By Manuela Zoninsein for IsraelStrategist.com–May 2012
Guangzhou, located in China’s Pearl River Delta, isn’t the kind of setting in which one would envision a progressive, green start-up. Guangzhou has made its name as a hotbed for manufacturing since Deng Xiaoping called for the country’s economy to open up to the outside world. The region’s products have long been of the cheap, fast and simple variety—not exactly high technology. Neither have they been the type of products that take particular heed of the environment; their manufacturers are, rather, concerned with sating people’s immediate consumption cravings.
Yet, for all these reasons, Guangzhou is in some ways the perfect place for Israel’s Better Place electric vehicle company to demonstrate its viability to the world.
The company has set up a demonstration site – called the Switchable Electric Car Experience Center – to showcase its vehicles, its battery-switching technology, and its philosophy, right across the street from the Guangzhou Auto Mall, the largest auto mall in southern China. Think of it: every time a Chinese car or car-parts customer rolls into the Auto Mall, she or he will pass by the minimalist, gently curving, nearly translucent aqua exterior of Better Place. Whereas all the other buildings are huge box-like replicas of every other storefront in the area, Better Place sets itself apart by showing a slick, modern, green and forward-thinking exterior that reinforces the company’s message: Better Place seeks to change the shape of the automotive industry, literally.
Visitors to the center have the chance to watch the battery switch technology in action, to learn about the company by watching this video, and to test drive a car (although the facility is awaiting licensing to permit drivers to venture outside of its own compound).
The battery switch station and education center is a partnership between Better Place and China Southern Power Grid Co. (CSG), which is an ongoing cooperation with CSG. Considered the eighth largest utility in the world, per the Fortune Global 500, CSG avails Better Place access to the five provinces that fall under its mandate. This is nothing to cough about: the company’s service area covers one million square kilometers and 230 million people. In addition to gaining a critical foothold into the Chinese power, transportation and vehicle market, Better Place, if successful, will prove to the world that it can operate its infrastructure across a massive geographic area and service a formidable population.
Uniquely, the People’s Republic of China already has a demonstrated commitment to electric vehicles. The Chinese Communist Party has identified electric vehicles as one of the top seven key national growth industries for the current Five-Year Plan, which is effectively the country’s mandate for the period between 2011 and 2015.
To produce the vehicles that house the proprietary Better Place batteries, which can be switched out in under 50 seconds (a shorter time than it takes to refuel at a traditional pump), the Israeli company is looking to enlist local original equipment manufacturers (OEM), which may initially involve local car companies and then expand over time. In exchange for its business, Better Place will seek help in accessing European markets once it expands beyond Israel and Denmark.
The Chinese electric car market builds upon a massive existing market for another type of electric-powered vehicle: the e-bike, 150 million of which are on China’s roads. The country’s 2,000-odd e-bike manufacturers produce about 30 million units annually, 80% of which are sold domestically. In other words, Chinese customers are already in the habit of using battery charging stations—which is key for Better Place, whose success hinges in part on customers becoming accustomed to using such charging stations.
Even though China surpassed the United States as the world’s largest automobile market between 2009 and 2010, there are still hundreds of millions of Chinese waiting to purchase a car. In a country where air quality is a major issue in terms of health, quality of life, and economic and social development, moving away from carbon-emitting vehicles is critical. In fact, electric vehicles are finding the highest growth rates in China’s smaller cities and its countryside. These first-time car consumers are not yet accustomed to a particular kind of car, so they are likely to be more open-minded toward an alternative, non fossil fuel consuming variety.
Further, Better Place isn’t the first electric car company to attempt doing business in China. The Chinese have seen the e-vehicle model before. One of Better Place’s main competitors, BYD (also called “Build Your Dreams”), a company started by Chinese Wang Chuanfu and 1/10th owned by investor Warren Buffet, has its headquarters in Shenzhen, about an hour’s drive from Guangzhou.
Historically, batteries are among the products that China does best. So Better Place, which aims to “work with ecosystem players to enable a compelling and integrated solution,” should be able to form a naturally complementary relationship with the PRC.
Of course, obstacles still remain. We’ll have to wait and see whether Better Place is really able to capitalize on the advantages that China offers.