This spring, two greentech venture capitalists took delivery of their long-awaited fully electric cars. Both men are convinced their slick new rides augur a cleaner future for all human transportation. But both can’t be right.

Steve Jurvetson clutched his key to the first production $98,000 Model S Signature in June before cheering throngs at Tesla’s Fremont, California factory. While video of Jurvetson’s maiden voyage coursed through Twitter, half a world away here in Israel, Greylock’s Noam Gressel had just completed two months in his modest $31,000 Better Place Renault ZE, one of the first sold to the public. No crowd, no speeches, no video — just a candid, enthusiastic blog post from Gressel.

Which VC’s car has a legitimate shot at becoming that elusive vehicle that finally nudges us over the hump toward mainstream EV adoption? The answer will have less to do with the car itself and more with business model of the company behind it. Consider what Dartmouth’s Ron Adner said about the Chevy Volt and Nissan Leaf in the Wall Street Journal recently:

Great cars, terrible sales — here is your e-car paradox… For the electric car to be anything more than a plaything for rich environmentalists — and have any impact on energy security or the environment — it has to succeed in the mass market. Unfortunately, manufacturers are approaching the electric car as another new product when what they really need is a new business model. The problem is not the cars themselves (which are technology marvels), or even the availability of charging infrastructure (which is improving thanks to government largess). Unless two neglected factors — battery depreciation and power-grid management — are addressed, costly efforts at improving e-cars and charge spots will fail in the mass market.

Only one of the two cars launched this spring addresses these issues, and it’s not the one that comes standard with Nappa leather interior, Alcantara accents, and carbon fiber décor.

In this land of hyper-ambitious startups, Better Place is the biggest, baddest, most hatzuf* yet — out to achieve nothing less than to wean humanity off its oil reliance. Shai Agassi, who was in line for the CEO role at SAP when he left to found Better Place in 2007, has now raised a whopping $750 million to tackle head-on the issues that have hobbled the EV industry to date. Better Place isn’t an Israeli startup per se — the initial team assembled in Silicon Valley and they’re currently doing a full global rollout, with Israel serving as the linchpin.

As Adner notes, there are two main reasons electric vehicles haven’t yet captured the mainstream: the battery is too damn expensive, and driving range between time-consuming recharges has been way too limited. Better Place addresses both issues in a novel way,  separating battery ownership from vehicle ownership while building a network of quick battery switching stations that allow for long trips with very short refueling stops.

So while Tesla sells expensive, beautiful cars — Elon Musk and team are betting that aesthetics and enhanced performance will expand interest in EVs — Better Place is actually in another market entirely: EV infrastructure and power supply. The 100,000 Renaults they now market in Israel and Denmark are intended merely to get the ball rolling, but Better Place has no intention of becoming a car company. So while its massive 85 kWh battery constitutes about half the cost of Jurvetson’s Tesla, Gressel paid nothing for his Renault’s battery. As battery technology improves, depreciation and resale of existing units falls on Better Place, not its customers.

Owners of the Better Place cars we’re starting to see on Israeli roads choose among six different monthly plans based on the distance they drive. It’s like buying voice and data service plans from your cell carrier, completely separate from your mobile device. The plans are priced 25-30 percent below the cost of driving a typical gas-powered car. And should oil prices collapse, Better Place says they’re prepared to renegotiate any existing contract.

I spoke with Gressel (who’s not a Better Place investor) and two other private owners of Better Place Renaults here, and everyone seems thrilled with the experience so far. I took one for a spin around Better Place’s northern Tel Aviv track and was surprised how responsive it is — the engine has no gearbox and accelerates like a turbo. And then of course there’s the blissful silence of an EV. Imagine a city freeway at rush hour with zero engine noise and emissions, just the wind and soft crunch of tires on asphalt.

Through the rest of this year, Better Place plans to activate 40 battery changing stations to cover Israel. Currently seven are running, with a new one sprouting up every week or so. The first changing station in Denmark, the second Better Place launch site, went live last week (check out the parade of the first 40 Danish cars). A battery switch takes just five minutes, and you can stay in your car, like at a car wash.

