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  • So how would you run a whole country without oil?

  • That's the question that sort of hit me

  • in the middle of a Davos afternoon about four years ago.

  • It never left my brain.

  • And I started playing with it more like a puzzle.

  • The original thought I had: this must be ethanol.

  • So I went out and researched ethanol,

  • and found out you need the Amazon in your backyard in every country.

  • About six months later I figured out it must be hydrogen,

  • until some scientist told me the unfortunate truth,

  • which is, you actually use more

  • clean electrons than the ones you get

  • inside a car, if you use hydrogen.

  • So that is not going to be the path to go.

  • And then sort of through a process of

  • wandering around, I got to the thought

  • that actually if you could convert an entire country to electric cars,

  • in a way that is convenient and affordable,

  • you could get to a solution.

  • Now I started this from a point of view that

  • it has to be something that scales en masse.

  • Not how do you build one car,

  • but how do you scale this so that it can become

  • something that is used by 99 percent of the population?

  • The thought that came to mind is that it needs to be as good

  • as any car that you would have today.

  • So one, it has to be more convenient than a car.

  • And two, it has be more affordable than today's cars.

  • Affordable is not a 40,000 dollar sedan, right?

  • Alright? That's not something that we can finance or buy today.

  • And convenient is not something that you drive for an hour and charge for eight.

  • So we're bound with the laws of physics

  • and the laws of economics.

  • And so the thought that I started with was

  • how do you do this, still within the boundary

  • of the science we know today --

  • no time for science fair, no time for playing around with things

  • or waiting for the magic battery to show up.

  • How do you do it within the economics that we have today?

  • How do you do it from the power of the consumer up?

  • And not from the power of an edict down.

  • On a random visit to Tesla on some afternoon,

  • I actually found out that the answer comes

  • from separating between the car ownership

  • and the battery ownership.

  • In a sense if you want to think about it this is the classic

  • "batteries not included."

  • Now if you separate between the two,

  • you could actually answer the need for a convenient car

  • by creating a network,

  • by creating a network before the cars show up.

  • The network has two components in them.

  • First component is you charge the car whenever you stop --

  • ends up that cars are these strange beasts that drive

  • for about two hours and park for about 22 hours.

  • If you drive a car in the morning and drive it back in the afternoon

  • the ratio of charge to drive is about a minute for a minute.

  • And so the first thought that came to mind is,

  • everywhere we park we have electric power.

  • Now it sounds crazy. But in some places around the world,

  • like Scandinavia, you already have that.

  • If you park your car and didn't plug in the heater,

  • when you come back you don't have a car. It just doesn't work.

  • Now that last mile,

  • last foot, in a sense,

  • is the first step of the infrastructure.

  • The second step of the infrastructure needs to take care

  • of the range extension.

  • See we're bound by today's technology on batteries,

  • which is about 120 miles if you want to stay within

  • reasonable space and weight limitations.

  • 120 miles is a good enough range for a lot of people.

  • But you never want to get stuck.

  • So what we added is a second element to our network,

  • which is a battery swap system.

  • You drive. You take your depleted battery out.

  • A full battery comes on. And you drive on.

  • You don't do it as a human being. You do it as a machine.

  • It looks like a car wash. You come into your car wash.

  • And a plate comes up, holds your battery, takes it out, puts it back in, and

  • within two minutes you're back on the road

  • and you can go again.

  • If you had charge spots everywhere,

  • and you had battery swap stations everywhere,

  • how often would you do it? And it ends up

  • that you'd do swapping less times than you stop at a gas station.

  • As a matter of fact, we added to the contract.

  • We said that if you stop to swap your battery more than 50 times a year

  • we start paying you money

  • because it's an inconvenience.

  • Then we looked at the question of the affordability.

  • We looked at the question, what happens when the battery is

  • disconnected from the car.

  • What is the cost of that battery?

  • Everybody tells us batteries are so expensive.

  • What we found out, when you move from molecules to electrons,

  • something interesting happens.

  • We can go back to the original economics of the car and look at it again.

  • The battery is not the gas tank, in a sense.

  • Remember in your car you have a gas tank.

  • You have the crude oil.

  • And you have refining and delivery of that crude oil

  • as what we call petrol or gasoline.

  • The battery in this sense, is the crude oil.

  • We have a battery bay. It costs the same hundred dollars

  • as the gas tank.

  • But the crude oil is replaced with a battery.

  • Just it doesn't burn. It consumes itself

  • step after step after step.

  • It has 2,000 life cycles these days.

  • And so it's sort of a mini well.

  • We were asked in the past when we bought an electric car

  • to pay for the entire well, for the life of the car.

  • Nobody wants to buy a mini well when they buy a car.

  • In a sense what we've done is

  • we've created a new consumable.

  • You, today, buy gasoline miles.

  • And we created electric miles.

  • And the price of electric miles ends up being a very interesting number.

  • Today 2010, in volume,

  • when we come to market, it is eight cents a mile.

  • Those of you who have a hard time calculating what that means --

  • in the average consumer

  • environment we're in in the U.S.

  • 20 miles per gallon that's a buck 50, a buck 60 a gallon.

