A new ecosystem for electric cars Shai Agassi

so how would you run a whole country

without oil that’s the question that

sort of hit me in the middle of a Davos

afternoon about four years ago and it

never left my brain and I started

playing with it more like puzzle the

original thought I had this must be

ethanol so I went out and researched

ethanol and found out you need the

Amazon in your backyard in every country

about six months later I figured out it

must be hydrogen until some scientists

told me the unfortunate truth which is

you actually use more clean electrons

than the ones you get inside a car if

you use hydrogen so that’s not going to

be the path to go and then sort of

through a process of wandering around I

got to the thought that actually if you

could convert an entire country to

electric cars in a way that is

convenient and affordable you could get

to a solution now I started this from a

point of view that it’s it has to be

something that scales a mass not how do

you build one car but how do you scale

this so that it can become something

that is used by 99% of the population

the thought that came to mind is that it

needs to be as good as any car that you

would have today so one it has to be

more convenient than a car and two has

to be more affordable than today’s cars

and affordable is not a $40,000 sedan

right that’s not something we can

finance or buy today inconvenient is not

something you drive for an hour and

charge Freight so we’re bound with the

laws of physics and the laws of

economics and so the thought that that I

started with was how do you do this

still within the boundary of the science

we know today no time for science fair

no time for playing around with things

or waiting for the magic battery to show

up how do you do it within economics

that we have today how do you do it from

the power of the consumer up and not

from the power of an edict down in on a

random visit to Tesla on some afternoon

I actually found out that the answer

comes from separating between the car

ownership and the battery ownership in a

sense if you want to think about it this

is the classic batteries not included

now if you separate between the two you

could actually answer the need for a

convenient car by creating a network by

creating a network before the cars show

up and the network has two components in

them first component is you charge the

car whenever you stop ends up that cars

are these strange beasts that drive for

about two hours in park for about 22

hours and if you drive a car in the

morning you drive it back in the

afternoon the ratio of charge to drive

is about a minute for a minute and so

the first thought that came to mind is

everywhere we park we have electric

power now it sounds crazy but in some

places around the world like Scandinavia

you already have that if you park your

car and didn’t plug in the heater when

you come back you don’t have a car it

just doesn’t work now that last mile

last foot in a sense is the first step

of the infrastructure the second step of

the infrastructure needs to take care of

the range extension see we’re bound by

today’s technology on batteries which is

about a hundred and twenty miles if you

want to stay within reasonable space and

and wait limitations in a 120 miles is a

good enough range for a lot of people

but you never want to get stuck and so

what we added as a second element to our

network which is a battery swap system

you drive

you take your depleted battery out a

full battery comes on and you drive on

and you don’t do it as a human being you

do it as a machine it looks like a car

wash you come into your car wash and the

plate comes up hold your battery takes

it out and puts them back in and within

two minutes you’re back on the road and

you can go again if you had charged

spots everywhere and you had battery

swap stations everywhere how often would

you do it it ends up that you do

swapping less times and you stop at a

gas station as a matter of fact we add

it to the contract we said that if you

stopped to swap your battery more than

50 times a year we start paying you

money because it’s an inconvenience then

we looked at the question of the

affordability and we looked at the

question what happens when the battery

is disconnected from the car what is the

cost of that battery everybody tells us

batteries are so expensive and what we

found out that when you move from

molecules to electrons something

interesting happens we can go back to

the original economics of the car and

look at it again the battery is not the

gas

stank in a sense remember in your car

you have a gas tank you have the crude

oil and you have refining and delivery

of that crude oil is what we call petrol

or gasoline the battery in this sense is

the crude oil we have a battery bay it

costs the same hundred dollar as the gas

tank but the crude oil is replaced with

a battery just it doesn’t burn it

consumes itself step after step it has

2000 life cycles these days and so it’s

sort of a mini well we were asked in the

past when we bought an electric car to

pay for the entire well for the life of

the car nobody wants to buy a mini well

when they buy a car in a sense what

we’ve done is we created a new

consumable you today buy gasoline miles

and we created electric miles and the

price of electric miles

ends up being a very interesting number

today 2010 in volume when we come to

market it is eight cents a mile those of

you who have a hard time calculating

what that means in the average consumer

environment we’re in in the u.s. 20

miles per gallon that’s a buck 50 a buck

60 a gallon that’s cheaper than today’s

gasoline even in the u.s. in Europe

where taxes are in place that’s the

equivalent to ace my nough $60 barrel

but e miles follow Moore’s law they go

