Nissan’s $5,500 Battery Replacement Program Operating at a Loss, Exec Admits

One month ago, Nissan finally announced the news that owners of its LEAF electric hatchback had been wanting to hear for many years: that it would sell them a brand new battery pack for their cars when their existing battery pack reached the end of its useful life.

It's official: the Nissan LEAF battery pack costs more than the $5,499 exchange price Nissan is offering customers.

It’s official: the Nissan LEAF battery pack costs more than the $5,499 exchange price Nissan is offering customers.

At the time, the headline price offered by Nissan of $5,499 after $1,000 trade-in rebate created quite a stir. Not only was it far cheaper than many had feared, but it seemed to indicate that Nissan had dramatically lowered the cost of building its electric car battery packs.

But as GreenCarReports found out in an exclusive interview with Jeff Kuhlman, Nissan’s vice president of global communications, the price Nissan is asking its customers to pay is far less than the cost of making the pack.

In other words, Nissan is subsidising its LEAF battery replacement program.

The revelation came when GreenCarReports asked Nissan to comment on how much it was spending on LEAF battery production. Predictably, Nissan declined — the prices automakers pay for high-value parts like battery packs is a closely-guarded secret — but Kuhlmann did at least admit one thing.

“Nissan makes zero margin on the [battery] replacement program,” he said. “In fact, we subvent every exchange.”

Naturally, the amount of subventing — or subsidising — Nissan applies to each battery pack isn’t something Nissan is willing to disclose, but it will likely change as the cost of producing battery packs drops.

Nissan admits the lower-than-cost battery pack is designed to keep customers happy.

Nissan admits the lower-than-cost battery pack is designed to keep customers happy.

Interestingly, Kuhlmann says, not a single owner has approached Nissan yet to order a replacement battery pack for their LEAF under the new program. That said, he reiterated, Nissan’s LEAF battery replacement program isn’t about making money: it’s “a ‘customer-first’ initiative” designed to keep Nissan’s existing customers happy and help encourage more consumers to make the switch to electric cars.

While the news that Nissan is subsidising its LEAF battery packs will no doubt cause some commentators to claim that this is categoric proof that electric cars are not financially viable and should be discontinued in preference for other low emission technologies, it’s worth remembering that automakers subsidising new technologies isn’t a new practice.

For many years, Toyota heavily subsidised the sticker price of its Prius hybrid, allowing the car to be sold relatively inexpensively and in large numbers. As time went on, Toyota gradually recouped the cost of subsidising the Prius in its early days until the Prius family became one of its most important vehicle lines.

Nissan, we suspect, is following a similar track.

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