Can Nissan stay relevant in the EV space?

LEAF Charge Port Lid

Will others take the lead?

When Nissan introduced the LEAF to the US market in December of 2010 I don’t know that anyone saw what this vehicle would do to the future of transportation. Certainly there were lofty goals and aspirations, but much of that was dreams and wishes with no real understanding of how this vehicle would impact the market simply because a change like this in the automotive world had never been seen before on this scale. True, GM came to market with the EV1 in 1996 – and produced a whopping 1,100 units over three years. Also, GM did not sell a single vehicle. They leased every one. The LEAF sold roughly 90,000 in its first five years in the US. Nissan came to market with a plan for a mass market EV, a plan which they have followed through on with the ripples being felt around the globe. When the LEAF came out, the only other battery electric car on the market in the US at the time was the low volume Tesla Roadster which became available in 2008. Chevrolet also launched the Volt with its onboard 4-cylinder range extending gasoline engine in December 2010. Since that time manufacturers from Asia, Europe, and the US have all jumped aboard the EV train offering pure battery electric vehicles, range-extended battery electric vehicles, and plug-in hybrid electric vehicles with some having already gone by the wayside. This time the EV movement is carrying much greater momentum than its mid-90’s attempt. But with modern second generation vehicles with greater range right around the corner is Nissan positioned to hold the market share that they established with the first generation LEAF?

General Motors has already announced the launch of the 2017 Chevrolet Bolt with production beginning the end of this year. That could mean deliveries either late this year or early next year. Chevrolet’s first true EV (if you don’t count the Spark EV, which many don’t), the Bolt carries a 60 kilowatt hour battery pack which should provide an EPA range of over 200 miles. When introduced at the Consumer Electronics Show in Las Vegas earlier this year, GM CEO Mary Barra placed the cost at “around $30,000 after government incentives”, which would put the price around $37,500. Both 60 kWh and $37,500 are important to keep in mind if your name is Nissan because currently their least expensive 30 kWh SV trim level starts at $34,200. But the Chevy Bolt is only one point of concern for Nissan. The Tesla Model 3 also lurks behind the curtain.

The Tesla Model 3, which Elon Musk said would be unveiled this month, is expected to have a starting price of $35,000, also according to Musk. But Tesla’s online marketing for its Model S bizarrely prices the 70D at $58,200 after government incentives and gas savings, with the actual price of $75,000 listed further down the web page. So my guess would be a starting price of at least $42,500 before federal EV incentives kick in [Update: Tesla’s announced starting price is $35,000 before incentives]. I also expect that, just as with the launch of the Model S and then the Model X, every early Model 3 buyer will pay significantly more than that for the Performance or Signature trim level, as that will likely be the only trim level produced initially. For example, the Model X theoretically starts at $80,000 with a 70 kWh battery, but the early deliveries were the Signature 90 kWh battery vehicles at upwards of $132,000 with no 70 kWh vehicles produced yet. All that to say that it is unlikely to see any Tesla Model 3s anywhere close to $35,000 for quite some time after initial deliveries begin. Musk has said production should start in late 2017, though Tesla also has a history of delaying initial deliveries beyond the promised launch date. With $100,000 plus vehicles (and the customers that buy them), this may not be a concern. But if Tesla wishes to play in the mainstream auto market in a big way, this behavior could prove troubling. The Tesla Model 3 would like to be an affordable, everyman EV, but we don’t really see that happening anytime soon.

What do these two vehicles in particular mean for Nissan? Precisely what they mean is that Nissan’s second generation 2018 model year LEAF must come out early in 2017, with a real world price closer to the Bolt than the Tesla, and offer a 60 kilowatt hour battery as standard equipment at that price. This would mean that to remain competitive Nissan would need to double the size of their current battery pack, and do it without raising the price by more than about $3,300 from their current SV trim level. Every month that the Chevy Bolt is on the market against Nissan’s aging first generation LEAF will cost Nissan market share. In the five years plus since Nissan launched their EV, many studies have been done that show that both range and price must come together to meet at the not yet clearly defined sweet spot for broader mass market appeal. For many, that sweet spot will be called the Chevy Bolt and it may just be the answer to their needs – 200 mile range for around $30,000 after incentives. That Nissan laid the groundwork will be immaterial to most of them. The next year or so will be very interesting in the EV marketplace.

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6 Responses to Can Nissan stay relevant in the EV space?

