As the interest in plug-in cars expands
internationally, a leading business publication
with a global readership surveys the entire
scene. We reproduce the story below as it appears
in print (minus a sidebar on fuel-cell cars that
can be found after the main article, all at
<http://www.ft.com/cms/s/d945686c-bd39-11dc-b7e6-0000779fd2ac.html>).

Here's how Pearson, FT's owner, reports on the paper's reach:
# The Financial Times, one of the world's leading
business newspapers, is recognised
internationally for its authority, integrity and
accuracy. Providing extensive news, comment and
analysis, the newspaper is printed at 24 print
sites across the globe, has a daily circulation
of 441,219 (ABC figures, September 2007) and a
readership of more than 1.3 million people worldwide.
# FT.com is one of the world's leading business
information websites, and the internet partner of
the FT newspaper. FT.com is the definitive home
for business intelligence on the web, providing
an essential source of news, comment, data and
analysis for the global business community.
FT.com attracts 5.35 million unique monthly users
generating 43 million page views (ABC electronic
figures, March 2007). FT.com has 101,000 subscribers.


Electric dreams: How plug-in cars picked up speed and credibility
By John Reed Financial Times January 8 2008, page 9

Silicon Valley start-ups are driving innovation
in an area where big carmakers have been
reluctant to invest, writes John Reed. Below
right, he assesses the prospects for an alternative 'green' fuel: hydrogen

LARGE PHOTO OF TESLA; CAPTION: The Tesla
Roadster, a battery-powered sports car that its
manufacturer claims can accelerate from zero to 60 mph in under four seconds.

The place is Buck's of Woodside, a Silicon Valley
cafe whose slogan is "flapjacks and tomfoolery".
Executives from the area's technology and venture
capital companies frequent the whimsically
decorated restaurant, alongside characters
clearly inspired by California's 1960s
counterculture. Felix Kramer, an
entrepreneur-turned-environmental activist, is
expounding on his favourite topic: electric cars,
and the big carmakers' reluctance to build them
commercially until they are cheaper and more
reliable. "If the cell phone companies had said
they wouldn't make them because they weighed as
much as a brick and would cost $1,000, we
wouldn't have them now," he declares. "It's
arrogant to say you won't build the version 1.0 car until it's perfect."

Mr Kramer's pressure group, the Palo Alto-based
California Cars Initiative (CalCars), has been
taking matters into its own hands. The non-profit
group dispenses advice on retrofitting Toyota
Prius cars to convert them into plug-in hybrid
electric vehicles (PHEVs), which are capable of
driving longer distances on battery power than conventional hybrid cars.

Toyota and General Motors, the world's two
biggest carmakers, are themselves testing plug-in
vehicles but delaying their commercial launch,
mainly due to snags in developing the lithium-ion
batteries needed to power them. Mr Kramer already
drives a Prius converted into a PHEV, painted
with the inscription: "This Plug-In Hybrid gets
100+ MPG". Outside the restaurant, someone has
left an earnest note on his windscreen: "Do you
know where I can buy batteries for hybrids or PHEVs?"

The scene is emblematic of northern California,
where a passion for all things automotive is
melding with the area's strong green streak and
local "geek" knowhow, making Silicon Valley a
hotspot for the developing field of electric
cars. The push for zero-emission vehicles is
becoming stronger as the US Congress, European
Commission and local authorities around the world
prepare legislation to force carmakers to make
their vehicles cleaner and more fuel-efficient.

Down the road from Buck's in San Carlos, Tesla
Motors is developing a battery-powered sports car
that the company claims is capable of going from
zero to 60 mph in less than four seconds, faster
than a Lamborghini Murcielago. Shai Agassi, a
former SAP president, recently raised $200m
(£101m, €136m) for Project Better Place, an
electric-car start-up. The company plans to
develop a "smart grid" of battery-exchange
stations that would allow drivers to recharge
their cars widely and quickly and, if successful,
remove one of the biggest obstacles to the
widespread adoption of electric cars.

PHOTO OF FELIX HOLDING PLUG; CAPTION: Felix
Kramer: "It's arrogant to say you won't build the
version 1.0 [electric] car until it's perfect.'

Google, whose founders Sergey Brin and Larry Page
are electric-car enthusiasts, recently made a
$10m call for investment proposals from companies
developing such vehicles, or the components and
infrastructure needed to produce them, through
Google.org, its philanthropic arm. The company
also lent early support to Think Global, a
Norwegian company that last year launched
production of all-electric minicars after raising
$93m in start-up funds, including from Silicon Valley investors.

