Nissan Leaf - after the investment in developing EVs for higher volume segnments, the stakes are high for Renault-Nissan

Nissan Leaf - after the investment in developing EVs for higher volume segnments, the stakes are high for Renault-Nissan

How quickly can the cost – and retail – price of electric vehicles come down? Mitsuhiko Yamashita, Nissan’s head of R&D, has told analysts he feels manufacturing cost parity between gasoline vehicles and BEVs will arrive within five years after the start of volume BEV production.

He attributed the savings not only to pack cost reductions, but also reduced part count and quicker, less complex manufacturing.

For Nissan, such cost parity would arrive for the 2016 model year. Right now, it estimates that its Leaf costs roughly twice what a petrol car of comparable size would. For the next generation of BEVs, those it will launch starting with the 2013 model year, the premium falls to 30%. And for cars launched in 2015, the cost premium would essentially be wiped out.

Japanese market analyst Takeshi Miyao of Carnorama estimates that Nissan’s cost today is slightly less than US$500 per kilowatt-hour. Masahiko Otsuka, president of Automotive Energy Supply Co. (AESC), the joint venture with NEC that supplies the batteries for Nissan and Renault’s electric vehicles, says that price must fall to US$370 or less for Nissan’s electric vehicles to be cost-competitive against the purchase price of a gasoline vehicle.

Petrol price important to take-up

While the purchase price premium for BEVs will decline over time, whatever the rate, the much lower operating costs of plug-in vehicles have already been established. But new car buyers habitually overweight the upfront purchase price (or monthly payment), and underweight the cost per mile of running expenses that include fuel, insurance, repairs, and so forth. Nonetheless, if gasoline prices rise swiftly and sharply as they did two years ago, the shock may help consumers focus on the cost-per-mile advantages of even more expensive electric cars.

And China...

Then there’s China. It is the clearly articulated policy of the Chinese government that its auto industry should be consolidated, and encouraged to invest in clean-vehicle technologies that can be exported. Which is all well and good, except that Chinese car buyers are either extremely price-sensitive – with no desire to pay any premium for fuel efficiency unless they see a payback, unlike US buyers who drive their hybrids proudly as a statement – or wealthy enough not to care about higher taxes and running costs for less fuel efficient models.

Only 18 months ago, in April 2009, China announced a goal of selling half a million electric vehicles a year by 2011. Sales are now merely a few thousand a year, and the goal doesn’t look remotely achievable. Still, various researchers suggest that the US and China will be neck-and-neck in BEV sales by 2015, with each country having sold a cumulative total of more than 800,000 electric vehicles.

As Western makers begin to produce highway-capable, safety-tested BEVs and sell them in noticeable volumes, the Chinese industry may in fact fall further behind in cutting-edge electric technology. A booming consumer market for cars has already made China the largest auto market in the world, passing the US last year. But inexperienced consumers and a lack of urgency to exporting globally competitive vehicles would seem to be working against the Chinese government’s goals of EV dominance, at least in the short term, as domestic automakers may conclude that it’s easier and more profitable to peddle minimally acceptable gasoline cars to unsophisticated buyers.

In fall 2010, China published draft regulations for production of electric vehicles by non-Chinese automakers that would require not only joint ventures with Chinese companies – the current model for auto production in general – but apparently transfer of the intellectual property around EV technology to those joint ventures as well. The regulations may be “updated” to lessen the impact, but it poses a thorny dilemma for OEMs: Is participating in a potential Chinese market for green cars worth transferring core technology to a partner that could well use it against the OEM once it’s understood?

This article is extracted from the published just-auto research report Global market review of electric vehicles – forecasts to 2017