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Better Place electric car startup pulls plug on US, Australia

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Gil Cohen Magen/Reuters/File

(Read caption) Shai Agassi, Better Place founder and chief executive, walks in front of an electric car during the inauguration of a new vehicle demonstration center in the Israeli city of Tel Aviv.

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A growing number of cars in the U.S. run either entirely or partially on electric power, and that trend is likely to accelerate with time. The shift from gasoline to electricity will present plenty of opportunities for auto start-ups, but one is already calling it quits.

As our colleagues at Green Car Reports note, the electric car company known as Better Place has pulled the plug on its U.S. and Australian operations. Better Place will continue to sell and service vehicles in Israel (where founder Shai Agassi resides) and in Denmark, but it will shutter its corporate headquarters in Palo Alto, California and its offices in Australia.

Does this spell doom for the future of electric cars? Not in the least. 

What does it mean for consumers? The jury is still out on that question.  

On the one hand, Better Place could simply be another victim of mismanagement. The company has been the subject of rumor and speculation for months, ever since it removed Agassi from his position as CEO and canned 40% of its workforce. Lackluster sales figures didn't help, either. In December, Better Place hired marketing whiz Peter Economides to refine the company's message, but it may have been too little, too late.

On the other hand, it's possible that the public just isn't that into Better Place's business model, which is, admittedly, a little complicated.

Better Place helped engineer vehicles to take advantage of its battery-swap stations and provides charging services for electric car owners. For example, it teamed up with Renault to create a special model of the Fluence Z.E. electric car, which comes with a battery that can be removed and replaced at a Better Place station. Better Place also partnered with General Motors to provide easy-access charging stations for owners of electric cars like the Volt. 

Better Place-compatible cars like the Fluence are sold to consumers at a discount, then Better Place provides charging and battery-swap services on a subscription basis. The company's hope is that consumers will be attracted to low-priced products but end up paying big bucks over time via subscription. It's a lot like mobile phone providers, which offer customers hardware for little or nothing, then spend the next two years milking them for profit.

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That's where the problem may lie. Car owners are used to warranties that tie them to a particular service provider after they've made their purchase. And of course, they're used to paying for gas and maintenance. A subscription for battery swapping or charging might cost the same as fuel for a conventional vehicle, but there's a difference between paying for use and paying in advance of use that may have been unsettling to customers.

As for Better Place's future, we can't say. On the downside, it still desperately needs to win over consumers. On the upside, Denmark and Israel are small countries, where Better Place can more easily roll out its charging infrastructure. To do the same here or in Australia would be costly and complicated. So, whatever the reason behind Better Place's withdrawal, it's probably for the best.

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