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Renault-Nissan cranks up electric car output, but where are the buyers?

The Renault Zoe goes on sale shortly in Europe. It is the first electric car to be priced close to its equivalent gasoline-powered equivalent. (Renault)

It’s depressing when you organize a party and nobody shows up.

That must be how the Renault-Nissan alliance feels as its showrooms fill up with electric cars that can’t find homes.

Most manufacturers hedged their bets a bit as electric cars were hailed as the way to cut carbon dioxide (CO2) emissions and consumption of fossil fuel. No matter that in fact electric cars merely transfer the production of CO2 to often coal-fired power stations, cost more than twice as much as regular cars, and have mediocre and unpredictable range.

But the French-Japanese alliance, egged on by CEO Carlos Ghosn’s claim that global sales of battery-only vehicles would reach 10 percent of global sales by 2020, have committed $5 billion to produce a range of electric cars. Alliance electric vehicle production would reach 500,000 a year by 2015. Sales would reach 1.5 million electric vehicles by 2016, including Renault Zoe and Fluence sedans, Kangoo vans, and the Twizy commuter machine that looks like a motor-cycle with a roof and four wheels, plus the Nissan Leaf and electric Infiniti. Most other manufacturers hedged their bets with much lower predictions and contented themselves with spending just enough to make sure that if electric cars suddenly became flavor of the month, they could quickly mobilize their resources.

“Carlos Ghosn did indeed bet the farm with Renault’s ambitious electric only vehicle project,” said Vic Heylen, director of the Flanders Centre for Automotive Research (FCAR) based near Antwerp, Belgium.

“In the meantime, the project has been scaled down,” Heylen said.

Renault had planned to build a battery plant in France, and Nissan had similar plans in Portugal. Both have been dumped. Nissan meanwhile still says it will build more Leafs at its British plant next year, despite dismal sales in Western Europe.

Even in France, doubts are being expressed about the viability of Renault’s plans. The influential Le Monde newspaper earlier this year headlined a story on the issue as “Renault’s Foolish Bet”.

But Renault is launching the little Zoe now in Europe, and according to Carlos da Silva, IHS Automotive analyst in Paris, it is priced closer to competitive cars of similar size and stands more of a chance of winning sales in the mass market. Da Silva agrees that Renault-Nissan has been over-ambitious with targets like 500,000 battery powered car sales a year by 2015, and cumulative sales of 1.5 million by 2016.
Low-priced Zoe

“The Leaf is barely selling 10,000 this year in the U.S., with Nissan’s target probably close to 20,000. In Europe it is mainly Renault leading the race for electric vehicles. Unfortunately, the weak economy isn’t helping the sale of these advanced cars, and nobody is buying the Leaf in Europe today. Things could change in 2013 with the Renault Zoe, which with government incentives is priced close to a similar sized gasoline car. This is the first mass market EV with a normal price. Renault is selling the car but leasing the battery to lower the cost,” da Silva said.

Da Silva pointed out that Nissan in the U.S. has cut the price of the Leaf, but Renault-Nissan isn’t likely to meet its sales targets.

“EV sales haven’t really started yet. We don’t think by the middle of the decade you will see as many electric vehicles as Renault Nissan is targeting,” he said.

In the real world, there aren’t many signs of life yet for electric car sales.
Financial tsunami

According to British newsletter Automotive Industry Data (AID), electric car sales in Europe reached 20,558 mainly battery-only Leafs and Opel Amperas, Europe’s version of the Chevrolet Volt, in the first 10 months of 2012 for a market share of 0.21 percent. The Volt is a battery powered car with a regular gasoline-powered engine to extend the range.

AID editor Peter Schmidt agrees that as things stand, alliance electric plans look questionable, if not dangerous.

“Renault-Nissan stuck its neck out and made this massive investment in electric car technology, battery technology and everything associated with it – suppliers, training with dealers and mechanics. Brand-new manufacturing plants, built at vast expense, are just about ready to start volume production of electric cars for which there are presently no willing buyers,” Schmidt said.

“There’s a potential financial tsunami heading for Renault’s shores,” Schmidt said.

“Ghosn probably rues the day he made that projection (10 percent of global sales by 2020). Renault might look smart if demand suddenly jumps. But ask anybody dealing with the automotive market and you struggle to find anybody living in the real world who would expect a repetition of what we are seeing in Norway,” Schmidt said.
Punitive Norway

Oil rich, social democrat Norway, is the biggest market for electric vehicles in Europe with a market share of just over 5 percent. Norway uses punitive taxation against regular cars, plus government action to favor electric cars in parking and city access to boost battery car sales. France, which owns 15 percent of Renault, has also used subsidy and government contracts to boost electric car sales, to little effect so far. Electric market share in France is 0.47 percent in the first 10 months of 2012, according to AID.

Dr. Peter Wells of the Cardiff Business School wonders if governments will come to the rescue of electric car projects, but points out that the CO2-thwarting credentials of electric cars are now being questioned.

“I think Renault and Nissan must be getting worried by now, even though a substantial proportion of the investment in electric cars has been supported by governments,” Wells said.


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