No Such Thing as a Free Car

Chris Anderson, author of The Long Tail, blogged today about a new company, Project Better Place, that proposes to give away electric cars with subscription plans for the electricity.

In some ways, this sounds like a great idea. As Anderson writes, it’s a classic model that usually works well: give away the razor, sell the blades. Lowering costs and helping the environment are great, of course, assuming the electricity is generated efficiently in the first place.

But what’s to prevent the downsides that come with similar mobile phone contracts? It’s self-evident that the mobile phone model drives up costs and hinders innovation. How will this be any different? I imagine these cars will come with minimum use contracts. When you can only recharge your car at a PBP charge station, what’s to prevent them from jacking the prices? What motivation do they have to innovate and improve the service, or even maintain it, for that matter? What happens with your car if you’re not happy with your service when your contract expires?

PBP’s fact sheet (pdf) even directly cites the phone contracts as inspiration:

The business model for the electric cars will be similar to that used by mobile phone operators. In the same way that wireless operators deploy a network of cell towers to provide an area of mobile phone coverage, Project Better Place will establish a network of charging spots and battery exchange stations to provide ubiquitous access to electricity to power electric vehicles. The company will partner with car makers and source batteries so that consumers who subscribe to the network can get subsidized vehicles which are cheaper to buy and operate than today’s fuel-based cars. Consumers will still own their cars and will have multiple car models to choose from.

This reminds me of People PC, which offered a free computer with an ISP subscription, very briefly in 1999. It wasn’t very successful; they eventually dropped the “free” PCs and made it just another ISP. People PC, Project Better Place and mobile phones are all basically financing plans. Most people get financing on their cars anyway.

It’s worth noting a few differences between the above models and the razor blades:

  • Razor blades are relatively cheap, compared to a car. If you don’t like them, it’s no big deal to throw the whole thing away.

  • Razors don’t come with a contract specifying a minimum number of blades.

  • You can still use your razors with other compatible blades.

With all that freedom that shavers have with their blades, the companies still somehow manage to keep us buying over-priced blades. They innovate by adding more blades, vibrating and changing the color of that little strip of lotion or whatever. Maybe the free car people can learn from this and find a way to make it work without following the cell phone model?