Better Place draws massive $350M to charge electric cars

Electric cars will be making their big debut later this year — but one of the biggest questions standing between their release and wide market adoption is charging infrastructure. It doesn’t make much sense to buy a car that you can only fuel up at home.

Leading the pack of companies working to solve this problem, Better Place has just landed $350 million second round of equity led by the HSBC Group — a potential turning point for the electric car and supporting industries.

The deal pegs the Palo Alto, Calif. company’s valuation at $1.25 billion. Some critics say that setting up enough charging and battery-switching stations to rival their gas counterparts will be prohibitively expensive; others say there won’t be enough EVs and plug-in hybrids on the road to support charging station development. It’s a classic chicken-and-egg scenario. But Better Place’s funding suggests the powers that be believe in the feasibility of infrastructure for an electrified generation of vehicles.

It is also one of the largest investments HSBC has made in the cleantech space to date — contributing $125 million to the total and taking a 10 percent stake. It was backed up by Morgan Stanley Investment Management, Lazard Asset Management, Israel Corp., VantagePoint Venture Partners, Ofer Hi-Tech Holdings and Maniv Energy Capital. This is also a good sign that big, mainstream banks are getting in on the act, foreshadowing an avalanche of interest in making electric cars and other advanced vehicles a realistic option for consumers.

Recently, Better Place has shifted its focus to battery-switching stations over straightforward plug-in charging stations like those being developed by Coulomb Technologies. The company’s plan is to launch a chain of sites where drivers could trade in depleted batteries for fully-charged ones. Right now, it’s on target to do so by the end of 2011, when Renault brings its electric cars with switchable batteries to market, focusing first on Israel and Denmark, then North America and Australia.

Battery switching has become more popular as EV specs have been released. The average advanced vehicle to hit the market will have a driving range of 100 miles and a battery that takes five hours to charge. No one is going to want to wait even a fraction of that time on the side of a highway during a long-distance drive. To accomplish its goals, Better Place will need billions, not just millions, but this HSBC financing is a solid start.

Better Place has raised an impressive $700 million in capital to date — leading to IPO predictions, though perhaps prematurely. It banked $200 million of that in a first round in 2008. But the HSBC deal propels the company to the top-tier of cleantech contenders like Solyndra, Tesla Motors, Fisker Automotive and eSolar, all of which have received sizable chunks of money, mostly from the government.