By now many of us around these parts know who Shai Agassi is and what he wants to do. He wants to build a distribution infrastructure of swappable batteries to be used in electric cars with the ultimate goal of making EVs mainstream. The problem is that electric cars remain an expensive proposition. Even with Agassi's approach that would sell the EV without a battery and add on a subscription model for the battery, the up-front cost will remain higher than conventional cars. Nonetheless, in Paris last week Agassi was telling the Wall Street Journal that he doesn't think the Chevy Volt would ever be more than a niche product. He bases that on price of the car, expected to be around $40,000 before any tax incentives.

Agassi thinks that is too high for what would otherwise be a $20,000 vehicle, like the Chevy Cruze on which it's based. As far as he goes, he's right, but he doesn't go far enough. GM and everyone else know that any car that will be mainstream has to have an affordable up-front cost. That's why GM originally wanted a $30,000 price point for the Volt. That's why they went with a smaller battery and range extender. The realities of the battery situation will continue to make longer range electric driving unaffordable for the foreseeable future from a purchase standpoint regardless of whether you take the GM or Better Place approach.

While Agassi's subscription-based software background may make sense for large deep pocketed corporations, for regular people the cost of entry is a much bigger hurdle than the total cost of ownership. If you can't pay the door charge, it doesn't matter if the drinks are free once you get inside. That's why so many people relied on cheap lease deals and nothing down mortgages over the last decade. The current reality of what is happening in the financial markets means that there is a high probability that none of these approaches will prove to be viable anytime soon. Unless a manufacturer can find a way to get that entry cost down and soon, all EVs will likely remain niche products for many more years.


[Source: Wall Street Journal]

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