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Now’s the time for electric cars

NEW YORK – What do screaming protesters at the G-8 and G-20 summits in Canada last week have to do with a battery service startup that has received $700 million in investment capital from Morgan Stanley and Lazard? And what do they have to do with this month’s planned initial public offering by Tesla Motors, an electric-car company?

The answer has to do with hopes for an oil-free future that was building even before Deepwater Horizon became a household word. Now many innovative companies are counting on anti-BP fury to take consumers over the edge and adopt alternate energy projects that were already in progress.

Consumers may even embrace the product they have famously rejected, the electric car. Better Place, a car battery service startup, begins with the wager that recharging batteries is the big obstacle that stopped consumers from buying electric vehicles. Using Israel as a test site, Better Place will open 75 stations where electric cars can simply swap an exhausted battery for a new one in the same time it takes to refuel.

There’s an old business theory that suggests the electric car may indeed zoom ahead this time. That theory, called disruptive innovation, was developed by Clayton Christensen, a guru at Harvard Business School back in the 1990s.

It boils down to this: A big company makes something that consumers buy en masse, a group to which it is beholden. Paradoxically, a company’s emphasis on good service can be an error. When management caters too extensively to extant clients, it forgets to develop new markets.

Meanwhile, a smaller group has an alternate idea that has flaws and no one even knows if a market for it exists. Over time, the quality of this marginal product improves. Next, the new product finds a crowd that is willing to accept imperfect technology because it likes the item for other reasons. These are the legendary first adopters, the MP3 crowd. Suddenly the alternate product is spreading like oil in the Gulf. The big company product seems as irrelevant as a cassette tape recorder.

Christensen laid out the reasons the electric car was failing, using as evidence the old Chrysler electric minivan. The vehicle required 1,600 pounds of batteries, which slowed acceleration. It cost five times as much as a comparable gas-powered model. It traveled less than 100 miles before needing to refuel, and recharging required hours.

Others noted that the viability of the electric car concept seemed fatally linked to the price of gasoline at the pump. Hence the timorous retreat to the hybrid. The question is whether all the current events of recent years, from two wars to multiple oil price spikes to, now, the BP spill, constitute a permanent change.
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Source: journalgazette.net

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