Nissan Considers Battery-Leasing for Electric Cars

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.”

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  • Lost Prius to wife

    Prove to me that there are no unknowns about lithium batteries especially after this article.

  • ex-EV1 driver

    Lost Prius …,
    There are definitely unknowns regarding lithium Batteries. The known unknowns are very clearly:
    1) How low can the price be driven by mass production and on what schedule? The first batteries will clearly be expensive but how fast can the prices drop and to what level?
    2) What will the battery life be? There are 2 important factors: cycle life and calendar life. Both of these can be offset by careful battery pack care, particular charging and temperature control.

    Cycle life can be affected by reducing the number of times the battery is charged above around 90% of capacity and discharged below about 10%.
    Current laptop battery manufacturers don’t care much about cycle or calendar life since they want their customers to replace their cellphone or laptop computer every 1 to 2 years. Therefore, current commodity lithium batteries have cycle life of only about 500 cycles or 5 years, whichever comes first. There is little real world data to point to how careful battery care might extend this or whether there are battery design changes that can improve this.
    Fortunately, sales of large battery cycle testers have been soaring recently so these unknowns will be diminishing over time.

  • skeptical consumer

    I think spreading the battery costs out is a great way to entice some drivers that experience shell shock over these sticker prices. At RMI we’ve pulled together a total cost calculator to allow drivers to see how long it will take (if ever) for a purchase of a PEV to payback.

  • Anonymous

    Breaking out the battery cost makes it ‘seem’ as if that is the only difference between a gasoline car and an EV. If electric cars are missing so many moving parts including the combustion engine, and are replaced with electronics, where did the cost savings go??? It’s essentially a laptop on wheels at this point.

    I think the automakers are playing with the numbers, because the more people adopt to a full EV, the less revenue they will see from routine maintenance, replacement parts and repair. The whole concept of a ‘hybrid’ allows them to ‘double dip’ on sales and maintenance costs, banking the consumer will be blinded by the ‘green’ marketing.

    It sounds like greed once again holding the price of the batteries so high to where it seems ‘logical’ to charge more than double what you would pay for petro, to lease a battery. Then pay ‘again’ for the electricity. It seems auto companies are just looking for a replacement revenue stream for maintenance and replacement parts EV cars won’t need.

    An electric car does not need to look like a space ship. Just rip out what’s not needed in a current petro design, and replace it with the necessary electrics. The battery and it’s components should cost no more than the current engine/transmission and other components necessary for the petro vehicle.

  • crookmatt

    This is probably one of the biggest hurdles for electric cars. If it costs just as much or more to lease a battery than it does to pay for gas in a “regular” gas powered car, what economic incentive to people have to drive electric cars.

    Without a true economic advantage, electric cars would remain a novelty for the ultra-green, or gadget geeks.

    I think battery breakthroughs will eventually make enough progress to make electric cars worth it, but it may take years or decades. Until then I’ll drive a Hybrid.

  • Mr.Bear

    If Nissan has no faith in their battery life expectancy, why should I?

    And they could de facto force all the owners to turn back in or junk their cars if they decide to cancel the battery lease program. Or would they say, “Our battery sucks. We are getting out of the battery business. Good luck with that P.O.S. we sold you.”

    Do I get to say, “the car is paid for, but I still have this $150 per month battery lease.”

    And how am I going to resell one of these cars? It’s $15,000 plus a $150 per month lease for eternity. How do I tell Nissan I transfered the lease? If the car is in a accident, does the battery have to be shipped back to Nissan?

    Maybe battery insurance is the way to go. I own the battery but they tack on extra if I want it replaced cheaper. Oh yeah, that’s like a warrentee add on.

    Maybe batteries should be pro rated like tires.

  • DC

    I really want the option to buy a true EV with no strings attached, but once again, the long arm of the oil-cartel reaches everywhere. This so-called ‘battery lease’ is a perfect example of a deliberate attempt to constrain EV ownerrship and keep costs as high as possbile. Does anyone need to be reminded of what happened the last time a auto-compay ‘leased’ EV’s? Yes, the all ended up in the crusher, except for 328 RAV4-EV’s. This is just a modified take on that idea. You own the car, but your leasing the powertrain, sorry not intersted.

    Anon, pretty much has it correct. The simple fact is the industry is screwing around with Li-on because precisely because it so expensive, resource constrained and of course, is guranteed to fail no matter how careful the user is. All they want to do is replace one non-renewable, expensive fuel source with a non-renweable expensive battery thats absoutely guranteed to fail within a few years (see your laptops LI-on for more details). And to top it all off, they say, “We dont think you will trust the battery, especially since we and our oil-cartel masters have expended a great deal of energy to make sure you dont over these many decades, so in order to make sure you feel more secure, well set it up so we control a vital component of your cars propulsion system”. Please ignore the fact weve crushed or patent encumbred any of the technologies that will actually work effectively in EV’s in favour of this uproven expensive Lease the Li-on scheme we;ve put together. Thank you”.

  • Dan L

    This is either deliberate sabotage or remarkable stupidity on the part of Gosn. He is showcasing just how expensive his batteries are.
    When the battery is an upfront capital expense, there are a lot of variables. It is difficult to determine whether electric actually saves you money over gasoline.
    When you are leasing the battery for $5.00 per day, it is very easy to determine that electric costs more.

    So, Gosn is essentially saying “We have very high prices. And we make it easy for you to see just how high they are.”

  • ex-EV1 driver

    Interesting points here regarding how this provides an after-sale revenue stream for the auto manufacturers. This is clearly a huge ‘problem’ with electric vehicles.
    I also wonder if Nissan knows how low the prices of batteries can go and how long they will last, hence, they want to control the supply of them so they can reap the savings instead of passing it on to the consumer.
    Personally, after having my last lease (an EV1) taken back from me by the manufacturer against my will, I will not enter into another lease unless I can clearly buy it out whenever I want.


    Nissan’s EV product chief, Andy Palmer, recently told me that the company has based the economics of its EV strategy on the cost of oil exceeding $80 per barrel. Because the battery currently costs $10,000 per vehicle, you need a relatively high oil price for EVs to beat internal combustion on cost.

    Burning fossil fuel oil in powerstations is more efficient than burning it in an engine, which is why EVs become more cost effective as oil prices increase.

    Oil costs have fallen due to the economic recession – but I just checked the year-forward forecast and it’s $84. Immediately pre-slump, it was, of course, $140.

  • auto lease inspection

    I think all of the companies that are coming out with electric cars really need to figure out what to do with the batteries before people will lease the cars. There might even be a secondary market for the batteries to be used elsewhere or recycled.

  • sonyasen76

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