Electric cars of the future at the Web 2.0 Summit

SAN FRANCISCO-- While most of this week's Web 2.0 Summit has centered on trying to find business models that work in today's slumping economy, two of the most exciting ventures are also the least affordable--at least for now.

Those two companies are Tesla Motors and Shai Agassi's Better Place. The two have completely different business models, but are joined by the idea that gasoline vehicles are something that will not last. Tesla, which is the creation of PayPal co-founder Elon Musk, is creating expensive sports cars that run off nothing more than electricity--and a large bank account to afford the six-figure cost of the vehicle. Meanwhile, Agassi's Better Place is aiming to change the paradigm in the automobile industry to the point where everything is electric; instead of filling up at gas stations, we'll simply be getting our batteries swapped out in less time than it would take to go through a car wash.

Both Musk and Agassi, who spoke at separate sessions Friday at the conference, face huge financial hurdles on the way to seeing their visions become as ubiquitous as the business models they're trying to replace. In Musk's case it's infrastructure as much as it is improving the actual technology.

Tesla's current model, which is a two-door roadster, costs consumers in excess of $100,000, and the company cannot produce them fast enough. The waiting list, which is currently at a little over 1,200 people, matches that of Tesla's current yearly production. "We're making 1,200 a year," said Musk, "and eventually 1,500 a year."

Musk hopes to drive production numbers up with future models, including a four-door sedan that will be unveiled early next year, followed by an economy car that will cost consumers "below $30,000." All of that hinges on improvements in Tesla's production techniques and other advancements in technology; Musk hopes to achieve production in the hundreds of thousands per year--basically enough for them to make it to most dealerships, and more importantly to get potential customers off long waiting lists.

Agassi's vision is much wider-reaching. Instead of focusing on building the cars, it's more about making a pivotal change in battery technology and getting existing car makers to adopt it in place of the traditional combustion engine. Agassi has already begun to build that infrastructure with Israel, which invested in Better Place earlier this year. Automaker Renault-Nissan, which is currently developing a Better Place-compliant vehicle, will have it out to customers sometime in 2011--in time to match the Israeli government-aided system of battery swap locations.

"Israel realized it doesn't have oil, and shouldn't need oil," Agassi said. He believes President-elect Barack Obama will be more open than President Bush to his company's plan. Agassi also believes that if something is not done soon to wean the U.S. off its dependency on oil then we'll have chaos when there is no longer gas to fill our country's fleet of vehicles. "This is a problem that has a lead problem of eight years to resolve. If you're not ready with a solution you're not going to be able to solve it when it comes."

For both companies one of the biggest hurdles is going up against the aged business models that dominate the world's automotive landscape. Musk said action had to be taken by someone, since waiting for Detroit to come out with its own solution would take too long--especially when they're facing a sharp downturn in sales and having to lay off large numbers of employees. He also noted that Chevy's upcoming Volt hybrid vehicle is a great start, but that companies like his could come in with new ideas that could push innovation that much further.

Agassi looks at it being more as a problem with the auto industry's transparency of its own innovations and trying to bundle old systems with the new. "It's the perfect Osborne 2. You always hear about the next new magic battery and nobody wants to buy a new car with the old battery."

Old or new, in both company's visions the battery is the piece of the puzzle that Detroit--and the world--is missing.