Despite slow sales, Ghosn sticks with EVs

Carlos Ghosn must be sick of hearing it by now. At every whistle stop, at every press briefing, every reporter in the world seems to ask him the same question: Did he misjudge the market for electric cars? In light of meager U.S. sales and the recent setbacks at a small number of electric-vehicle projects, is he losing his vision of an auto industry in which electrics will constitute 10 percent of all global vehicle sales? The Nissan CEO's answer every time: "No." With slow sales and technology problems largely deflating industry optimism about EVs, Ghosn is almost an industry outlier on the topic. Eight months from launching large-scale U.S. manufacturing of his electric Nissan Leaf sedan and the complex battery modules that power it, he is sticking to his guns. "I recognize the challenges and skeptics. I'm used to them," Ghosn told an industry audience in New York last week before the New York auto show, where he unveiled an Infiniti electric car. "One of the most frequent questions I get is whether I'm still bullish on EVs. Yes. I still believe they will be 10 percent of the market in 2020 in all the regions where they are available." He added: "I still believe the Renault-Nissan Alliance will sell about 1.5 million cumulative electric vehicles by 2016. Given how much our customers like their Leafs and given how early we are in the sales curve of this new technology, I have zero doubt that zero-emission is here to stay." But things haven't been going well: -- In March, General Motors suspended production of its plug-in hybrid Chevrolet Volt, which had been dogged by slow sales and hefty inventories. -- Fiat-Chrysler CEO Sergio Marchionne has fretted publicly that Chrysler Group will lose more than $10,000 per car on the planned electric Fiat 500. -- U.S. battery maker A123 Systems Inc. was stung by a recall of its batteries, which spooked potential EV consumers. -- Fisker Automotive has struggled in its plan to develop a plug-in hybrid family sedan, and the Department of Energy has held up the startup's federal loan for the project. J.D. Power and Associates and other research groups have been issuing warnings that U.S. consumers are still far from comfortable with today's EVs. Power forecast last year that all electrics and plug-in hybrids combined will tally just 159,000 annual sales by 2017. Yet later this year Nissan will start production at a new Leaf assembly operation in Smyrna, Tenn., with a capacity for 150,000 Leafs annually. Leaf sales have been sluggish. So far this year the company is just 1,733 units toward its 2012 target of some 20,000 to 25,000. Ghosn points out that all Leaf sales in the world are still being supplied by a solitary, small Japanese plant and a single battery module plant. And he indicated last week that Nissan has consciously refrained from expanding production in Japan because of the strong yen. 'Sold out' Al Castignetti, U.S. vice president of Nissan Division sales and marketing, notes that it is hardly a matter of the Leaf languishing on dealership lots. "We're 100 percent sold out," he says. "We just don't have any more inventory of Leaf for anybody." Complicating the Leaf's two-year-long introduction was last year's earthquake in Japan and the tedious wave-by-wave U.S. launch of the car. The Leaf became available in all 50 states only in February, more than a year after its U.S. introduction, Castignetti says. Until a few weeks ago, there were not enough Leafs in the pipeline to permit each of Nissan's 1,100 U.S. franchises to have a showroom demo model. Ghosn is unbowed. He tells skeptics that there is far more to the story than current monthly sales results. J.D. Power and other critics say that consumers are blanching at the high prices of the early electrics. The Leaf's sticker price jumped more than 7 percent last year to $36,050, including shipping. Ghosn says that is partly the fault of sourcing it from Japan, where the yen is making all auto exports uncompetitive. Once the car is sourced from Tennessee, its cost will go down sharply, Ghosn assures a reporter. But will Nissan cut its sell-price accordingly? He declines to show his hand. Ghosn also assured crowds in New York last week that he isn't worried about the November presidential election. A new conservative administration could eliminate the $7,500 federal tax credit for each Leaf buyer intended to help stimulate alternative fuel transportation. "The higher fuel costs go up, the less we need incentives," Ghosn says. Nissan hammered out the global Leaf business case with oil selling at about $80 a barrel. It is now in the $100 range. That's bad for consumers but good for a company selling an alternative to high gasoline prices. On that premise, Ghosn said in 2008 that government incentives would be necessary to carry Nissan's project through its first 1 million sales. He now says that projection has dropped by half, to 500,000. Future positioning Ghosn says that launching an EV was never envisioned as a quick start for big sales. He describes it as a long-term process to position the Nissan brand for the future. The car is ideal for Nissan's ambitions with the big new demographic of Generation Y consumers, age 30 and below. A study by Deloitte, Ghosn tells an audience, found that three out of five Gen Y respondents say they want an electrified vehicle more than any other vehicle. "That," he says, "puts Nissan in line with America's largest demographic group ever." But the questions continue. In another setting, a reporter confronts the CEO with a theory that the real reason electric vehicles aren't selling is because auto dealers "hate" selling electric cars. Ghosn is unruffled. "It's part of the future," he responds. "I don't think we, as a manufacturer, can have a dealer body who is not engaged in selling electric cars when our consumers tell us that's what they want."