Five business models to boost electric cars

As electric vehicles come to market, the auto and utility industries are experimenting with new business models to clear the way for the technology.

Martin LaMonica Former Staff writer, CNET News
Martin LaMonica is a senior writer covering green tech and cutting-edge technologies. He joined CNET in 2002 to cover enterprise IT and Web development and was previously executive editor of IT publication InfoWorld.
Martin LaMonica
6 min read

WASHINGTON--Everybody wants an auto battery breakthrough that will lead to longer driving range and lower prices than what's found with oil-powered autos. But while scientists are busy at work on the technology, there are a number of clever business ideas to make transportation cleaner and cheaper.

To a large degree, the toughest part of making electric vehicles take hold is sorting out new business models, according to speakers at last week's annual conference of the Electric Drive Transportation Association. Here are examples of how existing technology is already being used and of the approaches being explored to redefine the auto industry.

Sell electric vehicles like consumer electronics
To buy a car, most of us do a little research online and then walk into a dealership. With the introduction of new electric drive technology, that may not be enough anymore. As automakers come to market with electric cars, they're expanding their partners beyond the dealership lot.

Under the hood of EVs and hybrids (photos)

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Following similar arrangements made by General Motors and Nissan, Ford and Mitsubishi have signed on Best Buy's Geek Squad to aid in home charging station installation for their electric vehicles due this fall. The Geek Squad won't be doing the electrical installation of chargers, but they can do an initial evaluation and provide customer support.

Best Buy's bread and butter is selling consumer electronics, but moving into alternative tech transportation (and home energy management) is a strategic move for the retailer, said Chad Bell, the senior director for the personal mobility business solutions group. Just as they need help sorting out consumer electronics, people have a growing set of transportation options, such as electric bikes, motorcycles, or cars.

"We can provide the consumer information on how cool these products are because they are connected devices. They're a lot bigger than a cell phone, but it has a lot more to it than just the driving experience," Bell said during a panel last week.

The mobile phone as car assistant
In-car technology is a big trend in the auto industry, whether it's streaming Internet radio or voice commands. But technology plays a key role in the rollout of electric vehicles.

EV drivers will likely do the bulk of their charging at home, but if you're looking for a public charging station, you want to know where the closest one is and whether it's available. Charging station makers, including Ecotality and Coulomb Technologies, have built networked charge points that let you locate and reserve spots from your phone. One start-up called PlugShare has even built an app that lets homeowners share their plugs with drivers.

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Apps, either on a phone or PC, are integral to home charging as well. You can schedule car charging to take advantage of off-peak rates or check the charge status from your mobile phone. GM's OnStar division sends Volt owners e-mails with tips on how to be more fuel-efficient.

Having a communication link between the utility and home charger opens up more possibilities, such as letting consumers choose to charge their car with wind or solar power. "We have the technology to solve this problem today and we've demonstrated it," Tony Posawatz, the vehicle line manager for the Chevy Volt, said last week at the EDTA conference.

Driving plans
You buy cell phone minutes, why not miles? Until recently, Better Place appeared to be the only company with a business model of selling driving subscription plans. In their case, customers pay a monthly fee and they have access to charging points at home and in public places, as well as battery-swapping stations.

An electric car charger in Texas. NRG EV Services

But now utilities are getting into the game in a slightly different way. NRG EV Services is a division of utility NRG that recently began offering an electric vehicle service to its retail customers.

They've started the program in Houston and Dallas-Fort Worth where consumers can choose between three plans, with the most expensive at $89 a month, to essentially prepay for the electricity fuel for EVs. Consumers also have a home charger installed for free and free access to public charging stations.

The business model is sort of like a cable company installing a cable box at consumers' homes and then charging for the ongoing service, Arun Banskota, the president of NRG EV Services, said last week. The utility finances the installation of a charging station at home, which can cost $2,000.

For consumers, it's a good way to understand and lock into fuel costs for three years, avoiding the ups and downs of gas prices or changing electricity rates, he said. NRG is also looking at multifamily programs and installing charge points at workplaces, which, along with retail locations, are vital to creating an "ecosystem" around EV services, Banskota said.

Repurposing electric car batteries for grid storage
Lithium ion batteries are light and powerful but they are expensive, making up roughly half the cost of an all-electric vehicle. There are many efforts to improve the energy density of batteries, which will enable a longer range, and increase the number of charges they can handle.

But arguably, a business model change will cut the prices down before we have a technology breakthrough. In particular, people in the auto and utility industries are looking at ways of repurposing auto batteries for grid storage.

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Lithium ion batteries will lose about 20 percent of their charging capacity after about 3,000 cycles, which can be about 10 years of driving time, according to Tom Goesch, president of the transportation division of Indianapolis-based battery maker Ener1. At some point, a driver may want a refreshed set of car batteries, but the remaining capacity is plenty for grid storage.

If that business model get worked out, it could significantly cut down the cost of EVs for consumers, Brian Wynne, the president of the EDTA, said last week. One idea being explored is utilities would own and lease the batteries to consumers and then recoup them after a certain time.

Giving batteries a second life allows all the companies involved to get more value from the product and lower the upfront cost, Wynne said. Ener1 is exploring secondary use of batteries with a Japanese partner, but Goesch said there are some significant challenges to this industry taking hold, notably how to determine the price of used batteries, particularly in light of falling battery prices.

Car sharing
Zipcar went public two weeks ago, which drew attention to car-sharing services. Without a few pieces of technology, these services would be a lot more difficult. In the case of Zipcar, people find cars and reserve online and use an RFID-enabled membership card to unlock the car.

With the range limitations of all-electric cars, car-sharing (or renting) can give people the longer range required for some trips as needed. Also, renting hybrids and electric cars gets more people familiar with the technology.

Yes, there's an app for finding public electric car charging stations, including this one from Ecotality running on Motorola's Xoom. Martin LaMonica/CNET

Hertz started offering a car-sharing service in New York City and is looking to offer electric vehicle rentals to businesses and government customers, said Richard Broome, senior vice president of corporate affairs at Hertz. It's also looking to partner with hotel chains and retail locations to offer charge stations, he said.

"I don't think anybody understands how the public will use or access these cars, so there are a lot of models developing," he said. "What we are all doing is experimenting and collaboration, because we want to find the right answers."

The experimentation around electric vehicles is needed to figure out what the new "operating system" will be for this technology and for the industry to scale up profitably, said Luis Manuel Ramirez, CEO of General Electric Energy Industrial Solutions.

"From the consumer perspective, if we don't deliver solutions in the next 12 to 24 months, that will create a lot of churn and questions of whether it will happen or not (at large scale)," he said. "We have a window of opportunity, but as an industry, we need to deliver."