The EV Market Could Start Small, but Nissan's Carlos Ghosn Thinks Big

Last Updated May 28, 2010 2:26 PM EDT

Nissan CEO Carlos Ghosn is adept at making news with big pronouncements, and he has the whole world as his stage. Lately, he's been far more optimistic than nearly anyone else about not only the size of the coming EV market, but also his company's place in it. Given the realities of introducing wholly new technology into a still very troubled marketplace, a little more caution would be a good idea.

The height of his perhaps irrational exuberance was enacted Tuesday at the Detroit Economic Club, where he said that the Nissan Leaf battery car is sold out for 2010 and that the company may stop taking orders. But that was based on fairly 13,000 fairly casual Internet reservations in the U.S. -- the $99 people paid was fully refundable. History shows that mild displays of interest don't necessarily translate into selling cars. Toyota had tens of thousands of hand wavers in the pre-Internet days for the RAV-4 battery car, but only found homes for about a thousand. There was also extraordinary interest in GM's EV-1, and we know how that turned out.

The huge question is not whether the Leaf is good -- I've driven versions of it twice, and I think it's very good -- but whether the company can translate its 115,000 "hand wavers" and less than 20,000 to actual sales. Nissan shouldn't count on it.

Ghosn was still feeling expansive Wednesday, when he was on hand to mark the start of construction of a $1 billion lithium-ion battery plant next to Nissan's sprawling auto plant in Smyrna, Tenn. During a roundtable discussion, however, he equivocated a bit more than previously when asked about profitability. "This car will be a moneymaker, no doubt about it," he said. "We are not amateurs, and we would not have put $5 billion into this with no possibility of return. But will it make money in three, four or five years? I could give a different answer every month."

My prediction is that the Leaf will sell fantastically well-- in California. The $32,780 purchase price drops to a very affordable $20,280 there because of a $5,000 cash rebate unique to the state, plus a $7,500 federal tax credit. Combine affordability with a climate very friendly to green cars and the Leaf has excellent prospects. Its distinctive styling is also a big plus -â€" as with the Toyota Prius, driving a Leaf will advertise the owner's green credentials.

Ghosn gives the standard EV CEO response when asked about the market for EVs. Like Kevin Czinger of Coda, who I interviewed earlier in the week, he talks about the growing demand for cars in India and China that is driving up oil demand, cites the possibilities of imminent peak oil, gives a nod to the Gulf of Mexico oil spill, and adds that the planet is threatened by global warming. "We are not taking a risk by saying that in the long run the cost of oil will go up," he said.

I was in Smyrna for the groundbreaking, and watched Ghosn pull up in a blue Leaf (actually a barely functional prototype that would struggle to reach 10 mph). He said the ceremony marked "a big step forward in our global zero emission strategy," and could create up to 1,300 "green jobs." The plant will be 1.2 million square feet, and capable of producing 200,000 electric car battery packs annually, more than enough for the 150,000 Leafs the company plans to produce in Tennessee by 2012 (on existing assembly lines). If it ends up with unneeded capacity, Nissan can sell packs to other carmakers.

On video, Mark Swenson, Nissan vice president of product engineering, talk about how the new factory fits into the company's plans:

There was a lot of hyperbole on stage in Smyrna, but Nissan -- which is not only debuting the Leaf battery car at the end of the year, but also building batteries and advising cities on EV charging -- really does deserve credit for taking leadership in the EV space. There's no question the company, even with a $1.4 billion federal loan, is risking both its cash and its prestige.

And there are some good economic arguments to make for buying a Leaf. Consumers will pay $3 to charge their battery cars, versus $50 for a fill-up of largely imported oil, Ghosn said. "We see a huge opportunity to play a major role in transforming the transportation system and changing the image of the company," he said.

Reality is starting to sink in at Nissan that soon the Leaf will become an actual on-sale car. Spokesman Mark Perry, who showed off a cutaway battery pack, said that consumers are so far showing preference for Leafs in silver and blue, the latter being a "communications color" seen in most advertising and test cars. Perry also said that the company is working on fast charging, which should allow the car to be 80 percent recharged in less than 30 minutes. And he said that the Leaf's battery pack will be sufficiently robust to take 10 years of fast charging and still have 70 percent of battery capacity left.