Nissan Admits Arrogance in Sales of Taxpayer-Subsidized Leaf

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Ghosn photoA top Nissan official has said the company was “arrogant” in its marketing and sales approach for the all-electric Leaf, which received a $1.4 billion stimulus loan guarantee from President Obama’s Department of Energy.

Not that the company is going to return taxpayers their money, since the premise upon which Nissan received the loan were ridiculously high production estimates. Too much in expenses would have to be eaten otherwise.

“We were a little bit arrogant as a manufacturer when we went to the 50-state rollout,” said Al Castignetti, Nissan’s vice president for sales, to Automotive News in late November. “We had assumed that there were people just waiting for the vehicle who would raise their hand and say, ‘Give me a Leaf, give me a Leaf, give me a Leaf.’”

Considering there weren’t many people “raising their hands” in the few states where Nissan did roll out the Leaf, that was quite a presumption. And the wildly overstated claims the company gave DOE – which readily accepted them -- included estimates of the equivalent of 39,000 cars removed from the road per year, 204,000 tons of carbon dioxide “avoided” annually, and 23 million gallons of gasoline displaced.

Actually, those numbers are pretty arrogant. Nissan CEO Carlos Ghosn (pictured) last year predicted sales of 1.5 million EVs by 2016, and said EVs will account for 10 percent of new car sales by 2020.

“By the end of last month we had sold 15,000 (globally) Nissan Leaf,” he said in October 2011. “It is already the most sold electric car in history.” 

This was as Leaf sales were on their way to only 9,674 units in the U.S. for 2011. It’s as though Ghosn created his own virtual EV game that only DOE was invited to, in which they dreamt up a plug-in paradise where fossil fuels are demonic obstacles and extension cords choke them into submission. Then they could take their fantasy game numbers (including bonus points for “avoiding” the CO2 crash wall) and send them to DOE’s Loan Program Office for posting on the Web, while the Japanese auto interloper made away with U.S. taxpayer prize money.

The arrogance was viral throughout Nissan, which ignored the worldwide apathy for electric cars. In September 2011 CarsUK revealed in a survey of 12,000 Brits that 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 something like it.

And as NLPC reported, an October 2011 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 EV on the market. The Leaf’s range is 73 miles on a charge, if the weather is not too hot or too cold.

Not that Nissan cared. Mark Perry, director of product planning and strategy for Nissan North America, 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. How’s that for arrogance? 

Rather than pay attention to what people who could be his customers said, Perry instead reviewed the data of how existing Leaf owners used their vehicles. The results of the EV Project, overseen by DOE, showed the average Leaf driver only traveled 37 miles per day, far shorter than the alleged 100 mile range that Nissan was claiming at the time the car could go on a full charge. Never mind the only people whose habits they observed already knew the EVs’ limitations and bought one anyway. 

But the evidence mounted well before that. The Daily Mail reported in January that sales of electric cars in the United Kingdom fell so sharply that there are more charging stations than there are vehicles.

“Just 2,149 electric cars have been sold since 2006, despite a government scheme last year offering customers up to £5,000 (about $7,700 U.S. dollars, similar to Obama’s $7,500 tax credit per EV) towards the cost of a vehicle,” the U.K. newspaper reported. “The Department for Transport says that around 2,500 charging points have been installed, although their precise location is not known.”

That’s just 430 cars sold per year. In addition, Britain spent £30 million on charging points for public and business locations, and EV buyers have taken advantage of only £3.9 million of the £300 million in government grants made available for EV purchases, according to The Daily Mail. In the U.S., besides the EV subsidies and tax credits, the charging station infrastructure and vehicle battery industry have also been subsidized with billions of Recovery Act dollars.

In his semi-mea culpa this month, Nissan’s Castignetti attributed the Leaf’s failure to catch on in part to the lack of infrastructure.

“We didn’t prepare our dealers properly,” he told Automotive News, which may make you wonder what kind of people were given the $1.4 billion to play with. “We’ve pulled back a little bit and are telling our dealers, ‘You don't market this car traditionally. You don’t put it in the newspaper. You need to go and find the electric car buyer in your market.’”

That sounds a lot like Ford’s approach with its Focus Electric, whose head of global marketing said to USA Today earlier this year, “The marketing of the Focus Electric is to people who buy electric vehicles, not to you and me. We’re focused on the people who buy them.” That’s $5.9 billion in taxpayer stimulus for another company not trying too hard to make electric cars a success.

But in truth, as Car and Driver reported last month, the alternative vehicles are barely on the market in order to comply with government-mandated Corporate Average Fuel Economy (CAFÉ) standards. The automakers incur huge penalties for failing to bring up the average gas mileage for the vehicles they sell up to federal demands. On the other hand, with taxpayer subsidies, the car companies get much of the expenses for the lousy-selling EVs in their lineups covered.

“In many cases this is intentional,” Car and Driver reported, “with automakers building EVs to satisfy regulators and leasing a limited number of loss-making vehicles in California and a handful of other states.”

Even Nissan is beginning to admit this publicly, if not loudly. This year the Leaf sales pace trails 2011’s, with only 8,330 sold through November.

"No carmaker makes 54.5 miles per gallon without alternative-fuel vehicles,” Castignetti told Automotive News. “Direct-injection engines are not going to get you there.”

He added that Nissan erred by “selling Leafs like Altimas.” Meanwhile at the Los Angeles Auto Show last month Ghosn, maintaining his straight face, said he remains “very comfortable in the potential for at least 500,000 cars a year [globally]. We don’t think that we overinvested in this.”

Of course he doesn’t believe that. It’s taxpayers who were forced to do so, in the ultimate act of arrogance by both government and crony corporatists.

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.