Will Silicon Valley Become the “Detroit of Electric Cars”?

In theory, Battery electric vehicles (BEVs) are the ideal form of transportation. They produce no noxious exhaust fumes, and minimal pollution, especially when charged from renewable energy. They are capable of acceleration exceeding conventional vehicles, but are much more quiet. Widespread use of BEVs would also reduce dependence on petroleum, enhance national security, and help mitigate the effects of global warming.

So what’s the problem? Historically, the issue with BEVs was the high battery costs, limited travel distance, charging time, and battery lifespan. However, new technology advancements have addressed most of these issues and some believe the time is right for the emergence of the mass produced electric car.

Former SAP executive, Shai Agassi, announced recently that he's raised over $200 million for a company that plans to revolutionize the electric car industry. The idea should find plenty of fertile ground in California with all of the local enthusiasm for plug-in hybrids already in place. Silicon Valley is already the capital of the world's high-tech industry, so for many the move to become the Mecca of one of the hottest sectors of the automotive industry is quite a natural development.

The Palo Alto based entrepreneur has spent months preparing for the daring venture. He believes if anywhere is able to disrupt the car industry, it’s in the valley.

"Detroit is a car manufacturing center. I think what we're looking at is not something that can be done in a normal way. . . . It needs an Internet approach, a Google approach." Agassi noted. "In the valley, we know how to do technology disruption. We know how to do business models, how to develop proof of concept and get it adopted around the world."

No one will argue with Agassi on that point; the valley is notorious for shaking things up, but can a “Google” type approach really turn the auto world upside down?

Even Agassi’s most enthusiastic supporters aren’t sure about the potential of electric cars. They wonder what kind of company it would take to rival the huge global auto industry. How much of an impact can start-ups such as Agassi's Better Place and Tesla Motors of San Carlos really make when compared to the big players?

"It's not simple or cheap stuff to do," said Neal Dikeman, partner with Jane Capital Partners, a San Francisco merchant bank focusing on clean tech and energy technologies. "$100 million is the ante up to play the game," Dikeman said.

"People are waking up to the fact that this is not like software start-ups that raise $40 or $50 million, and then have IPOs," said Darryl Siry, Tesla's vice president of sales, marketing and service. "This business is capital intensive."

Agassi acknowledged that "massive investments" are required to begin the transition from gasoline engines to electric-drive autos. He calculates the total cost for every affected industry at a mind-blowing $6 trillion a year. Even so, he believes it will all end up being worth it.

"The first carmaker to field a solid electric vehicle at scale will enjoy benefits that will dwarf the success of the Prius for Toyota," he predicted.

He says the rising cost and possible scarcity of oil, growing worries about pollution and global warming, and developments in technology making batteries more affordable are all part of the new factors that will spur the growth of the electric car.

On the environmental side, using the power grid for transportation is not only more affordable but more environmentally sound. That's becoming more true every day as governments are requiring utilities to get power from renewable sources such as solar, wind, water and geothermal.

Agassi has, of course, crunched the numbers on the economics of oil. With prices at $100 a barrel, he believes electricity is the only plausible answer for future personal transportation, because gas is only slated to become increasingly unafordable and unavailable.

According to Agassi, either he does it, or someone else does it, because at some point electric cars are inevitable.

Posted by Rebecca Sato

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Story Links:

http://www.mercurynews.com/business/ci_7392438
http://en.wikipedia.org/wiki/Electric_car
http://www.evworld.com/