Cutting-edge technology never comes cheaply. Automakers routinely subsidize it in new cars in new markets to gain a foothold, or even a competitive advantage--and still can lose money on innovation.Does Nissan plan to lose money with its upcoming electric car, the 2011 Leaf?
"We don't," says Nissan director of product planning Mark Perry.
On hand to make a major announcement about Leaf sales at Plug-In 2010, an electric-vehicle conference in San Jose, Calif., Perry says that Nissan is uniquely positioned to grab the lead in the race to build and sell electric cars on a mass scale with the 2011 Leaf, which has been available for orders since earlier this year.
Perry points out that Nissan has been developing battery technology for most of the past two decades--technology that now is finding a home in the Leaf hatchback, which enters production soon at a Nissan plant in Oppama, Japan.
"We have 17 years of R&D coming to market," he says. "It's our battery pack. We're not paying somebody else's margin."
Economies of scale
Perry says Nissan sees mass production as the ways to reducing the cost of the Leaf. The company will build the Leaf at the Oppama factory until the end of 2011, when an expansion at its Tennessee manufacturing complex and a new battery plant will come online. After the Leaf begins production in America, Nissan will add production in Europe at facilities in France, the U.K. and Portugal.
Given the lack of advances in battery chemistry, and Nissan's investment in proprietary technology, the company will depend on the cost efficiencies of mass production to lower the Leaf's cost over its life cycle. Across all the factories to be opened, Nissan will be capable of building 500,000 electric cars per year.
The cost of the Leaf program also will be amortized over years, and across a range of Nissan products. "Car programs typically are 5-7 years long," Perry notes. "You try to make your money over that period." The Leaf likely will follow that typical cycle, and it will be joined by other Nissan electric vehicles over its lifespan. The new vehicles will include an electric car for the Infiniti brand; an electric commercial vehicle; an unnamed electric vehicle for the Nissan brand. All will help spread the cost of the electric-car technology across a wider swath of Nissan vehicles, up to 10 percent of the company's annual sales volume.
Nissan may have its best advantage in timing. The company will virtually own the mass-market electric-car space for at least a year before any other brand has another EV to sell. Ford will sell an electric Focus in 2012; Tesla says its Model S sedan is on track for 2012 as well.
"Those who get there first, and those who get there with a cost advantage, should have an advantage," Perry says. "That's what we're trying to do."
Leaf + used car?
The first Leaf owners will take delivery of their electric cars late this year, and Nissan will launch the car in a handful of regions as it ramps up production. Pre-registered customers in Portland, San Diego, Phoenix/Tucson, eastern Tennessee and Hawaii will be the first to receive cars, with markets like Atlanta, North Carolina, and Boston expected to join the list after the first of the year.
Nissan has amassed more than 16,000 deposits for the Leaf, but is fighting a misperception that the car is sold out. Potential buyers will have to wait their turn, Perry says, but by the end of next year, drivers in all 50 states will be able to purchase a Leaf--and the online registration process remains open.
Some drivers will get a better deal than others, of course. While the 2011 Leaf is a compact car and carries a base price of $32,780, Perry says after federal and state tax credits, the Leaf checks in well below the average price of a new car--about $27,000 last year, he says.
The base price doesn't account for the $7,500 federal tax credit that's anticipated, bringing the effective price for most buyers down to $25,280. State incentives include a $5,000 tax rebate in California, $5,000 tax credit in Georgia, and $1,500 tax credit in Oregon, plus carpool-lane access in many places.
No matter which state the Leaf calls home, "we're at $25,000," he explains. "We're at the left side of that curve."
And for those concerned about owning a car with a usable driving range of 100 miles, Perry points out that with the Leaf, Nissan is "going to be $10,000 less than anyone else out there. You could get a used car for that."