Nissan's Leaf strategy: battery powered confusion?November 18, 2010: 1:18 PM ET
Nissan really wants to be the leader in electric vehicles. Maybe that's why it's being coy about how many they plan to sell.
Nissan executives have been notoriously optimistic about the electric vehicle market, and not without a vested interest: they hope to become the leading manufacturer of green cars. So far, the company's image has done well from the refresh. Nissan has received plenty of press for its aggressive pursuit of building lower-emissions vehicles and has run a big advertising campaign to reinforce that position in consumers' minds.
But some recent press seems to indicate they may be listening to their own hype. On Tuesday, it looked a lot like Nissan CEO Carlos Ghosn told a crowd of reporters covering the market debut of Nissan's battery-fueled electric plug-in car that the company expected to sell 500,000 units during the 2013 year. (The New York Times coverage of Ghosn used the words "hit 500,000 units a year in three years.")
That's shooting very high. And apparently not actually the message the company was trying to convey. Fortune followed up with a Nissan (NSANF) spokesperson who clarified that Ghosn meant the company will be able to make 500,000 cars by 2013, even if consumer demand doesn't actually meet that number. The spokesperson said the company doesn't even forecast that far out. But being able to make half a million cars isn't the same as selling them, though that's the impression Ghosn probably made in most reporters' minds and notebooks. (When asked, Nissan said it wasn't in any rush to ask the Times for a clarification or correction.)
Selling 500,000 Leafs by 2013 would surpass all other predictions for electric vehicles sales. A November report by global marketing firm J.D. Powers predicted that the total number of vehicles on the road using any kind of battery propulsion system would be 5.2 million in 2020—7.3 % of the total sales for the estimated 70.9 million cars sold worldwide. Analysts differ on EV industry predictions, but 500,000 Nissan Leafs equals a tenth of J.D. Powers' estimated global market for all kinds of cars running on batteries—hybrid and otherwise—seven years later. That's quite a mismatch.
So where is Nissan getting its numbers? From itself, mostly, says Nissan's Jeanine Ginivan. The company predicts 10% of all vehicles sold in the year 2020 will be electric vehicles. That number, not surprisingly, is higher than estimates in most analyst reports, though Nissan has been glad to see analyst predictions climb to up to seven or eight percent market penetration up from five or six, Ginivan says.
The company will have the capacity to make 50,000 cars by the end of this year. Nissan gauged consumer interest in the cars by the quick response to online reservations for the Leaf. Interested car shoppers could pay a $99 refundable deposit to put their name on the list to get a Leaf. The company was expecting to get 20,000 reservations by December. When they hit 20,000 people early, in October, Nissan stopped taking reservations and gauged that consumer response would be good.
Even though the pre-payment shows more commitment than, say, "liking" something on Facebook, "99 dollars is a number that still could be walked away from very easily," says Efraim Levy, a private equity analyst with Standard and Poor's.
Consumers' minds could change by the time the car is released, says Levy, who lists gas prices, the economy, and competition from other automakers as reasons why a buyer could pull the plug on a plug-in purchase.
The Leaf release would certainly work out best for Nissan if people buy the car in the huge numbers that the company is forecasting. But, there are added benefits to the green campaign. "I think it's important to see how it helps the overall brand and not just the sales of the Leaf," Levy says, who adds that the most important thing for the car company is to get people on the lot. According to Nissan's 2009 annual report, the company also plans on rolling out models of entry price vehicles. Those could possibly appeal to consumers who would check out the Leaf, but ultimately may not want to pay the $32,780—or even as low as $25,280 after federal tax credits—for a compact car.
Regardless, Nissan's über eco campaign has given a backbone to a previously scattered marketing strategy. If Nissan can launch the Leaf, sell it fairly well, and drive buzz, it won't matter if the company can't put 500,000 new Leafs in garages during 2013. Apparently, they never said they were going to anyway.