  1. Carl Fiorica says:

    Interesting take. I think Nissan needs to come up with the next generation, range extended model of the Leaf in order to stay relevant as the Bolt will start to take some of their customers. We’ve had our Leaf for 2 years now, it’s a good car and once you get a feel for the range it has it works great. I’m not so sure all of the assumptions made about the upcoming model 3 are correct though. Tesla (Elon Musk) has expressed regret over the delivery of the Model X with the signature series only being available first. They have stuck to the $35,000 price level throughout…though it does remain to be seen if that is the initial or post rebate price.

    • Ernie Hernandez says:

      Hi Carl, thanks for the feedback. I’ve not heard Nissan mention anything about a range-extended LEAF, but that doesn’t mean they aren’t working on one, or some other model that might be a range-extended EV. I agree that the LEAF is a great car for those who understand its limitations. When the Bolt launches I expect it to do well almost immediately, likely being supply limited rather than demand limited. Regarding Tesla, they are still a bit of a renegade in the industry and much of what they do reflects that. The completion of their battery plant in Nevada will define the launch date of the Model 3, but I truly would be surprised to see it priced under $40,000 pre-rebate. We shall see.

      • John Marvin says:

        The Tesla website claims “$35,000, starting price BEFORE incentives”. Sure that might change, but I would be surprised if that went above $40,000. At the unveiling Elon Musk emphasized that even if you order the Model 3 with no options, you’d be getting a great car. So I suspect that he will try to deliver on that promise, although I do agree that they might build more of the expensive versions at first. I think at this point, since they have working prototypes, that they have a pretty good handle on production costs. It’s going to be the inevitable delays that will be expensive.

        I think the biggest issue is that it won’t be so easy to ramp up production as quickly as he thinks. Just because the Tesla factory is a factory that once produced 500,000 cars per year doesn’t mean that being able to do that again will be easy. But I do suspect that despite advances in automation, there will be a lot of new good paying jobs being created at least while the initial orders (actual orders, not the inflated reservation list) are being fulfilled.

        • Ernie Hernandez says:

          John – Welcome to Living LEAF. Also, thanks for the reminder. I’d meant to update my post with Tesla’s announced starting price of $35,000 before incentives. I’ll do that now. Great observation about the production capacity of their factory. Tesla is not a major automobile maker… at least not yet. This new Model 3 is a hugely significant vehicle for the future of Tesla. If successful, it will elevate Tesla’s stature in the industry.

  2. Mike says:

    Interesting article for sure.
    I’ve had my Leaf for two years and still enjoy driving electric, but I was sorely disappointed by the warmed over update for this year. Leaf is looking increasingly outdated now and long in the tooth, only the iMiev looks worse inside.
    GM have already updated the Volt with 1(plus a .1) as well as readying the Bolt for production – and all Nissan have to show us is a few minor changes with a bigger battery at a too high incremental cost.
    I am now one of the 300,000-ish Tesla Model 3 reservists so I’ll at least have the choice in 2017/8 to get a Model 3, but I’m not hopeful for Nissan to suddenly wake up and deliver something to really compete.
    It seems like they are stuck in 2011 and still think they are a market leader.
    Regarding the Tax credit – I find it interesting that GM still quote a price after incentives, when they are likely to hit 200K before Tesla who still quote pricing without incentives.

    • Ernie Hernandez says:

      Mike – Welcome to Living LEAF and thanks for your comments. My sense is that the 2018 LEAF will have a 60 kWh battery and an all new body design, and it will be out before the Model 3, but after the Bolt. Pricing is the big issue – will they be able to maintain a competitive starting price in the mid-$30k range. I think they will.

      All manufacturers come to market with the top trim levels first to maximize profit, so Tesla has not done anything there that every other auto manufacturer has not done. But if they wish to become a player in the big leagues, they will have to produce some of their Model 3s as entry level trim levels within the first year of production, or many will become disillusioned in the affordable Tesla. In my view, Nissan has waited too long for a refresh. But I believe the reason is this – they have decided to go with LG as opposed to the AESC partnership to source the traction battery, and that may have contributed to the delay. If Nissan’s effort is good enough regarding style, range and features, some of those that placed early deposits on Model 3 will sell their interest and buy a LEAF 2.0.

      Bottom line, what early Model 3 orders are telling us is that absolutely there is a demand for an affordable, stylish, 200-mile electric car. Probably a much higher demand than the industry was expecting.

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