At its "Googleplex" campus in Mountain View, the
company is running a project to collect data for
research purposes from retrofitted PHEVs such as
those promoted by CalCars. "Silicon Valley is
known for its innovation," says Google.org's
Kirsten Olsen, who is managing the project.
"People are tired of waiting around for Detroit,
so we're thinking of ways we can innovate with the technology."

No one in the burgeoning electric-car field is
suggesting that Silicon Valley, with its high
wages and property prices, will ever replace
Detroit, Stuttgart or Toyota City as a centre for
car manufacturing. Away from California, car
companies and industry analysts continue to
emphasise the obstacles blocking the
commercialisation of electric cars, including
price, performance, and the battery technology
and recharging infrastructure needed to make them viable.

What Silicon Valley can do ­ and is increasingly
doing ­ is finance and launch small, pioneering
ventures that incubate new technology. Executives
at the area's privately funded start-ups say they
have the advantage of moving more quickly than
publicly traded car companies, which typically
deliberate over product decisions and rarely
pursue risky new niche vehicles at the expense of
sure sellers, including the big, high-emission
cars that dominate America's roads.

"Silicon Valley tends to be quicker about jumping
on trends, and we can do [for cars] what we did
with the computer, the internet, the mobile phone
and electronic toys," says Stephan Dolezalek of
Vantage Partners, a fund with investments in
clean-technology companies including Tesla and Project Better Place.

Silicon Valley's strengths also lend themselves
to the electric-car field, which requires both
knowledge of cutting-edge technology and
experience in financing and managing risky
start-ups. "The technology is electronics and
software, and we know how to do that well," says
Ian Wright, the founder and chief executive of
Wrightspeed, another Silicon Valley company that
has built a prototype electric sports car.

PULL QUOTE: 'People are tired of waiting around
for Detroit, so we're thinking of ways we can innovate with the technology.'

The field of electric cars is not new, nor is
enthusiasm for them in California new. America's
most populous state has long taken a lead in
seeking to promote greener cars, going so far as
to challenge the federal government in court for
the right to regulate vehicle emissions. The
state began requiring carmakers to sell some
zero-emissions vehicles in 1990, lending impetus
to the industry's first wave of electric cars.
Toyota developed an electric version of its RAV4
sport utility vehicle and GM its EV1, later the
subject of a documentary entitled "Who Killed the
Electric Car." These early electric cars
foundered on a combination of cost, demand,
infrastructure and technological factors.


Since then, however, automotive and battery
technology, legislation, and public opinion on
global warming and energy security have all moved
on. Petrol prices have also risen sharply, giving
new impetus to the field, as well as to work on
cars powered by biofuels or hydrogen fuel cells.
Big car companies are now making commitments to
electric cars: alongside the GM and Toyota
plug-in cars being tested, Daimler,
Renault/Nissan and Mitsubishi all plan to launch
all-electric vehicles for commercial sale within
the next few years. While electric cars will not
overtake petrol any time soon, their number is
expected to grow exponentially over the next
decade. A significant portion of the financing,
technology and market demand powering them will come from California.

Tesla typifies the emerging e-car field, with all
its potential profits and pitfalls. The company
was started in 2003 with $105m of capital, $37m
of which came from Elon Musk, the engineer who
co-founded the PayPal electronic payment service
later sold to Ebay. While most early electric
vehicles have been microcars with a prim "eco"
look, the Tesla Roadster (left) will be a
stylishly curvy, high-end two-seater derived from
the Lotus Elise. Tesla plans to sell the Roadster
for $98,000 and says that it has pre-sold its
first-year production run of 800. "We're going to
make electric vehicles that are beautiful, sexy
and fast," says Darryl Siry, Tesla's
vice-president for sales, marketing and service.
"We are going to develop zero-emission vehicles
that people will still want to drive."

Lotus will assemble the Roadster in the UK, with
parts sourced from places as far-flung as Taiwan
and Thailand. Its crucial, made-in-Silicon-Valley
component is a battery pack composed of thousands
of laptop-size batteries, managed by a system
that will make it both reliable and safe. Lithium
ion batteries have shown a tendency to overheat
or even explode, a major safety issue for their
use in cars. However, Tesla says that it has
tested its cars extensively, including in crash simulations.

