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Feb 14, 2013

When a LEAF Falls

 

With a $6k price cut on the Nissan LEAF, what does a sub-$20k EV mean for the industry?

Nissan LeafIn mid-January, just prior to the famed Detroit auto show, Nissan announced a more than $6,000 price drop for the base model of its all-electric LEAF. Compared to 2012’s base model price of $35,200, the 2013 Leaf S sticker price of $28,800 makes it the least expensive five-seat EV for sale in the U.S. In some states, the combination of federal tax credits and state incentives will bring the LEAF in under $20,000; in California, it comes in under $19,000, according to TIME.

There’s been plenty of speculation as to why Nissan dropped the sticker price: shifting production from Japan to the U.S., reduced trim and features, higher production volume and economies of scale, continued battery cost reductions, the possibility that the LEAF might be a loss leader for Nissan.

Regardless, crossing the $20k threshold is a major milestone. It will potentially make a big difference for consumers considering an EV and put pressure on other EV and PHEV competitors. In fact, in the wake of Nissan’s announcement, Chevy likewise announced a forthcoming “thousands of dollars” price cut for its plug-in Volt. A future with much greater EV adoption may be coming into sight, with prices likely dropping across the board for EVs in the foreseeable future.

U.S. drivers average 37 miles per day (13,476 mpy). But nearly 20 percent of U.S. drivers average more (15-20k mpy). An equal number travel even farther. For those higher mileage drivers, the economics of LEAF ownership are starting to look very good.

Consider the appeal of a $20k LEAF for a two-car family with a longer-than-average commute. One of their cars is about to kick the bucket. They plan to keep a conventional gas-fueled auto for longer road trips, but they’re contemplating an EV replacement for the other. How do the numbers shake out? In the following chart, we’ve compared the Nissan LEAF’s 2012 and 2013 prices with the 2012 Nissan Versa Hatchback, the LEAF’s gas-powered equivalent, using nationwide 2012 averages for prices for gasoline and electricity per kWh.

Chart

Consumers might not—and likely would not—get excited about a 6.5-year payback. But a three-year payback? That just may signal a turning point for EVs; the three-year payback is within many consumers’ preference window. For many higher mileage drivers, then, the numbers just make sense. They certainly do for Tom Wieringa.

Wieringa, a long-time RMI friend, specializes in transportation solutions for the food industry. He describes himself as a lightweight auto kind of guy who also knows a thing or two about heavy-duty trucks. Oh, and he’s also a former Indy car driver. This is a guy who knows—and loves—his cars. And he loves his Nissan LEAF. He’s been driving it since fall 2012 and has already logged 6,500 miles, though he’s been a proud and very satisfied EV owner for over ten years.

“You think I’d be driving a Ferrari,” he says. “But I like technology, and I like efficiency. The cost to run my LEAF is so low that it’s ridiculous.” (He does also have a diesel Mercedes-Benz, but prefers his LEAF.)

Wieringa is exactly the kind of higher mileage commuter for whom the Nissan LEAF’s economics are really beginning to pay off. His daily round trip commute is 76 miles, fully double the average daily miles of LEAF owners in 2011. Many days he’ll drive his LEAF upwards of 150 miles, thanks to a level two charger he installed at his Golden, CO office with a kit purchased at Home Depot.

With the low electricity rates he pays in his home of Longmont—roughly $0.07 per kWh, two-thirds the national average—he estimates it costs him just over $0.02 per mile to drive the LEAF. “I essentially got a free car,” he says. “With my commute, I save about $300 per month on gasoline, which more than offsets the monthly car payment.”

“You feel almost guilty pulling into a gas station to get a pop,” Wieringa says, smiling, “because you have no business being there.”

Wieringa may be head over heels for his LEAF, but EVs and PHEVs need not work for everyone right away to be successful. Such vehicles need only to grab a foothold, and the nation’s higher mileage commuters—people like Wieringa—just may be the place to start, just as rooftop solar PV first grabbed its foothold in markets such as California and has been steadily building from that foundation.

