part of the program, the Chinese government is currently putting tremendous pressure on all parties involved with the production of electricity, battery charging equipment, cars, and batteries, in order to produce real results within the given time frame, which for the Chinese government means between 800,000 and one million electric cars on the road within four years.

At the government electric car charging equipment and energy storage exhibition held in December in China, the latest projects were displayed, among them the implementation of a wide range of pilot programs for electric car battery charging in the Yangtze River Delta region and on Hainan Island in southern China. The Chinese authorities say they are aiming to build 16,000 electric car charging stations in the pilot area by the end of 2011.

However, economic analyses show how far away the goal is. The main problem is bottlenecks. For example, the Chinese have not yet decided on a unified standard, or what the future electric car recharging process will entail. They are leaning towards integrating home recharging with commercial fast recharging; the latter can charge the battery to 80% of capacity in ten minutes.

Fast battery recharging pilot programs are currently popping up in abundance in China, but this is causing a bottleneck of demand for electricity during peak hours, and putting pressure on electricity production capacity, which is already limited. This works in favor of the Better Place model.

Another bottleneck is car manufacturers, which must gamble huge investments to develop the electric car without a proper battery charging infrastructure readily available, which would help widen their customer base. In addition, the Chinese government is currently working on the formulation of specific safety and crash standards for electric cars, which will be completed only in two years. The transition to mass production can only begin once these standards are published.

Better Place's strategic partner, CSG, is shooting in all directions and it seems that a battery changing solution is just one type of ammunition that will meet government pressure. So far, CSG has built 14 fast recharging stations and 2,900 charging posts. CSG recognizes that Better Place's robotic battery rechanging technology is superior, but a profitable business model that matches Chinese market conditions has not yet been formulated.

The Israeli business model of purchasing batteries with private funding and then leasing them would be problematic for the Chinese market, where the main players are the government electricity companies.

The electric car market in China is chaotic, and it seems like it is trying to create both the egg (charging infrastructure) and the chicken (the electric car) simultaneously. Better Place has great technological potential, but the rules of the game have not yet been decided.

What is happening in Israel

Israelis are not especially interested in what is happening in the Chinese electric car market, but the Chinese are very interested in what is going on in Israel. Better Place also follows the Israeli business model in order to show them the practical potential of its technology.

Dan Cohen says that Better Place is in the midst of a six-month trial to test the system and the cars. In the first quarter of 2012, electric cars will be distributed to selected leasing company customers, and the operational recharging, replacement and control infrastructure will be completed by April. Cohen says that the company is aiming to sell 4,000-5,000 electric Renault Fluence ZE cars in 2012 in Israel and a similar number in Denmark. In 2013, 15,000 cars will be sold in both countries. By 2016, 100,000 electric cars will be in operation in both countries. How many of them will be from China, we still do not know.

Published by Globes [online], Israel business news - www.globes-online.com - on December 27, 2011

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