  • That's cheaper than today's gasoline, even in the U.S.

  • In Europe where taxes are in place,

  • that's the equivalent to a minus 60 dollar barrel.

  • But e-miles follow Moore's Law.

  • They go from eight cents a mile in 2010,

  • to four cents a mile in 2015,

  • to two cents a mile by 2020.

  • Why? Because batteries life cycle improve --

  • a bit of improvement on energy density, which reduces the price.

  • And these prices are actually with clean electrons.

  • We do not use any electrons that come from coal.

  • So in a sense this is

  • an absolute zero-carbon, zero-fossil fuel

  • electric mile at two cents a mile by 2020.

  • Now even if we get to 40 miles per gallon

  • by 2020, which is our desire.

  • Imagine only 40 miles per gallon cars would be on the road.

  • That is an 80 cent gallon.

  • An 80 cent gallon means, if the entire Pacific

  • would convert to crude oil,

  • and we'd let any oil company bring it out and refine it,

  • they still can't compete with two cents a mile.

  • That's a new economic factor,

  • which is fascinating to most people.

  • Now this would have been a wonderful paper.

  • That's how I solved it in my head. It was a white paper I handed out to governments.

  • And some governments told me that it's fascinating

  • that the younger generation actually thinks about these things.

  • (Laughter)

  • Until I got to the

  • true young global leader, Shimon Peres, President of Israel,

  • and he ran a beautiful manipulation on me.

  • First he let me go to the prime minister of the country,

  • who told me, if you can find the money you need for this network,

  • 200 million dollars,

  • and if you can find a car company

  • that will build that car in mass volume,

  • in two million cars -- that's what we needed in Israel --

  • I'll give you country to invest the 200 million into.

  • Peres thought that was a great idea.

  • So we went out, and we looked at all the car companies.

  • We sent letters to all the car companies.

  • Three of them never showed up. One of them asked us

  • if we would stay with hybrids and they would give us a discount.

  • But one of them Carlos Ghosn, CEO of Renault and Nissan,

  • when asked about hybrids said something very fascinating.

  • He said hybrids are like mermaids.

  • When you want a fish you get a woman and

  • when you need a woman you get a fish.

  • (Laughter)

  • And Ghosn came up and said,

  • "I have the car, Mr. Peres; I will build you the cars."

  • And actually true to form, Renault has put a billion and a half dollars

  • in building nine different types of cars that fit this kind of model

  • that will come into the market in mass volume --

  • mass volume being the first year, 100 thousand cars.

  • It's the first mass-volume electric car,

  • zero-emission electric car in the market.

  • I was running, as Chris said,

  • to be the CEO of a large software company called SAP

  • And then Peres said, "Well won't you run this project?"

  • And I said, "I'm ready for CEO" And he said,

  • "Oh no no no no no. You've got to explain to me,

  • what is more important than saving your country and saving the world,

  • that you would go and do?"

  • And I had to quit and come and do this thing called A Better Place.

  • We then decided to scale it up.

  • We went to other countries. As I said we went to Denmark.

  • And Denmark set this beautiful policy;

  • it's called the IQ test.

  • It's inversely proportional to taxes.

  • They put 180 percent tax on gasoline cars

  • and zero tax on zero-emission cars.

  • So if you want to buy a gasoline car in Denmark, it costs you about 60,000 Euros.

  • If you buy our car it's about 20,000 Euros.

  • If you fail the IQ test they ask you to leave the country.

  • (Laughter)

  • We then were sort of coined as the guys

  • who run only in small islands.

  • I know most people don't think of Israel as a small island,

  • but Israel is an island -- it's a transportation island.

  • If your car is driving outside Israel it's been stolen.

  • (Laughter)

  • If you're thinking about it in terms of islands,

  • we decided to go to the biggest island that we could find,

  • and that was Australia. The third country we announced was Australia.

  • It's got three centers --

  • in Brisbane, in Melbourne, in Sydney --

  • and one freeway, one electric freeway that connects them.

  • The next island

  • was not too hard to find, and that was Hawaii.

  • We decided to come into the U.S.

  • and pick the two best places --

  • the one where you didn't need any range extension.

  • Hawaii you can drive around the island on one battery.

  • And if you really have a long day you can switch,

  • and keep on driving around the island.

  • The second one was the San Francisco Bay Area

  • where Gavin Newsom created a beautiful policy across all the mayors.

  • He decided that he's going to take over

  • the state, unofficially, and then officially,

  • and then created this beautiful Region One policy.

  • In the San Francisco Bay Area not only do you have

  • the highest concentration of Priuses,

  • but you also have the perfect range extender.

  • It's called the other car.

  • As we stared scaling it up

  • we looked at what is the problem to come up to the U.S.?

  • Why is this a big issue?

  • And the most fascinating thing we've learned is that,

  • when you have small problems on the individual level,

  • like the price of gasoline to drive every morning.

  • You don't notice it, but when the aggregate comes up

  • you're dead. Alright?

  • So the price of oil, much like

  • lots of other curves that we've seen,

  • goes along a depletion curve.

  • The foundation of this curve is that we keep losing the wells that are close to the ground.