Ghosn: Nissan Business Plan Now Based on Government Subsidies

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Nissan LeafWhile sales of the Chevy Volt languish, the maker of the all-electric and better-selling (but not great-selling) Nissan Leaf maintains that his company’s fortunes and that of his alternative vehicle have a promising future – with two big “ifs.”

Renault-Nissan CEO Carlos Ghosn told Reuters he expects 2012 sales to surpass this year, barring “economic 'armageddon'” and “ a 'Lehman-style' crisis.” According to Ghosn, “the highest level of uncertainty is Europe,” but he is confident “that 2012 will be another record year for the car industry no matter what Europe does." But anyone paying attention to the debt crisis knows it has the potential for total economic collapse and to spread to other continents, including North America. 

Ghosn also attributes his optimism to the prospects for electric vehicles. Reuters reported that Renault-Nissan is investing 4 billion euros ($5.57 billion) in the technology, and Ghosn has predicted sales of 1.5 million EVs by 2016 and that EVs will account for 10 percent of new car sales by 2020.

“By the end of last month we had sold 15,000 Nissan Leaf,” he said. “It is already the most sold electric car in history.”

Most automakers like to boast about their successes based upon qualities such as value, styling, safety rankings, or popularity with the purchasing public. So upon what does Ghosn base his hopes for the Leaf and Renault-Nissan’s future EV offerings? That’s right: government subsidies. 

It’s quite amazing, in fact, that not a single company dealing in so-called “green energy” products – at least that I’ve discovered (I’m still waiting) – has modeled their business plans strictly on the appeal their products would or should have for the buying public. Instead they draw their schemes to capture public dollars via government mandates, grants, contracts, research dollars, subsidies, or tax breaks or rebates. Duke Energy, for example, justifies its massive investment in wind energy on the fact that it can earn a 17 to 22 percent return on equity, thanks to taxpayers and to its customers who are forced (thanks to monopoly conditions) to pay more for renewable-generated electricity.

So Ghosn is giddy because, Reuters reports, “that there had been no cancellations in incentives or support schemes for electric cars so far despite the Europe's debt crisis and austerity measures.” For example, he fully expects (he’s right) that China will “invest” big in EVs, and says “the Brazilians are starting to think about it.”

“It does not matter if, for example, Portugal stops the incentives, as long as other countries like the United States continue to support,” Ghosn said. “If countries like France, Japan and the UK support and then China, that is about to start to support, that's fine.”

What a feel-good accomplishment for Green industry advocates: That a major carmaker feels it can lose EV subsidies from tiny Portugal (10.7 million people – about 1.2 percent of Europe’s entire population) and still survive! But given the past failures of such green jobs “investments” in places like Spain, Ghosn ought to be much more wary of the possibility that government money will dry up in bigger places. 

For example, look at the United Kingdom. Despite a £5,000 ($8,000, slightly more than the U.S. $7,500 tax credit)-per-vehicle grant for purchasers of EVs, plus incentives that allow them to avoid other taxes and congestion fees, only 786 applications for the grant had been received as of the end of September. As the Web site CarsUK noted, “That means, in all probability, that less than 200 electric cars have been bought in the UK by private buyers in 2011 – despite the £5k bribe.” But regardless, economic conditions will dictate whether governments can continue to give away money for non-essential behavior modification schemes such as this.

The U.S. has experienced dismal sales of the Volt and Leaf as well, with only 3,895 of the former and 7,199 of the latter sold through the end of September this year. For comparison, as the Los Angeles Times reported, “Chevrolet sells about 20,000 of its similar-sized Cruze sedans every month.” That’s because gas efficiency-minded customers want a vehicle that can drive much farther than the limited range of the EVs.

Worse, the prospect for future customer interest in EVs is dim. CarsUK revealed in a survey of 12,000 Brits that exactly none of them planned to purchase a pure electric car like the Leaf when they replace their current vehicle. Two percent said they would consider purchasing a hybrid, such as a Toyota Prius or presumably the Volt or something like it.

And as NLPC reported last week, a survey of 13,000 consumers from 17 countries found that “no more than 4 percent of consumers are satisfied with what electric vehicle manufacturers have made available.” Of the many shortcomings, respondents said the EVs’ limited range was a top concern. Most said they wanted a capability to go 300 miles, which is far beyond the capacity of any current EV on the market.

Not that the automakers – at least Nissan, that is – even care to go there. Mark Perry, director of product planning and strategy for Nissan North America, amazingly and arrogantly told Web site AutoObserver.com (published by Edmunds) “there’s no market need” for an EV that can travel a few hundred miles before recharging. Rather than pay attention to what people who could be his customers said, Perry instead engaged in the equivalent of naval gazing and reviewed the data of how current Leaf owners are using their vehicles. The results of the EV Project, overseen by the Department of Energy, show the average Leaf driver only travels 37 miles per day, far shorter than the alleged 100 mile range that Nissan claims the car can go on a full charge. Never mind the only people whose habits they observed already knew the EVs’ limitations and bought one anyway.

The strategy is clear: whether it’s EVs, or wind power, or anything environmentalists call “green,” the corporations’ goal is not to give consumers what they want. It’s to either force them (as with renewable electricity mandates) or to highly subsidize impractical technologies in order to make their schemes somewhat worth buying, and therefore profitable. It’s so much easier to get a few bureaucrats and politicians to coercively expand your business than it is to convince the public to believe the junk you sell is valuable.

Paul Chesser is an associate fellow for the National Legal and Policy Center and is executive director of American Tradition Institute.