Nissan's Ghosn Defends LEAF as Long-Term Investment

By · April 01, 2013

Carlos Ghosn

Nissan CEO Carlos Ghosn at New York International Auto Show

In some quarters, Nissan CEO Carlos Ghosn has some explaining to do for staking the company's future on the all-electric LEAF. While the LEAF just had its best sales month ever, with more than 2,200 units sold in March 2013, it will take several months of similar numbers to overcome the sting of low sales in 2012. Speaking at the New York International Auto Show (NYIAS) over the weekend, Ghosn defended the choice to embrace electrification, saying that Nissan can afford the long-term investment, and that Nissan intends to make a major move into China with the LEAF technology.

Ghosn described the LEAF as "an asset for the brand." He believes the EV projects an eco-friendly and tech-savvy image of the company. It shows that Nissan "dares going into places and tackling products that nobody has tackled before," he said. Ghosn's rhetoric is persuasive, but this question lingers: Does a company spend 4 billion euros developing a product just to convey a green image?

One Step at a Time

For Ghosn, the LEAF is more than expensive greenwashing. It's a long term investment in the future of the automobile. With manufacturing now localized to North America and England, Nissan is now ready to, as Ghosn put it, "transform the LEAF from a technological feat to a sales performance." With the LEAF, Nissan has "a great car, a great technology but the main challenge now is to sell."

Ghosn named several steps, the first of which has already been taken. Many believe that electric cars can only be slow, boring, ugly, golf carts, but the LEAF (and other modern electric cars) are blasting this misconception. The LEAF has high customer satisfaction figures, good performance, and is a real car. These factors work together to dispel EV stereotypes.

But, according to Ghosn, the LEAF is still too expensive. The next step for Nissan was to "localize" production of the LEAF to North America and Europe. That move is part of a broader strategy to move production out of Japan, to the same continent where cars are sold. The reason behind this is monetary exchange rates, and the value of the Yen. The current exchange rates are expensive for Nissan, and moving LEAF production to the U.S. is what enabled Nissan to lower the entry-level price of the LEAF.

What's Next?

The next step is to beef up charging infrastructure. Public charging infrastructure, especially for fast charging, makes electric cars more attractive to potential buyers, and more useful for current owners. Nissan is looking to deploy fast chargers at Nissan dealerships across the U.S.

Ghosn also reiterated a plan he's described several times over the last few weeks, to take a leadership role in China in electric vehicle sales. China has big plans for electric vehicle adoption, and Nissan wants to be there. Even if U.S. LEAF sales don't pick up speed, Nissan can still benefit if LEAF sales pick up overseas.

The last step Ghosn discussed was government efforts to spur adoption. Whether it's mandates in China, or incentives in other countries, governments around the world (to varying degrees) are putting their weight behind electric vehicle adoption. This isn't just for environmental or climate change reasons, but also for concerns about national energy security. Governments want an alternative to total dependence on oil, and electric cars offer a compelling solution.

Is Ghosn betting the company with the LEAF? No. As he put it, the company sells 64 vehicles only one of which is the LEAF. The corporate balance sheet has the resilience required to sustain the long-range investment horizon for this investment to bring handsome returns.

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