The Rational Walk has covered developments related to electric cars over the past several months. Some have asked whether we have suddenly become environmentalists and whether such articles are really relevant to the main focus of this site.  Although we have long been skeptical about many aspects of the environmental movement in general and the prospects for electric vehicles in particular, Berkshire Hathaway’s investment in Chinese automaker BYD prompted another look at the issue. When Berkshire Hathaway Vice Chairman Charlie Munger puts as much personal prestige behind an investment, that should focus the attention of any intelligent investor.

It’s All About Range, Range, Range …

BYD has developed an all electric vehicle that will be introduced in the United States in limited quantities next year and promises to deliver  a range of nearly 250 miles on a single charge coupled with a ten minute “quick charge” process that can deliver another 125 miles on a 50% charge. Meanwhile, General Motors will introduce the Chevrolet Volt which is an electric vehicle supplemented by a gasoline engine that serves to extend range. Putting aside GM’s potentially exaggerated claim of 230 miles per gallon, the Volt is obviously a significant innovation.

Range is the name of the game.  Without a way to quickly and easily refuel a vehicle for long road trips, ordinary Americans will never buy electric vehicles in large numbers.  The vastness of the United States requires it.  While most commutes may be short, other than higher income environmentalists trying to make a statement, most people cannot afford to buy one car for the commute and another for longer road trips.

Shai Agassi’s Vision

Shai Agassi, the founder of Better Place, has come up with a strategy for building infrastructure that he believes will solve the problem of range.  Mr. Agassi’s strategy is one that has been discussed here in the past.   Better Place plans a two pronged approach that will place recharging stations near parking spots as well as provide “battery exchange” stations where drivers can quickly obtain a fully charged battery when on a longer road trip.

The main problem with Mr. Agassi’s vision appears to be the massive infrastructure costs that will be required to build his battery exchange network along with the requirement that all cars adopt a universal standard in which his automated exchange stations can quickly swap a car battery.  I view both BYD and General Motors as having very different strategies with their product offerings.  BYD claims to have technology that offers a 50% charge in ten minutes which would make it unnecessary to exchange the battery on a road trip.  General Motors believes that the gasoline engine can supplement Volt drivers on longer trips.

In the video clip below, Mr. Agassi presents his vision for Better Place as part of a speech to the Alfred Deakin Eco-Innovation Lecture in Melbourne, Australia last month.  For the full program, please click on this link.

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