Safety issues aside, the cost of lithium-ion
batteries is also a concern. While GM and Toyota
say they can make plug-in cars profitable only if
they can sell them in large volumes, Tesla's
high-end business model should allow it to pass
on more of the development costs to customers. As
it builds production scale and the cost of
batteries comes down, Tesla hopes to make
vehicles in larger numbers, including a
lower-priced sports sedan. It also hopes to sell
its batteries to others. "We're going to look
like the Porsche of electric-vehicle companies ­
or the Honda, where the business model is to sell
not just cars, but motors too," says Mr Siry.

Despite its ambitious plans, Tesla has delayed
the launch of the roadster twice, most recently
due to problems with making a transmission
durable enough to handle the car's high torque
and revolutions per minute. Technological hurdles
aside, Tesla will need to set up a reliable
service and supply network ­ a doubly daunting
task given the company's small scale and the fact
that its cars, with their 220-mile electric
battery-powered driving range, will be pioneers in their class.

Tesla initially plans to set up service and
showroom outlets in Los Angeles and Menlo Park,
and is building garages in Chicago and New York.
To bring its planned sedan to market, however,
Tesla will need a larger, costlier network ­ the
kind of thing established carmakers have taken decades to build up.

Tesla's network concerns point to the obstacles
any niche producer faces when taking on the big
players of the established car industry. They
also highlight one of the biggest roadblocks
preventing the roll-out of electric cars on a
large scale: the availability of places to
service and recharge them. The plug-in cars now
in development, such as GM's Chevrolet Volt, will
be rechargeable from any electric wall socket.
The model should work well in the US, where many
car-owners have garages, but less so in Europe or
Japan, where more motorists park on the streets.
In a sign of the weightiness of the issue Toyota,
which is testing PHEVs in France, Japan and
California, recently announced an agreement with
the French utility EDF to develop public
recharging points around Europe, along with a
system for billing drivers for the power.


Mr Agassi, the Israeli-born entrepreneur behind
Project Better Place, is proposing a radically
different solution to the conundrum of electric
cars and recharging infrastructure. His idea is
to develop a grid of charge points and
battery-swap stations where motorists can have
their batteries exchanged for fully recharged
ones within five minutes. Early electric cars, he
says, flopped in part because motorists were
asked to shoulder the costs of the cars'
expensive batteries, which they could not
recharge quickly or easily. "Car-buyers were
asked to pay more, wait as we charge and pay for
all the energy costs," he says.

Under Mr Agassi's business plan car batteries
would become the property of companies such as
his own, which in time would bring down the
retail price of the vehicles significantly. Much
as telecommunications companies build the
transmission towers needed to make mobile phones
work, infrastructure providers would then roll
out a network of battery-swap stations dense
enough to make long-distance driving in electric
cars viable. Electric car owners would pre-pay
for charging plans for their cars, with different
packages offered, comparable to those now
available from mobile-phone operators. As with
mobile phones, electric cars might over time even
be offered to drivers for "free" as part of their recharging package.

"We're bringing something into play that no one
has done before: we're bringing the market," says
Mr Agassi. Vantage Partners' Mr Dolezalek, whose
fund invested in Project Better Place, says: "If
you can make recharging as simple as going to the
gas station, you can change the theory on electric vehicles."

Since starting the company in 2006, Mr Agassi has
travelled extensively to sell the idea to
policymakers, carmakers, and oil and utility
companies. Project Better Place will target
"transportation islands" ­ places with dense
populations where the large majority of drives
are short. Renault, which is developing electric
cars, has confirmed holding discussions with Mr
Agassi. He has floated the plan in his native
Israel, an effective "island" in the Middle East
concerned about energy security, and gained
support for the project from Shimon Peres,
Israel's president. Mr Agassi is not discussing
specific plans, but notes that the UK would also
lend itself to the concept, as would China, with
its many densely populated urban areas.

The group is in touch with officials in 15
countries, he says, and plans to establish local
companies and raise further funds as it grows.
"The feeling we're getting from carmakers is
almost like Netscape's IPO," says Mr Agassi.
"They're saying: 'We have to be there.'" Others
in the car industry highlight technical barriers
to battery-swapping, while more generally
executives continue to stress the performance and
other factors impeding widespread adoption of electric cars.

Mr Agassi acknowledges that his reputation is on
the line with the new venture. Silicon Valley, he
says, has a track record of driving innovation by
coupling cutting-edge technology with new
business models. "We have business-savvy
technical people who are used to taking risks."

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Felix Kramer fkramer@...
Founder California Cars Initiative
http://www.calcars.org
http://www.calcars.org/news-archive.html
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