Nissan-Renault Has Huge Battery Overcapacity Problem

After a full assault on the electric-vehicle market with the Leaf, it looks like Nissan boss Carlos Ghosn will be making some seriously tough decisions about how the company, and its French partner Renault, will build or source its batteries.

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According to a report in Reuters, Ghosn “is preparing to cut battery manufacturing…in a new reversal on electric cars. The plan, which faces stiff resistance within the Japanese carmaker, would see U.S. and British production phased out and a reduced output of next-generation batteries concentrated at its domestic plant.”

The biggest problem is the deal Nissan signed with NEC when they built a battery plant in Zama, Japan, which produces 220,000 power packs a year. Nissan is required to pay for every single one, despite Renault-Nissan only selling 67,000 electric vehicles in 2013, or just over 176,000 EVs to date. And that doesn’t take into account that the Renault portion — very controversially — use much less expensive LG-sourced batteries instead.

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Back when the Renault Zoe launched in 2010, the difference in price between the internally-developed Nissan/NEC pack and the LG pack was huge. “It was a 15-20 percent cost gap,” said one of the people involved in the Renault decision. “In purchasing, 3-4 percent is usually enough to choose a partner for.”

Despite the Nissan Leaf earning monthly sales records in the United States, and the Dongfeng Nissan joint-venture launching its Leaf-based Venucia e30 in China this month, Ghosn is pursuing drastic steps to stop the battery oversupply.

Ghosn is looking at several options, including tagging LG to supply some future Nissan EVs in China, perhaps bringing LG battery production into Nissan’s existing U.S. and British plants, or even from France’s BollerĂ©. If the existing plants have to be shut down, there will likely be “heavy charges” if both are closed, one manager explained to Reuters.

“We’re in the process of opening up battery sourcing to a range of suppliers,” Ghosn said, including outsourcing “within the framework of alliance procurement. What’s important to us is that electric car performance fully meets customer expectations.”

Reuters