7/30/2019 Barnea on Electric Cars1

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The Jerusalem Post|Innovation Industry & Science|11/201226

Avner Barnea.

buyers are key success actors o this newventure.

Changing the Automotive

IndustrySooner or later, I predict, electric vehicles willtake o, changing several sectors prooundlyand could dramatically remodel the ortuneso the automotive and utilities' sectors andgenerate the rise o a battery industry.The concerns are high or companies in theseindustries. In the near uture, executivesshould determine how to garner revenues.Planning should also begin on buildingmarkets and demands and on programs andways to build capabilities i early adoptioncreates a sustainable market.Electric vehicles pose an enormous threat to

incumbent automakers as the automakers willhave to reinvent their businesses to survive.Competitors ace signifcant entry barriers,including such as manuacturing scale, cus-tomer management, and capital. Incumbentautomakers are not staying behind and buildstrategic alliances to oer attractive designso electric vehicles to the consumers.However, electric vehicles open up oppor-tunities or incumbent automakers. Autoexecutives will need to consider develop newstrategies or electric vehicles. The plans othe automakers, or example, must includean evident understanding about the way

they will prioritize R&D across the vehicleplatorms, rom hybrids to plug-in hybrids,to battery-electric models and cars powered

Electric cars are shaking up the car industry; Are they going to be part of

the mainstream? |Avner Barnea*

by internal combustion engines.Automakers should also consider how theirrelationships with the battery makers willdevelop, as well as the role o technologystandards will play in tting batteries intovehicles. Battery makers will try to secure thevalue implied in owning core skills, includ-ing innovation in batteries and in the neweatures they could make possible.

Major Factor Battery CostsThe economics o electric vehicles starts withthe batteries, whose cost has been declining

by 10 percent annually. Analysts predict thatit will continue to all over the next years asproduction volumes rise. Still, the price oelectric cars would be quite high.Subsidies could help bridge the dierence.

Business innovation could address costs too.Innovators are considering similar models tocover the batterys upront cost and recoverthe subsidy by charging or services.To attract buyers, electric vehicles o vari-ous kinds such as hybrids, plug-in electrichybrids, or all-electric cars must be cheaperto operate than petrol-ueled ones. The di-erence between the total lietime costs o acar with an internal combustion engine andan electric car will depend or some time onthe dierence between the price o petrol andthe cost o the battery and o recharging it orthe cost o leasing a battery and o rechargingservices. Oil prices have fuctuated wildlyover the past our years, and electricity pricesvary throughout the world.

Threats and OpportunitiesPosed by Electric Cars

n a surprise move, American-Israelielectric car company Better Place an-nounced in early October that its ounder

Shai Agassi would be replaced as CEO byEvan Thornley, the current CEO o BetterPlace Australia. Is it the end o this businessinitiative in Israel?Will consumers eventually trade their petrol-powered cars or newly rechargeable models?Electric transport would seem to be in ouruture. But how long will investors have towait or the venture to pay o?

The Near FutureFor the next 10 or so years, the purchase priceo an electric vehicle will probably exceed theprice o an average petrol-uelled amily car

by several thousand dollars. The dierence isdue mainly to the cost o designing vehiclesthat can drive or extended distances on bat-tery power and to the cost o the battery itsel.Whats more, the inrastructure or chargingthe batteries o a large number o electricvehicles isnt in place, nor is the industry toproduce them on a large scale. In any case, it

seems that or now, consumers arent exactlyclamoring or battery-powered cars.

Push from GovernmentsOptimists are speculating about generoussupport by governments. They think thatconcern over energy security, ossil-uelemissions and long-term industrial com-petitiveness will motivate governments bycreating incentives to change the market tobattery-powered vehicles. In act, govern-ments in many countries are starting to actin this way. In some countries, such as Israel,electric vehicles already make economic sense

because buyers get substantial tax breaks romthe government. Business models designedto make electric vehicles more attractive to

I