from 8 cents a mile in 2010 to 4 cents a

mile in 2015 to 2 cents a mile by 2020

why because battery’s life cycle improve

a bit of improvement on energy density

which reduces the price and these prices

are actually with clean electron we do

not use any electron that come from coal

so in a sense this is an absolute zero

carbon zero fossil fuel electric mile at

two cents a mile by 2020 now even if we

get to 40 miles per gallon by 2020 which

is our desire imagine only 40 miles per

gallon cars would be on the road that is

an 80 cent gallon 80 cent gala means if

the entire Pacific would convert to

crude oil and we’ll let any oil company

bring it out and refine it they still

can’t compete with 2 cents a mile that’s

a new economic factor which is

fascinating to most people now this

would have been a wonderful paper so

that’s how I solved it in my head it was

a white paper I handed out to

governments and some governments told me

that it’s fascinating that the young

generation actually thinks about these

things until we got to the true young

global leader Shimon Peres president of

Israel and he ran a beautiful

manipulation on me first he let me go to

the prime minister of the country who

told me if you can find the money you

need for this network two hundred

million dollars and if you can find a

car company that will build that car in

mass volume in two million cars that’s

what we needed in Israel I’ll give you a

country to invest the 200 million into

Paris thought that was a great idea so

we went out and we we looked at all the

car companies we send letters to all the

car companies three of them never showed

up one of them asked us if we would stay

with hybrids and they will give us a

discount

but one of them Carlos go and see over

an O and Nissan when asked about hybrids

said something very fascinating said

hybrids are like mermaids when you want

a fish you get a woman and when you need

a woman you get a fish and gone came up

and said I have the car mr. Paris I will

build you the cars and he actually true

to form Renault has put a billion and a

half dollars in building nine different

types of cars that fit this kind of

model that will come into the market in

mass volume mass volume being the first

year a hundred thousand cars it’s the

first mass volume electric car zero

emission electric car in the market I

was running as Chris said to be the CEO

of a large software company at called s

AP and then Paris said well once you run

this project and I said well I’m ready

for CEO and he said no no no no no you

got to explain to me what is more

important than saving your country and

saving the world that you would go and

do and I had to quit and come do this

thing called better place now we then

decided to scale it up we went to other

countries as I said we went to Denmark

and Denmark said this beautiful policy

it’s called the IQ test it’s inversely

proportional to taxes they put a hundred

and eighty percent tax on gasoline cars

and zero tax on zero emission cars so if

you want to buy a gasoline car in

Denmark it cost you about sixty thousand

euros if you buy our car it’s about

twenty thousand euro if you failed the

IQ test they ask you to leave

we then were sort of coined as the guys

who run only in small island I know most

people don’t think of Israel as a small

island but Israel is an island it’s

Transportation Island if your cars

driving outside Israel it’s been stolen

and so if if you’re thinking about it in

terms of islands we decided to go to the

biggest island we could find and that

was Australia the third country we

announced was Australia it’s got three

centres in Brisbane and Melbourne and

Sydney and one freeway when electric

free where they connect them the next

Island was not too hard to find and that

was Hawaii we decided to come into the

US and pick the two best places the one

where you didn’t need any arranged

extension Hawaii you can drive around

the island on one battery and if you

really have a long day you can switch

and keep on driving around the island

and the second one was the San Francisco

Bay Area where gavin newsom created a

beautiful policy across all the mayors

he decided that he’s going to take over

the state unofficially and then

officially and then created this

beautiful region one policy and in San

Francisco Bay and not only do you have

the highest concentration of Priuses but

you also have the perfect range extender

it’s called the other car now as we

started scaling it up we looked at what

is the problem to come up to the US why

why is this a big issue and the most

fascinating thing we’ve learned is that

when you have small problems an

individual level like the price of

gasoline to drive every morning you

don’t notice it but when the aggregate

comes up you’re dead all right so the

price of oil much like lots of other

curves that we’ve seen goes along a

depletion curve the foundation of this

curve is that we keep losing the wells

that are close to the ground and we’ll

keep getting wells that are further away

from the ground he becomes more and more

and more expensive to dig him out now

you think well you know it’s been up

it’s been down it’s been up its gonna

keep on going up and down here’s the

problem at 147 dollars a barrel which we

were in six months ago the u.s. spent a

ton of money to get oil then we lost our

economy we went back down to 47

sometimes at 40 sometimes it’s 50 now

we’re running a stimulus package it’s

called a trillion-dollar stimulus

package we’re gonna revive the economy

hopefully it happens between now and

2015 somewhere in that space

what happens when the economy recovers

by 2015 we would have had at least 250

million new cars even at the pace were

going at right now that’s another 30

percent demand on oil that is another 25

million barrels a day that’s all the

