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WOW! $25,000 For an EV? Here Comes Nissan LEAF!

Nissan has today announced U.S. LEAF pricing. On the eve of the New York show, they have successfully caused a near-unanimous “WOW” across the industry with an amazingly low price for high-technology system. Profit per vehicle is not something automakers are happy to talk about in any situation, but the expectation is that Nissan may not make any profit on the LEAF for many, many years. Still, the combination of an affordable price and the years of deep legwork Nissan has done in preparing consumers and communities for the product, the LEAF is the biggest step yet in advancing the cause of electric vehicles. What does this mean for the success of LEAF? Here’s my first reaction…
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Pricing Summary
$32,380 ($25,280 after $7500 Federal tax credit)
$349/month for 36-month lease (Nissan takes the credit to enable that price)
$2200–AeroVironment home-charging dock and installation (also eligible for tax credit)
$99 Registration fee, refundable (www.nissanusa.com)


Kudos….
Nissan is committed to this strategy, and playing for the next 50 years, apparently willing to take losses, and being smart about minimizing those losses. Also, Nissan’s strategy is bound up with the Renault Alliance, with the EV program part of a global effort; U.S. is not the only major target market, perhaps ultimately not even the main market. The company has a well-researched and well-developed strategy. Nissan has spent well more than a year globally prepping the ground and reaching out extensively customers to educate and to governments and power companies to eliminate or reduce obstacles and gather partners and advocates.
No matter where demand goes, Nissan does deserve kudos for being brave enough to put muscle behind changing the status quo and enabling customers to really see how alternatives might work for them. Should EVs be successful this time, it will surely be more a result of Nissan’s groundwork and patient strategy than of Tesla’s flash or Fisker’s beauty.
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…and Questions
Is the LEAF pricing a game-changer? In many ways, no. Offering a product at a loss is not sustainable strategy, even if useful in the short term or for a commendable endgame (reduction of dependence on fossil fuels). Nor is it a new strategy.
Nissan’s offering the LEAF at an impressively low price, in the context of electric vehicles rather than the context of five-door hatchbacks, does not mean that others will be able to follow suit, nor will it help us truly understand what the consumer demand is. Make anything just cheap enough, and people will buy it.
There is terrific pent-up demand and low supply. This surprisingly low pricing will increase demand to some degree, and Nissan will have no trouble selling all the LEAFs (Leaves?) they can build for the first couple of years. But is this the beginning of a boom-and-bust scenario? Is our appetite for the next “gotta have,” certainly among the enablers for the dot com and the real-estate booms, overinflating sustainable demand?
There is much more to the LEAF than a cheap price, but perhaps shielding consumers from the true cost of technology furthers the illusion that fuel efficiency, or alternative power in this case, is cheap and that personal transportation is effectively a right. Nor do Nissan’s 85,000 handraisers prove there is a sustainable 150,000-unit North American sales potential for the LEAF–the volume Nissan will be ultimately be able to produce in Smyrna, Tennessee.
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At $33,000 (not taking government incentives into account), LEAF is a technology steal, one that can even turn my head. (In theory anyway; in reality, that is more than I’ve spent on any car and that I haven’t bought a new car since 1991.) But how much is Nissan losing on those cars, and for how long can those losses be absorbed? Yes, volume will slowly bring manufacturing and component costs down. But will those costs come down fast enough?
Conditioned by launching with loss pricing supported by government incentives, will consumers eventually accept a price that covers the true cost? The pressure on components costs to come down is tremendous.
If selling these cars requires more than $13,000 in incentives (Federal $7500, California $5000, plus credit for half of the $2200 home-charging system install), what does demand really look like?
The U.S. government is on a phenomenal spending spree, and California is broke. For how long can these tax breaks be maintained? The first year, when global supply of Nissan’s EV will be only about 50,000 units, it might not hurt so much. But what about 2014, when there are more mainstream OEMs playing in the EV and plug-in hybrid markets and supply is up dramatically?
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Side Note: LEAF Versus Volt
While not a direct head-to-head, these alternative vehicles have been in the spotlight and both can run on electricity only. Nissan’s price puts Chevrolet Volt’s long-ago estimated, and not yet confirmed, $40,000 on the truck. The Volt still has benefits as a vehicle that can be used as a primary, while LEAF needs to be a second or third car in the family fleet, a commuter. Still, the pressure will be on for Chevrolet to come in closer to Nissan LEAF pricing than initial rumors suggest they were headed.

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