Some 14.4 million vehicles were sold in the U.S. last year, half of them cars. Compared to 2011, EV sales were up nearly 20 percent; plug-in hybrid sales were up more than 400 percent, according to the National Automobile Dealers Association. With barely a market a few short years ago, percent growth is not the best indicator. But EVs like the LEAF and PHEVs like the Volt can triple their sales from 2012 by capturing just one percent of the market.

This is an aggressive growth trajectory, but with prices dropping and EV ownership looking that much sexier, it could happen. The century-old auto industry and the related fueling/charging infrastructure won’t change overnight. But with the likes of Ford, GM, Honda, Tesla, and a long—and growing—list of others offering increasingly affordable EVs, we just might be seeing signs of it turning over a new (and cheaper) leaf.

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Showing 1-5 of 5 comments

February 15, 2013

Cool title - Very interesting. Threshold, watershed moment, or another interesting milestone? But what of the ever elusive, mythical "Hypercar" of Natural Capitalism lore? Oh when will we ever see the true innovation tipping point open the floodgates of true American technological dominance!?

Great news Josh/Peter Nat Miullo - U.S. EPA & car nerd.


February 21, 2013

Early adopters always pay the premium price... we bought our first digital camera for $1200 with a 1.3Mp resolution... we also bought our Leaf in early 2012 and we do not regret the current price drop (only a little). Let's hope that we will experience the same benefits of technology improvements and cheaper prices just like the digital cameras.
Other benefits that we got as early adopters was the installation of a free charging station at home ($2,000 value) and a favorable TOU rate from our utility company ($0.07 per kWh off peak) that makes our ROI almost as good as the new price drop... so I guess it is really a win win situation after all.


February 22, 2013

A bit of apples and oranges here...the discounted version of the LEAF is at 3.3 kW charging (versus 6.6 kW for the other LEAF trim levels) and you have to pay extra for DC fast charge, rear camera, etc.
Another RMI article cites an average closer to 13,000 miles/year for U.S. drivers rather than the 17,000 miles used in your calculation (U.S. average of about 29 miles/day).
Also MANY utilities have pricing higher than 12 cents/kWh (even with PEV TOU rates), especially for those with mandated renewable content which can increase costs for electricity.
Thanks


February 22, 2013

Nat: With the LEAF price drop, we may be seeing the beginning of a tipping point for EVs. The LEAF recently surpassed 50,000 units sold worldwide, making it (I believe) the best-selling EV. But I suspect the real watershed moment is yet to come, when consumers have a spectrum of affordable EV options, and not just - in essence - a take it or leave it option with one sub-$20k car on the table.

Andres: Good point about early adopters. It's also interesting to hear some of the benefits you got as an early adopter, which partially offset the early adopter premium you paid for getting an earlier model LEAF.

Joel: I see your point about the apples to oranges, though I think the fundamental point still stands that a less expensive EV becomes more financially attractive to consumers with a faster ROI. You're right that other RMI articles cite an annual mileage number closer to 13,000 (the specific number is 13,476, I believe). That's the average for all U.S. drivers. In this article, though, we're looking at a specific subset of U.S. drivers: higher mileage commuters (which account for 20% of U.S. drivers), hence the 17,000 number. The take away is that the economics of EV ownership look that much more favorable for these owners, and that this subset U.S. drivers may be a promising place for EVs to gain a stronger toehold in the automotive marketplace. And yes, though 12 cents/kWh may be the U.S. average, some utilities charge higher rates, which will certainly impact total cost of ownership and ROI.

Pete Bronski
Editorial Director


June 14, 2013

Peter, "payback" tends to be esoteric and make decisions look pass fail. Have you thought about doing monthly cost analysis instead?

Sometimes that nicely represents comparative that allow people to see incremental cost and make broader minded, better decisions.

I like Wierlinga's cost per mile analysis brought back to monthly. That's how people tend to live, on a monthly budget. So that type of analysis speaks a language that needs no translation.

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