u.s. usage today in other words at some

point when we’ve recovered we go up to

the peak and then we do the OPEC

stimulus package also known as $200 a

barrel

we take our money and we give it away

you know what happens at that point we

go back down it’s going to go up and

down and the downs are gonna be much

longer than the ups are gonna be much

shorter and that’s the difference

between problems that are additive like

co2 which we go slowly up and then we

tip and problems that are depletive in

which we lose what we have which

oscillate in the oscillate until we lose

everything we got now we actually looked

at what the answer would be right

remember in the campaign 1 million

hybrid cars by 2015 that is 0.5% of the

US oil consumption that is 0.0 well

percent of the rest of the world that

won’t do much difference we looked at an

MIT study 10 million electric cars on

the global roads 10 million out of 500

million we will add between now and then

that is the most pessimistic number you

can have it’s also the most optimistic

number because it means we will scale

this industry from a hundred thousand

cars in 2011 to 10 million cars by 2016

a hundred X growth in less than five

years you have to remember that the

world today is bringing in so many cars

we have 10 million cars by region that’s

an enormous amount of cars China is

adding those cars India Russia Brazil we

have all these region Europe has solved

it they just put tax on gasoline they’ll

be the first in line to get off because

their prices are high China solves it by

an edict at some point they’ll just

declare that no gasoline car will come

into a city and that will be it the

Indians don’t even understand why we

think of it as a problem because most

people in India fill two or three

gallons every time for them to get a

battery that goes 120 miles is an

extension on Range

not a reduction in range we’re the only

ones who don’t have the price set right

don’t have the industry set right don’t

have any incentive to go and resolve it

across the u.s. now whereas the car

industry on that very interesting the

car industry has been focused just on

themselves they basically looked at it

and said Carwin Auto will solve

everything within the car itself no

infrastructure no problem we forgot

about the entire chain around us all

this stuff that happens around we are

looking at an emergence of a car to zero

a whole new market a whole new business

model a business model in which the

money that is actually coming in to

drive the car the minutes the miles if

you want that you are all familiar with

subsidized the price of the car just

like cell phone you’ll pay for the miles

and some of it will go back to the car

maker some of it will go back to your

own pocket but our cars are actually

gonna be cheaper than gasoline cars

you’re looking at a world where cars are

matched with windmills in Denmark we

will drive all the cars in Denmark from

windmills not from oil in Israel

we’ve asked to put a solar farm in the

south of Israel and people said oh

that’s a very very large space that

you’re asking for we said what if we had

proven that in the same space we found

oil for the country for the next hundred

years and I said what we tried there

isn’t any we said no no but what if we

prove it and they say well you can dig

and we decided to dig up instead of

digging down these are perfect matches

to one another now all you need is about

10% of the electricity generated think

of it as a project that spans over about

ten years that’s 1% a year now when

we’re looking at solving big problems we

need to start thinking in two numbers

and those are not 20% by 2020 the two

numbers are zero as in zero footprint or

zero oil and scale at infinity and when

we go to cop 15 at the end of this year

we can’t stop thinking at patting co2 we

have to start thinking about giving

kickers to countries that are willing to

go to this kind of scale one car emits

four tonnes and actually 700 and change

million cars today I’m a at 2.8 billion

tons of co2 that’s in the additive about

25% of our problem cars and trucks add

up to about 25% of the world’s co2

emissions we have to come and attack

this problem with a focus with an effort

that actually says we’re gonna go to

zero before the world ends I actually

share that with some legislators here in

the US I shared it with with a gentleman

called Bobby Kennedy Jr who’s one of my

idols and I told him one of the reasons

that his uncle was remember it is

because he said we’re gonna send a man

to the moon

and we’ll do it by the end of the decade

we didn’t say we’re gonna send a man 20%

to the moon and they’ll be about 20%

chance we’ll recover him he actually

shared with me another story which is

from about 200 years ago 200 years ago

in Parliament in Great Britain there was

a long argument over economy versus

morality 25 percent just like 25 percent

emissions today comes from cars 25

percent of their energy for the entire

industrial world in in the UK came from

a source of energy that was immoral

human slaves and there was an argument

should we stop using slaves and what

would it do to our economy and people

say what we need to take time to do it

let’s not do it immediately

maybe we free the kids and keep the

slaves and after a month of arguments

they decided to stop slavery and the

Industrial Revolution started within

less than one year in the UK had a

hundred years of economic growth we have

to make the right moral decision we have

to make it immediately we need to have

presidential leadership just like we had

in Israel that said we were Ndoye ‘el

and we need to do it not within 20 years

or 50 years but within this presidential

term because if we don’t we will lose

our economy right after we lost our

morality thank you all very much

you