When is a car like a mobile ‘phone?
Posted on November 5, 2007 by Richard Beddard
Filed Under Ramblings |
When it’s powered by electricity and given away for free…
How prescient that Money Terms should have defined the razor blade business model last week, where a company sells a product at a low price to get people to buy complementary products.
Think razors and blades, or printers and inks, but not, for example, cars and fuel, where the initial cost of the car is high and the price of fuel (supplied by somebody else) is steadily rising too.
Step forward Project Better Place, which made a splash last week when it announced plans to build an electricity grid to fuel cheap electric cars. The company will subsidise the cars, just like mobile networks subsidise ‘phones.
That might enable it to beat the Catch-22 facing any revolutionary new fuel, that nobody will buy new cars adapted for it until they can refuel everywhere, and nobody will build a refueling network until there is demand for the cars.
Project Better Place says its business model will work, because, against the backdrop of peak oil and climate change, the price of oil is rising (in Europe, it says, the average price of a used car is less than the cost of fueling it for a year) and the cost of batteries is falling.
Blogger and editor of Wired, Chris Anderson, is jubilant - and I think I can see why. He wrote The Long Tail, a business book that also made a splash, last year.
His big idea was that the cost of production, distribution and marketing is falling so low a new era of bounty and choice is opening up to the consumer.
One of the weaknesses of the book, I thought, was its focus on the media and entertainment businesses, where it’s fairly easy to see how digitisation and the Internet have brought down costs and extended markets across the globe.
Shai Agazzi, Better Place ceo, who knows Chris Anderson and calls his own blog The Long Tailpipe, likens his grid to the digitisation of oil. Instead of transporting energy by tanker and super-tanker, Better Place will be sending it as electrons, generated from renewable energy sources.
Maybe it’s a $200m pipedream. But if it’s not, it will be every bit as disruptive as the turmoil facing the media and entertainment industries since another network, the Internet, took off.
Chris Anderson:
Shai’s company is taking a bigger view of the business they’re in–rather than selling cars, they’re selling personal transportation, and charging a rate proportional to use. When fuel seemed nearly free compared to price of the car, companies sold cars. Now cars seem nearly free compared to the cost of the fuel. Thus an opportunity for a car company that thinks different.
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