IDC: Better Place business model is sound

Analyst Sam Jaffe: The electric car venture should re-mold its Israel operations as a head-on competitor to the leasing companies.

"The problem with writing an obituary for Better Place Inc. is that the underlying business model is still very sound, writes IDC analyst Sam Jaffe in a report on the electric car venture following what he calls the ouster of CEO and evangelist-in-chief Shai Agassi.

Jaffe writes, "Better Place planned on launching a network of battery switching stations that would allow subscribers to their system limitless driving range. The idea was that Better Place would bring the wireless communications business model to personal transportation. They opened the first network in Israel and, lo-and-behold, the subscribers didn't show up. Yet."

Jaffe adds that Better Place's business model makes sense and makes money. "The problem, unfortunately, has been in the execution of the marketing plan. The Israeli car market is held hostage by a small oligarchy of leasing firms. Better Place chose to thread the needle by having those leasing firms be their distributors while at the same time not sharing enough profits with them. The leasing companies balked at becoming a middle-man, and froze Better Place out of the market.

"The solution to the impasse is for Better Place to either re-mold its Israel operations as a head-on competitor to the leasing companies or to renegotiate its contracts with them. That's a relatively simple fix. It will lead to a much higher market penetration and a flood of sales. It is my opinion that Better Place will eventually succeed in the market and will quickly thereafter be faced with EV network competitors. The company still has quite a bit of cash on hand to restructure its Israel operations and then can worry about international expansion."

Published by Globes [online], Israel business news - www.globes-online.com - on October 22, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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