EV Company Better Place Announces Pricing for Denmark Launch

Better Place, the electric car company that has developed battery swapping technology for its vehicles, announced pricing on March 3rd for their entry into the Danish market later this year. The technology, which allows drivers to switch out the battery pack with a freshly charged one in under 2 minutes (a video demonstration of which is shown here in a prior Triple Pundit article), overcomes two drawbacks of electric vehicles: the time taken to recharge batteries typically measured in hours, and range anxiety. But does it offer a price competitive solution for the environmentally conscious motorist?

The vehicle, called the Fluence Z.E. developed in conjunction with Better Place's partner, Renault, is to be introduced at a cost of €27,496, (at the time of writing $38,236 USD). On top of this, buyers will have to pay for one of five monthly subscription packages based on their anticipated mileage. This additional fee is necessary because as the battery may be swapped out, the owner is effectively leasing battery services, as opposed to owning the hardware. At the low end, subscriptions will cost €199 ($276) a month, but for high mileage users, driving over 40,000 kilometers a year (25,000 miles), an unlimited mileage plan is to be offered at €399 ($554) a month. A home charger, unlimited electricity use, and access to Better Place charging points and switching stations, are all bundled into the pricing.

These costs might seem a bit steep at first, but in Denmark, gasoline is running at 12.23 Kroner ($2.29) per liter, or, the equivalent of $8.70 per US gallon. Now, compare the high-end Better Place subscription plan with driving a conventional economical car getting, say, 40 MPG over 25,000 miles a year. In the conventional car you would be paying around $453 per month in gas, compared with $554 for the Better Place subscription. Not exactly parity, but maybe not an outrageous premium either, especially when you factor in the stability of the Better Place subscription plan, versus the unpredictable price of oil. Furthermore, the long term value proposition starts to look more compelling since we may reasonably anticipate a continuing upward trend in oil prices.

So, Better Place arguably holds its own against a conventional car in the long run, but how about against other electric vehicles? Here, Better Place mitigates an important electric vehicle expense -  battery replacement cost. Since lithium ion battery packs degrade with repeated charging cycles, as well as with age, eventually they need replacing. Better Place claims a life of eight years and their battery partner, A123, suggested at the West Coast Corridor Coalition conference I attended last year,  that average battery costs are around $700 per kWh (though falling). An article appearing in Cycle World's April 2011 print edition, suggests that a manufacturer could today, however, put a battery pack together for as little as $350 per kWh. Although I was unable to find the size of the pack in Better Place's car, the Nissan LEAF has a 24 kWh battery pack, so, depending on which cost basis you go with, a battery pack is likely to run somewhere between $8,400 and $16,800 to replace. This lump sum cost is not a concern for the Better Place customer, and this will likely make resale values higher for their cars as compared with other electric vehicles. How easy will it be to sell a five year old LEAF as its battery approaches the end of its useful life?
One of the future markets for Better Place is the San Francisco Bay Area, and it will be interesting to see how the vehicle is priced for this geography. The economics of the Danish market means that Better Place is reasonably competitive with conventional vehicles, while the swapping technology mitigates range-anxiety and battery replacement costs as compared with other electric cars. But with Bay Area gas prices around half the level of Denmark's, either gas will have to go way up (not an unreasonable scenario), or a modified pricing strategy will be needed to make the Better Place solution as attractive here in the USA.