Nissan Plans Both Electric, Hybrid Cars at U.S. Plant

Source: Bloomberg (Alan Ohnsman and Kiyori Ueno)

July 21 (Bloomberg) -- Nissan Motor Co., aiming to be the top seller of electric vehicles in the U.S., is hedging its bets.

Nissan will use a $1.6 billion U.S. loan to retool a Tennessee plant so hybrids and other fuel-efficient models can be made on the same line as battery-powered cars to keep from wasting capacity. Electric vehicle assembly will be phased in “to avoid under-utilizing the plant while the market is developing,” said Senior Vice President Andy Palmer.

Carmakers are readying electric vehicles in response to higher oil prices, demand for more fuel-efficiency and concerns over climate change tied to carbon exhaust. Even with U.S. aid to build and buy them, the higher cost and shorter driving range of electric vehicles may hold the total market to less than the 150,000 vehicles Nissan will be able to build at the factory.

“There is a risk that the plant may struggle to reach full capacity quickly,” said Ashvin Chotai, managing director of Intelligence Automotive Asia Ltd. in London. “A lot will depend on the price and affordability of the car and experience of initial users.”

Current costs for lithium-ion battery packs that can propel a car 100 miles (160 kilometers) are as much as $30,000, and may fall to about $15,000 by 2015 as production techniques improve, said Menahem Anderman, president of Advanced Automotive Batteries, a consulting firm in Oregon House, California.

Initial U.S. demand will be at least a total of 7,500 electric vehicles, or EVs, sold in model years 2011 through 2013, along with about 60,000 plug-in hybrid cars, due to requirements in California under its so-called zero-emission vehicle program, according to Anderman.

Basically California

“I would suggest that the EV market in the U.S. will basically be the California regulatory requirement, plus perhaps 20,000 units,” Anderman said. “As long as the gasoline price is under $5 a gallon, there’s no real market for EVs.”

Gasoline cost an average $2.48 a gallon in the U.S. on July 17, according to the AAA, a drivers’ group. The price peaked at $4.11 a gallon on July 15, 2008.

Electric cars are an “emerging” market, Nissan’s Palmer, head of the company’s electric vehicle program, said via e-mail. The company plans to start making the exhaust-free cars in the U.S. by 2012. The U.S. loan will also fund a lithium-ion battery factory next to the Smyrna plant that will make packs for as many as 200,000 cars a year.

Flexibility to make different types of advanced cars on one line will let demand “drive the optimum production balance between zero-emission and low-emission vehicles,” said Palmer.

Nissan rose 2.1 percent to 581 yen in Tokyo trading at the 11 a.m. break.

Forecast Range

Industry forecaster CSM Worldwide predicts global electric vehicle output will rise to 132,067 in 2015 from 7,115 units this year, said CSM analyst Yoshiaki Kawano. An economic study from University of California, Berkeley, this month predicted electric vehicles will make up 64 percent of U.S. sales by 2030, assuming prices are held down by letting drivers lease battery packs that can be readily switched.

Competition in the market for low-pollution cars ranges from Toyota Motor Corp., the largest seller of gas-electric hybrids, Honda Motor Co., General Motors Corp. and Hyundai Motor Co., to new entries including California’s Tesla Motors Inc. and BYD Co., a Chinese car and battery maker backed by Warren Buffett.

The only electric vehicle sold in the U.S. approved for highway use is Tesla’s $109,000 Roadster. Mitsubishi Motors Corp.’s electric i-MiEV minicar, sold in Japan for 4.6 million yen ($49,000), goes on sale in the U.S. next year.

Nissan said yesterday it will invest $700 million to build two plants in the U.K. and Portugal that will also make lithium- ion batteries for electric cars.

Ford, Tesla

Nissan on June 23, along with Ford Motor Co. and Tesla, was among the first companies to benefit from the Energy Department’s program to provide $25 billion in low-cost loans to fund production of highly fuel efficient autos in the U.S.

The aid is part of Congress’s 2007 energy bill to help automakers boost average fuel economy by about 40 percent, to 35 miles (56 kilometers) per gallon by. President Barack Obama moved up the fuel-efficiency deadline in May to 2016 from 2020. The U.S. also provides a $7,500 tax credit to consumers who buy electric cars.

Smyrna Factory

Nissan said it will use the federal cash refurbish its 26- year-old Smyrna factory. The plant has about 3,900 employees and capacity to make as many as 550,000 cars and light trucks annually, including the hybrid Altima sedan.

A version of the electric car Nissan will eventually build at the Smyrna plant is to be unveiled in Japan next month. Nissan has said the 5-passenger model goes 100 miles solely powered by a lithium-ion battery pack. Limited sales begin in Japan and the U.S. next year.

To make the car more affordable, Nissan has said it may lease the battery pack to customers for about the same amount they’d spend annually on gasoline.

The loan “is specifically dedicated to the investment of EV and battery production in Smyrna,” said Palmer. “We are committed to becoming the leader in zero-emission vehicles.”