Buy the car, lease the battery

The auto industry’s transition to alternative energy won’t just affect oil companies. It’s destined to disrupt and reinvent supply chains for fuel, financing and just about everything else that makes a car run. All of which translates into unprecedented opportunities for entrepreneurs. The latest evidence: Norway’s two-seat, electric-powered Think City car—set to go on sale in the coming months—will come with an owner financing package unheard of in the auto industry. Consumers will pay an estimated USD 15,000 to 17,000 for the vehicle, but the company plans to lease the Think’s battery. And for good reason: on its own, the battery would cost an estimated USD 34,000, more than the price of a low-end luxury vehicle in most countries. Moreover, the Think battery’s useful life will depend on how the vehicle is used. Meaning: if Think owners were compelled to buy the battery along with the car, they’d be assuming risks few vehicle buyers would tolerate. The workaround Think has devised is a USD 100-200 per month bundle that will include the battery lease plus other services such as insurance and mobile internet access. The latter will enable the company to remotely monitor the battery’s remaining useful life. As the battery’s ability to recharge declines with age, the company will automatically offer owners the chance to replace it or alternately keep the battery in exchange for a lower monthly leasing fee. Think’s battery-leasing business model differs sharply from that of US electric car maker Tesla Motors. With a batteries-and-all price tag of about USD 100,000, the sporty Tesla is being marketed as status symbol for Hollywood celebrities and Silicon Valley titans. Notwithstanding, under an agreement announced this spring, Tesla will help supply Think with battery packs. Notably, both Think and Tesla are start-ups, aptly illustrating how the switch to alternate fuels will make room for innovative upstarts in an industry dominated by giants. (Related: The going is green—and electric.) Spotted by: HL Tay