Nissan Hopes Its New Electric Car Will Change Consumer Behavior
NEW YORK--Despite the high stakes for Nissan on the launch of the Leaf, Carlos Tavares, the chairman of Nissan Americas, managed to look relaxed as the car's 24-city tour came to an end Thursday in Manhattan. To an extent, his career depends on the success of the company's first all-battery car. But if he was feeling any pressure, you would not have known it from his Chesire Cat-worthy grin.
Nissan (and its partner Renault) are betting heavily on the Leaf, with the enthusiastic support of the executive who heads both companies, Carlos Ghosn. The other Carlos, who is Portuguese, has also had a very public role in presenting the car around the world. Tavares, who is only 48, has nonetheless been with Nissan or Renault since 1981. He joined the latter as an engineer and moved up to run the company's C platform (midsized cars). He moved from Renault to Nissan under Ghosn's stewardship in 2004.
Although Renault owns a 44 percent stake in Nissan, the two automakers have turned in very different balance sheets lately. On Thursday, Renault announced a $4.2 billion loss for 2009. Renault owns a 44 percent share of Nissan, which had better news: A profit of $501 million for the fourth quarter of last year. The European market is particularly challenging right now, with 10 percent declines in 2010. Peugeot also showed a loss for the year.
Nissan is betting that the Leaf and other electric cars won't just help the company's balance sheet, but they may also change consumer behavior. "Zero emission vehicles will change how people use their vehicles," Tavares told me in an interview before the Leaf press conference Thursday night. "The power will come to you: You'll be able to charge in your garage, in parking lots and in shopping malls." Fifteen-to-thirty-minute fast charging at malls--offered free by retailers who want to grab captive shoppers--has become an object of faith for carmakers. When I asked Tavares if Nissan had talked to Wal-Mart, Home Depot or Best Buy about the retailers adding charging stations, he said no, but the benefit seems clear. "People will spend $100 in the store, and the charge costs, what, $2?" he asked.
The Leaf is headed for the market in Europe, Japan and the U.S. at the end of the year. Pricing is a major issue, and the company will finalize the price in April. Tavares confirmed in New York that Nissan will not, as previously thought, lease battery packs to customers. The car itself will be sold or leased, but based on focus group feedback it will come with the batteries.
If the Leaf battery pack, built with NEC, really does cost Nissan $10,000 each (as BusinessWeek has reported), then it's hard to imagine that the company can sell the cars at approximately the same price as a Toyota Prius, which starts at $22,800. That approximate price (attributed to a "spokesman") was cited in an AP dispatch, along with an estimate of 20,000 units moved in the first year. Tavares declined to provide such an estimate in his interview with me.
"This is a real car," Tavares said, alluding to past examples that simply spun on show stands. He pointed to the sole Leaf on display (which, ironically, was not fully functional). "We have delivered zero emission at the same cost of driving a gasoline car--you don't have to be green to buy a Leaf." Tavares said that the company's studies have shown that 95 percent of commuters actually drive less than 100 miles (the car's range on lithium-ion batteries) daily. But "range anxiety" may be an initial barrier for many potential buyers.
Renault and Nissan are also partnered to deliver public charging. In Israel, the Renault-Nissan Alliance is working to deliver not only a network of charge points but also electric versions of the Renault Laguna (a family car launched in 1993) with swappable batteries for longer trips. Tavares said that swappable batteries are "not needed in the U.S. market," where many homes have multiple cars, fast charging is likely to be available and trips are relatively short. The Leaf will not have swappable batteries.
The Leaf remains a highly speculative proposition, and pricing makes a big difference. Nissan has a list of 50,000 people expressing interest in the car by clicking on a website or filling in a form, but converting them into buyers is a delicate dance. Nissan may have to subsidize the initial years of the Leaf, but Tavares is firm that a healthy profit will be necessary. "All of our business plans and cost targets are based on profitability--the program needs to be sustainable," he said.
But a recent Pike Research poll shows that would-be EV buyers are very price sensitive. The study said that 48 percent of Americans would consider buying a plug-in hybrid. But if they were assured that it would cost no more than 10 percent in excess of their current car, the number jumped to 83 percent joining the coalition of the willing.