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