A synopsis of Tom Friedman's column in today's NYT: "While Detroit Slept"-
Engineers and entrepreneurs in Denmark and Tel Aviv are developing a real-world alternative to Detroit's business model. And when it is completed, our bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of the iPod and iTunes. It will be remembered as pouring billions of dollars into a book-store chain on the eve of the birth of Amazon.com and the Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet.
What business model am I talking about? It is Shai Agassi's electric car network company, called Better Place. Just last week, this company, based in Palo Alto, Calif., announced a partnership with the state of Hawaii to road test its business plan there after already inking similar deals with Israel, Australia, the San Francisco Bay area and Denmark.
The Better Place electric car charging system involves generating electricity from as much renewable energy--such as wind and solar--as possible and then feeding those clean electrons into a national electric car charging infrastructure. This network will consist of battery exchange and battery charging spots with plug-in outlets. The first such spots were opened in Israel this week. Battery-exchange and plug-in stations will by 2011 be located all over Israel, Hawaii, Denmark and Australia. The whole system in each country will then be coordinated by a service control center that does the billing.
Under the Better Place model, customers can either buy or lease an electric car from the French automaker Renault or Japanese companies like Nissan. General Motors didn't want to get involved. Customers would then buy miles on their electric car batteries from Better Place the same way you now buy an Apple cell phone and the minutes from AT&T. That way Better Place, or any car company that partners with it, is paid for each mile you drive.
In short, while GM sells cars, Better Place will essentially be selling mobility miles, and cutting transportation costs in half.
The first Renault and Nissan electric cars are scheduled to hit Denmark and Israel in 2011, when the whole system should be up and running in both countries.
Japan will likely be the next country to get in on the deal. On Tuesday, Japan's Ministry of Environment invited Better Place to join the first government-led electric car project along with Honda, Mitsubishi and Subaru. Better Place was the only foreign company invited to participate, working with Japan's leading auto companies, to build a battery swap station for electric cars in Yokohama, the Detroit of Japan.
Better Place is building a car company on the new industrial platform of the 21st century, not the one from the 20th, and is doing it the exact same way that Steve Jobs did, to overturn the music business. Watch out Detroit!
What did Apple first understand in order to be able to do what it did?
1. Today's technology platform would allow anyone with a computer to record music.
2. The Internet and MP3 players would allow anyone to transfer music in digital form to anyone else. You wouldn't need CDs or record companies anymore. Apple simply took all those innovations and integrated them into a single music-generating, purchasing and listening system that completely disrupted the existing music business.
And what Agassi, the founder of Better Place, is saying is that there is a similarly new way to generate mobility, not just music, using the same new 21st century platform. All it takes the right kind of auto battery--the "iPod"- in this story--and the right kind of national plug-in network--the equivalent of an iTunes store--to make the business model work for electric cars, at six cents a mile! Meanwhile, the average American is today paying around 12 cents a mile for gasoline transportation, which also adds to global warming and strengthens petro-dictators.
If we miss the chance to win the race for Car 2.0 because we keep mindlessly bailing out Car 1.0, there will be no one to blame more than Detroit's new major shareholders, who will soon be we the taxpayers.