After four years of preparations, hundreds of millions of dollars raised, construction of a costly battery recharging and replacement network, and a global campaign to win hearts and minds, which has raised huge expectations in Israel and elsewhere, last month, Better Place Inc. entered the stage of having to prove itself and come up with the goods. In early August, it officially launched its sales campaign, after many months of marketing trials, "quiet" sales to car fleets, and road tests by company employees.
At the end of the first month, the figures showed that Better Place delivered 80 electric cars in August, and 380 cars in January-August, including company cars to its employees.
Better Place Israel CEO Moshe Kaplan (Kaplinsky), formerly deputy chief of staff of the IDF, is unconcerned by the slow start, saying that it is just the beginning. "We've put about 500 electric cars on the road, in line with our expectations. This number fits the capacity of our network to handle new deliveries. The rate of sales is excellent, and I am sure that we will meet our target of putting 4,000 cars on the road in our first 12 full months of full operations," he told "Globes".
"Globes": How has the jump in the price of gasoline affected demand for and sales of the electric car?
Kaplan: "All the companies in Israel are now preparing their work plans for 2013, and they are seeking ways to cut costs. In the case of the gasoline price hike, which is a major routine expense for companies, they have only three ways to save money: switch their entire fleets to small cars; increase the fuel allowance for employees; or switch their fleets to electric cars, and fix the usage cost at a preset level, which will save thousands of shekels over the three-year contract.
"Companies are now approaching us as they are drawing up their work plans. Some of them want to close deals by October 31. We're talking about some of the largest car fleets. These are not feelers: these fleets checked out and tested the electric cars. At least three companies asked for quick delivery of 100 cars this year. The economic situation is only accelerating the process."
Kaplan says that the battery replacement stations project is at an advanced stage, and that more than NIS 1 billion has already been invested in deploying the infrastructure. "We have 21 stations open, which make it possible to drive freely from north to south," he says. "We did all of this from the ground up in four and a half years, including development of the technology, which is an unprecedented achievement in my opinion. We're opening stations at a rate of three a week. Our recharging posts are found in 400 parking lots with over 2,000 recharging points."
Leasing companies unenthusiastic
The word in the automobile sector is that the Israeli leasing companies, considered Better Place's main marketing channel to the car fleets, do not receive orders for the electric cars with much enthusiasm, mainly because of the risk of the price of the cars in the second-hand market. Nevertheless, Kaplan evinces no intention of setting up independent leasing activity. "The leasing companies are currently acting under constraints that are unconnected to Better Place (such as the difficulty of raising capital, D.B.) So far, five companies have signed agreements with us, and I regard them as partners in the enterprise," Kaplan says. "We are seeing demand arising from the users and this is reaching the leasing companies, and that serves their interests too. We will reach the sales targets with the existing companies."
This week, the regulator announced a reform that will distinguish between the price of the battery and the price of the car and will equalize the private usage value for income tax purposes of chargeable hybrid cars and of electric cars that compete with Better Place's vehicle. Do you see a threat here?
"We don’t see our competitors as a threat. Any importer that wants to bring an electric car into Israel receives support from us in the form of information on our charging system and the technical ability to use it. As far as usage value of the electric car is concerned, the state could do more. Today, we can offer economic benefits to companies and employers, but for the full benefit to reach the employees, the state needs to reduce the usage value of an electric car. It makes no sense that an employee who drives a clean electric Fluence ZE should pay the same usage value as for Fluence that runs on gasoline or diesel. I hope that the state will find a way of easing the usage value for those who receive electric cars. I think that this is realistic and justified."
Asked his opinion of the Ministry of Finance's intention of introducing into the usage value assessed on those who receive company cars the value of the free fuel benefit as well, which could give Better Place a huge marketing boost, Kaplan gives a surprising answer. "I haven't visited a fuel station for a year, but as a citizen I don’t think that it is appropriate to impose such a high tax burden on employees who in any case pay some of the highest tax rates in the economy."
According to figures from Israel Corporation (TASE: ILCO), the biggest investor in Better Place, the venture has lost some NIS 500 million so far this year. Does that not worry the investors?
"Our results cannot be described as a loss. This is a long-term investment, similar to the investment that was made in Road 6. We are investing in infrastructure that will generate revenue later. Our investors are not speculators, but players for the long term. I feel very comfortable with the relations between us and also with Israel Corporation."
Published by Globes [online], Israel business news - www.globes-online.com - on September 13, 2012
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