Electric cars are coming to Israel

Palo Alto, Calif.-based Project Better Place is quickly moving from a well-funded startup to a well-connected reality with the news today that it's teaming up with the Renault-Nissan Alliance to launch an electric car and charging network in Israel.

The deal brings Project Better Place founder and CEO Shai Agassi back to his Israeli roots and establishes the first launch for the ambitious company.

The agreement was announced by Israeli President Shimon Peres.

"I met Shai before I hardly knew him. I heard about him. And, by the way, good things, which is very unusual," said Peres, getting laughs at the Jerusalem news conference.

"You are in business, the auto business, but we are in the same direction. To make the world a better place to live, to make the peace a better option to meet."

Peres said the project could create 50,000 jobs.

The plans call for 500,000 charging stations to be built across the tiny nation, allowing drivers to recharge their electric vehicles or swap batteries.

"Our intent is to actually generate as much of the electricity, or buy the electricity, from sources, obviously through the Israeli Electric Corporation, from, as much as possible, from sustainable green sources," said Agassi.

"Whatever source of generation, electric source of generation, we still completely eliminate all the particles and NOx emission at the ground, as well as reduce carbon emission, CO2 emission, by a factor of at least two," he said.

The cars will come from France's Renault, which plans to start selling an all-electric vehicle in 2011. Tokyo-based Nissan Motor (Nasdaq: NSANY) created the lithium-ion battery pack through its joint venture with NEC (OTC: NIPNY), also based in Tokyo.

The Renault-Nissan Alliance, formed in 1999, is the fourth largest automotive group in the world by sales volume.

The electric cars, a first from Renault, won't be exclusive to the Israeli market, but Israelis will be getting a discount, as the government there recently extended a tax incentive on the purchase of any zero-emissions vehicle until 2019.

Another incentive is the lifetime guarantee on the cars that buyers will be getting through Project Better Place, which will distribute the vehicles in Israel.

Renault president and CEO Carlos Ghosn said the cars would have a range of about 60 miles in city driving and up to 100 miles for highway driving, and accelerate from zero to 60 in 13 seconds with a top speed of about 68 miles per hour.

"This is going to be a sedan, with many passengers in it," said Ghosn. "We want, as possible, to make it a normal car. Same kind of driving, same kind of acceleration, same kind of speed limit."

Check out a prototype of the electric car based on Renault's Megane model >>

Project Better Place launched in October 2007 with a $200 million first round of funding, led by Tel Aviv chemical, shipping and technology company Israel Corp. (see Electric car charging startup raises $200M)

Backers also include Morgan Stanley, VantagePoint Venture Partners, and a group of individual investors.

The startup recently added another $30 million to its coffers, with the cash coming from Israel's Ofer Shipping, owned by the same family that controls Israel Corp.

Under the Project Better Place model, consumers will buy and own their car, but subscribe to energy, including the use of the battery, on the basis of how far they drive.

The company compares its system to the way cell phones are sold, with an initial purchase and then a monthly subscription for mobile service.

Calling it a "perfect first mass market," Project Better Place said 90 percent of car owners in Israel drivefewer than 70 kilometers per day, or 43.5 miles.

All of the major urban centers in Israel are no more than than 150 kilometers apart, according to the company, which said that electric vehicles could satisfy most of the population's transportation needs.

The entire framework for the Israeli development is expected to go through a series of tests starting this year.

Agassi said he's getting strong support from the Israeli government, which, if Project Better Place is successful, will be able to cut the amount of money it spends on oil from other countries.

Israel does not produce any oil.

"One of the things the secretary of finance has told us is that he is going to be my best partner. He said 'We want to you to succeed, because if you succeed we're going to tax you,'" said Agassi.