Better Place Gets Major Boost With $350 Million Financing Round Led by HSBC

Better Place Gets Major Boost With $350 Million Financing Round Led by HSBC

By John O'Dell January 25, 2010

By John O'Dell, Senior Editor

Better Place, the California-based proponent of battery swapping as the answer to electric vehicle range issues, is announcing several new backers and a big boost for its strategy this morning.

In a new round of venture financing, the company founded by former high-tech executive Shai Agassi has raised $350 million - more than a third of it from London-based banking and finance giant HSBC.

In addition to HSBC, investors in the Series B financing round include Lazard Asset Management and Morgan Stanley Investment Management and initial investors including several Israeli groups and the green investment unit of Silicon Valley's VantagePoint Venture Partners.

HSBC, which becomes a 10 percent stakeholder in Better Place - valuing the company at $1.25 billion - will place Kevin Adeson, head of its global capital financing unit, on the company's board.

Successful execution of Better Place's plans ultimately will require billions to be raised, but the nearly $800 million garnered from early investors now is certainly a decent start for a company that has yet to celebrate its third birthday.

"We are confident that Better Place has the technical and commercial solutions to allow for the mass adoption of electric cars in the near term," Adeson said in a statement released late Sunday.

The company's switchable battery system "will offer the consumer an affordable and attractive alternative to current combustion engine and hybrid vehicles," he said, adding that the giant bank expects "the Better Place model to be widely adopted across many countries and cities, particularly in those markets with policies strongly favoring electric vehicle adoption."

Better Place, started by Agassi in 2008, proposes that automakers with electric vehicles adopt a uniform battery installation system that permits robotic removal and replacement of complete battery pack systems so consumers won 't have to spend hours waiting for their vehicles to be recharged from the power grid.

The company has shown a working battery exchange station in Yokohama, Japan, and says it will begin building them in Israel next year as that nation ramps up to be the first to approve a nationwide EV system that will enable Better Place and its partners to market cars built by Renault and designed with battery packs that can be charged at Better Place charging stations and swapped when depleted - at Better Place exchange stations - for fully recharged packs.

Agassi told Green Car Advisor in an interview last year that his engineering staff has developed a system that could perform the entire battery exchange process - from  drive-in to departure - in under 4 minutes, or less time than it takes to fill a conventional combustion engine vehicle's gas or diesel tank.

Skeptics, and there are many, say that automakers are notoriously unwilling to standardize critical systems - a requirement if the Better Place model is to be used -  and that motorists will resist the Better Place idea that they should obtain fuel for electric vehicles in prepackaged, pre-paid or leased blocks, the same way they buy minutes for their cell phones.

To date, only Renault has openly supported Better Place's swappable battery idea.

Even its partner, Nissan, while supplying batteries for the Renault EVs, has been decidedly cold to adopting that strategy for its own electric vehicles - the upcoming Nissan Leaf EV does not have an exchangeable battery

But Agassi is undeterred, and he has supporters. In addition to Israel, Denmark also has signed on to support a nationwide Better Place roll out in 2011, and the company has signed regional marketing agreements in Australia, the San Francisco Bay Area, the state of Hawaii, and Ontario, Canada.

California-basedTesla Motors also seems to be interested - its former engineering director told us last fall that the new Tesla Model S electric sedan has been designed so that it can use a swappable battery.

Agassi apparently doesn't see the U.S. as a primary market initially for Better Place, though. The country is too big and too politically divided to permit the kind of  nationwide agreement that gives Better Place a good opportunity to succeed.

The new funding, the company said in a statement Sunday, will help it expand in markets "where the business model economics and investor returns are optimized, notably in Europe and Asia."

Having HSBC on board has got to be a big help to Better Place in marketing its system as the banking house seems unequivocal in its endorsement:

"Better Place is a private sector solution to the issue of infrastructure provision for electric cars and can succeed without government subsidy and without sacrificing consumer expectations for personal mobility," said Stuart Gulliver, executive director of HSBC Holdings and CEO of the company's Global Banking and Markets operation.

Agassi's idea is that by separating the battery and the power to charge it from the auto purchase, EVs will be cheaper and people will find themselves paying no more for the batteries and electricity than thee now pay for gasoline each month.

Battery leases through Better Place would be based on the amount of range a customer needed each month, just as cell phone contracts are based on blocks of minutes of air time.

The company also sees establishment of a system of public chargers as essential to wide use of EVs and as part of its system proposes nationwide networks of public chargers so motorists can top up their EV batteries most anytime they make a stop to go shopping, visit a restaurant or movie theater, or are at work or even visiting friends.

Topping up batteries would extend the time, and distance, motorists could drive EVs without visiting a battery exchange station, he says.

Its agreement with the Israeli government calls for Better Place to launch a pilot program in Tel Aviv next year that ultimately would encompass nationwide installation of 50,000 charging stations and several hundred battery exchange stations to serve tens of thousands of Renault-built EVs.

Better Place last year told Renault Chairman Carlos Ghosn that it would commit to selling 100,000 of his company 's EVs in Israel and Denmark through 2016.

John O'Dell:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter.