It was just last week that I received a slick brochure in the mail from Better Place with their latest deal to purchase one of their electric vehicles (EV). For a down payment of $7,000 I could get a Better Place EV with full road service and a home charging station. The monthly payment is $700 for 72 months. Total price tag comes to about $57,400 at the end of the six year period. The new campaign was just kicked off in conjunction with one of Israel’s largest department stores. Apparently the marketing department didn’t get the memo that Better Place is planning of filing for bankruptcy this week.

The fist thing I thought when seeing this advertisement was, “No wonder Better Place is going out of business, their cars are terribly expensive and the concept is still unproven.” The fact is, most Israeli’s simply don’t earn anywhere near the amount it would require to purchase this car. It is a vehicle for the top 10% of earners at best. However, many of those people are already driving recently purchased vehicles that have been acquired over the past few years. Go anywhere around Israel and you’ll notice lots of nice new looking cars. In terms of new car sales the year 2011 was a record setting year with 226,000 cars hitting the road. Since then the numbers are down, as there are only so many new cars a nation of 8 million people can absorb.

The auto business in Israel is affected by a few factors that make it different from other countries. For one, Israel does not produce any autos domestically (better place vehicles are made by Renault), they are almost all imported by around 10 major companies. Furthermore the effective tax on autos is 100% (including VAT).

My last car in the US was a used 2000 Honda Odyssey. I paid $7,000 cash, took it to get registered and paid a few hundred bucks in state fees. The same car in Israel would effectively cost nearly twice as much, and gas is running the equivalent of $8 a gallon. Therefore it is no surprise that many Israelis simply can’t afford to own a car, or consider it a waste of money if they live in an urban environment. Again those that can afford a car most likely purchased one back in that record setting year of 2011.

The benefit to buying an EV in Israel is that you pay a reduced tax of only 37% (including VAT) and have minimal fuel costs. However, even with this incentive the cars remained expensive and out of reach for the average Israeli.

The business model of Better Place relied on a trend of ever rising gas prices, and a shift to where 50% or more of vehicles on the road would be EV’s. They also spent a huge amount of money to install battery switching and charging stations throughout the countries that they operated in. The high capital costs of the EV infrastructure along with lackluster sales did not bode well for the company’s bottom line, however laudable its goals were of creating a more environmentally friendly automobile.

Personally, I am sad to see this Israeli company go out of business. I thought the technology developed by Better Place was really amazing, especially the battery recharging station concept. Hopefully this technology will be sold to another auto company that can continue to invest in it and incorporate it into an EV platform on a global scale.