For the past few months, Nissan-Renault has been tiptoeing around the idea of leasing the battery packs that power its upcoming electric cars. The goal is to assuage consumer worries about getting stung with the high cost of replacing an electric car battery if it fails or loses too much capability over the course of years. Nissan has not confirmed details, but Carlos Ghosn, chief executive for Nissan and Renualt, in an interview earlier this month with Le Journal du Dimanche, mentioned a cost of “just under 100 euros per month” (about US $150) for battery leasing.
Ghosn’s passing comment, not applied to any specific vehicle, does not provide enough data to begin punching numbers into a calculator—but reveals how tricky the economics of pure electric cars might become for consumers.
Nissan is targeting about $30,000 as a purchase price for the Nissan Leaf, its electric car rolling out in limited production in late 2010, and widespread release in 2012. That figure is well below the competition. Mitsubishi’s i-MiEV is selling for about $47,000 in Japan, and the Chevy Volt plug-in hybrid—with its 16 kilowatt-hour battery versus the Leaf’s 24 kilowatt-hour battery—is expected to sell for about $40,000. Separating the monthly price for a battery lease from the original purchase price would explain how Nissan could offer the Leaf at such a competitive price.
Ghosn’s increasingly frequent comments about battery leasing could reflect a change of direction for Nissan, or could mean that battery leasing will only be offered for Renault-brand electric cars. Larry Dominique, vice president of product planning for Nissan North America, speaking at an industry conference last month, said, “We want our customers to have just one payment.”
Pricing Shell Game
The business website BNET warns, “Leasing a battery effectively just splits a monthly car payment in two.” According to BNET, Ghosn wants to spin the second payment, for the leased battery, as an equivalent to the amount the driver of a regular car would pay for gasoline. “But that’s a cost that an electric car owner can avoid, whether they’re paying a monthly lump sum or a car payment plus a battery leasing payment.” Electric car drivers will spend much less on electricity recharging than they would on gasoline—although few drivers spend close to $150 per month on gasoline. The economic advantage of spreading out $4,000 or $5,000 worth of battery lease payments will largely depend on prices at the pump and the number of miles driven.
Nissan is also considering the option of leasing the entire vehicle, batteries included, but will need to avoid the perception that it could prevent devoted owners from keeping their vehicles, if they so desire, at the end of the lease. Automakers that offered electric cars in California in the late 1990s eventually forced drivers to return vehicles—some of which were infamously crushed—creating a public relations nightmare.
Leasing deals will also have to take residual value into consideration—and the value of an electric car with diminished battery capability (even if only to a slight degree) could adversely affect those values. Dominique told Ward’s Auto, “We want to be able to control the residual value. We want to be able to control the end value, so at the end of a lease or loan we have the vehicles back and we can decide what to do with them.” In addition, plug-in car batteries will have as much as 80 percent of their useful life left when they’re no longer powerful enough for use in cars. A leasing firm could find other uses for them in stationary systems.
Goal: Eliminate Confusion
Nissan is not alone in its consideration of a battery-leasing plan for electric cars. Project Better Place, a start-up company planning to offer battery recharging and swapping services, wants to own batteries and sell “battery subscription services” similar to cell phone plans. The company is partnering with Nissan in Israel. Think Car USA, prior to its bankruptcy last year, planned to lease batteries for its City electric car.
Sparing customers the need to perform detailed cost calculations will be a key strategy for successfully introducing the next generation of electric cars. Batteries remain the largest area of concern. Mary Ann Wright, CEO of battery venture Johnson Controls-Saft, last year told USA Today, “Until we know how these things are going to behave on the road, and how much these things are going to cost, it would make sense to lease them.”