But since most electric vehicle charging can be done slowly, at home or work (through “trickle charging”), one of the concerns about a broad public move to EVs has been the increased aggregate load on the electric grid. Better Place devised a clever solution to this: “managed charging,” which is really only possible with its model of separating car ownership from energy provision.

Centralized diagnostic software learns how far each driver typically drives each day, and charges its entire network of batteries just enough to satisfy that, with some to spare (if you plan a long drive, you can request more overnight juice). In addition, Better Place is in constant communication with the electric company to time and locate its charging to avoid exacerbating existing demand surges on the grid — during, for example, heat waves.

So how and when does Better Place make money? I understand that the highly capital-intensive initial stage required the company to burn through over $400 million of its $750 million financing. But Joe Paluska, Better Place’s VP of Global Policy and Communications, tells me that aside from that ongoing infrastructure build, the company’s sales model is already profitable. Ongoing, their model assumes that oil costs will rise over time while batteries become more efficient and cheaper. So with its consumer packages priced at a fixed percentage below gas costs, Better Place expects to profit from that growing spread.

Of course, a whole lot can still go wrong for Better Place, as it rolls out globally. Its model makes a ton of sense in principle, but in many ways it’s swimming against the tide. To name just three altogether possible bad scenarios:

  • Battery efficiency growth stalls — Despite massive scientific effort in this field, it’s proven very difficult to significantly enhance the output of Lithium Ion batteries, and every new proposed battery chemistry (such as nanomaterials) has been way too expensive to make sense commercially. Better Place insists its financial model works even with its existing 24 kWh battery, but without a step change improvement in battery efficiency in the next decade, can it squeeze out margins that would allow even returning investors’ money?
  • DC fast charging works — Chevrolet, Nissan and Tesla are counting on a nationwide U.S. buildout of DC fast charging stations to enable long trips in their EVs. These stations are more than ten times cheaper to build than Better Place’s battery changing stations and currently enjoy federal government funding. Better Place points to three big problems with DC fast charging: the time required (over 30 minutes including cooling), plus the heavy impact on both the battery and the power grid. But if these technical limitations can be overcome while battery prices fall, it would end up much harder to justify the Better Place model.
  • Industry resistance grows — Better Place chose Israel, Denmark, and Australia —  nations with progressive renewable energy policies — for its initial launch, since at this stage it needs both government subsidies (or vehicle tax breaks) and policymaker cooperation on regulation and licensing. But the automaker and oil industries wield enormous power in Washington and Berlin, and will almost certainly resist a promising new private player with ambitions to gut the core of their business. Without government support from the major western powers, how far can Better Place go?

On the final point, Paluska insists that real policy change in the US begins at the city level, and points to Better Place’s electric taxi program now underway in the Bay Area as a sign of progress. This involves switch stations in the San Francisco-to-San Jose corridor to enable a fleet of zero emission, switchable-battery taxis.

So the current plan is to focus on such friendly locales and give consumers a better deal than gas, along with an amazing customer experience. They’ve done little paid marketing here in Israel, relying more on their initial customers to spread the love. It’s true that the first wave of customers are drawn at least as much to the idea of an electric vehicle as they are to the savings. As Gressel says, “I would much rather visit a switching station than a greenhouse-gas-and-fume-emitting, OPEC-controlled, range-anxiety-hoax-promoting gasoline station.”

At the same time, as with any super ambitious project, skeptics abound — including (and not surprisingly) here in Israel. Almost anyone you ask has something to gripe about on Better Place, like my local corner store owner: “Tell me, why does this Agassi get special treatment? You watch, he’ll just become another tycoon!” But as Saul Singer, who made Better Place the marquee story in the intro to his best-selling Startup Nation says, “Once people begin to see these cars on the road and realize they’re for real — below the cost of standard cars and with no real downside, all this cynicism will fade away.” He’s got one on order.

*[Editor’s note: “Hatzuf” is a Hebrew word, the adjective form of Yiddish/Hebrew “hutzpah.”]