Nissan Considers Slashing In-House Battery Manufacturing, But It’s Not Because Electric Cars Are a Failure

Unlike some of its rivals in the green car marketplace, Japanese automaker Nissan produces all of the lithium-ion battery packs it needs for its all-electric Nissan LEAF and e-NV200 electric van itself at dedicated battery production facilities in Japan, the U.S. and UK.

Nissan needs an affordable, high-density battery pack to keep it competitive in the marketplace.

Nissan needs an affordable, high-density battery pack to keep it competitive in the marketplace.

As Reuters claimed yesterday however, Nissan is in the process of rethinking its battery manufacturing process, closing or reducing in-house battery manufacture from current levels.

It’s a rumour — one which Nissan isn’t officially confirming as yet — which has already caused many electric car skeptics to claim that Nissan is rethinking its electric car strategy. But dig a little deeper, and the reasons behind a potential in-house battery production cull are far more practical and pragmatic.


The first of these is cost. While Nissan initially moved to its own in-house battery manufacture with the intent of dramatically reducing the cost of battery packs and thus its electric vehicles, Nissan hasn’t quite managed to achieve its own goals in terms of cost per watt hour.

“We set out to be a leader in battery manufacturing but it turned out to be less competitive than we’d wanted,” a Nissan executive reportedly told Reuters on condition of anonymity. “We’re still between six months and a year behind LG in price-performance terms.”

South-Korean firm LG-Chem is currently the battery firm of choice for many automakers looking to produce their own plug-in cars. In recent years, General Motors, Ford, and Audi have all used LG Chem battery cells in their electric and plug-in hybrid cars, alongside Nissan’s automotive partner Renault.  Despite working together closely on other aspects of electric vehicle development, Nissan and Renault have traditionally worked independently on their electric car battery programs, with Renault relying on LG-Chem for its battery cells rather than using Nissan’s in-house battery cells.

Renault uses LG Chem battery packs in its Renault Zoe hatchback, Renault Kangoo Z.E and Renault Twizy vehicles.

Renault uses LG Chem battery packs in its Renault Zoe hatchback, Renault Kangoo Z.E and Renault Twizy vehicles.

“Renault would clearly prefer to go further down the LG sourcing route, and the Nissan engineers would obviously prefer to stay in-house,” another anonymous source said. “The write-off costs are potentially huge.”

In the end however, If it costs Nissan more to produce batteries in-house than it does to buy them in from a first-tier supplier like LG Chem, business logic would suggest that switching to an external supplier is the most sensible way to ensure that Nissan’s electric car fleet continues to expand its market grasp.

Energy Density

Then there’s the matter of energy density. In the competitive world of plug-in cars — where companies like Tesla are currently leading with ranges per charge which far exceed any other plug-in car on sale — there’s a race on to produce the longest-range electric car possible.

With both the second-generation Nissan LEAF and second-generation Chevrolet Volt due to hit the market within the next eighteen months or so, both companies are working hard to produce a competitive, affordable long-range plug-in vehicle. Add the spectre of the upcoming 200+ mile 2017 Tesla Model  — which Tesla says will retail for around $35,000 — and the buzz word for second-generation electric cars is clearly range.

Nissan's e-NV200 also uses the same Nissan-made battery pack as the LEAF, but cost is key for its future.

Nissan’s e-NV200 also uses the same Nissan-made battery pack as the LEAF

In order to achieve that longer range however, automakers have to ditch existing battery chemistry and build battery packs with a higher energy density. Essentially a measure of how much energy can be stored per unit mass, higher energy density battery packs make it possible to travel further per charge without needing to devote more space to a physically larger battery pack.

What’s more, LG Chem has already proclaimed that it will be building a 200-mile battery pack for at least one major automaker for 2016. If it can produce that for less than Nissan can produce it, then it makes sound business sense for Nissan to look to LG Chem for its battery manufacture.

Beating Tesla

But perhaps the most logical reason for Nissan switching from its in-house battery manufacture to an external supplier comes from Tesla Motors, whose massive $5 billion lithium-ion battery manufacturing and recycling Gigafactory is set to be producing up to 50 Gigawatthours of lithium-ion battery packs by 2020.

Set to be the largest battery manufacturing facility in the world, the Gigafactory will be capable of producing lithium-ion battery packs at a fraction of the cost of existing battery plants around the world. Many orders of magnitude larger than Nissan’s in-house manufacturing facilities, the only way for Nissan to truly compete with Tesla in terms of price per kilowatt-hour and miles per unit price is to switch to larger-scale battery manufacturers like LG Chem — or perhaps to work with other automakers on its own Gigafactory project.

Tesla is the car company Nissan needs to match -- or best -- in terms of battery pack cost and range.

Tesla is the car company Nissan needs to match — or best — in terms of battery pack cost and range.

When pushed, Carlos Ghosn, joint CEO of both Nissan and Renault, commented that Nissan may open up its battery supply chain to include suppliers like LG-Chem, but didn’t comment on the future of Nissan’s own in-house battery manufacturing processes. In an official statement from the Renault-Nissan alliance, the alliance said that Nissan was “100-percent committed to its industry-leading electric vehicle programme,” and wasn’t about to write down its massive investment in electric vehicle battery technology.

What that means in real terms isn’t clear, but we can tell you one thing for certain.

Nissan isn’t about to give up on its electric car plans. And with Nissan’s next-generation LEAF due very soon, a longer-range LG Chem battery pack could be just what Nissan needs to keep the cost of its best-selling LEAF at the right price.


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  • Esl1999 .

    Nissan and Tesla believe in the same thing… a world that switches to EVs in large numbers. The reality is that, for now, the world isn’t ready. Tesla is proactively working its way there, but Nissan, unfortunately, has only focused more on the car and not the other important things that go along with convincing the world they need to start making the switch. I’ve heard the term “dismal sales” as the reason for the battery plants eventual closures (phased out sounds nicer) in the US and UK. I think, once certain manufacturers understand that their philosophy of producing the minimum of what they think we need is short sighted, will have a more exciting array of EVs on the market. I still congratulate Mr. Ghosn and Team Leaf for making a good, solid EV.

    • Surya

      I don’t think “dismal sales” is the right term. Significantly less than hoped? Certainly. But the Leaf, with its 140000+ sold cars is not a dismal failure, now is it 🙂

      • Esl1999 .

        You’ll see where I got the quote if you go to YouTube or iTunes and watch Autoline Daily 1458.

        • Surya

          Well, I don’t agree with them 🙂

  • Guy Gooch

    We live in an exciting time for EV technology. I’m glad to be part of it. n

  • Martin WINLOW

    Nissan is showing a very interesting side of the EV ‘revolution’. The LEAF is a high quality car and is very popular with its owners. Unfortunately, it is just too expensive to quite ‘catch the wave’ of mass sales that would propel it, and EVs in general, into a mass market thing that, in turn, would bring about a huge fall in price. Up until now, that is.nnLEAFs in the UK are now selling for significantly under the u00a320k mark thanks to Nissan matching the UK governments u00a35k subsidy on new LEAF purchases. There are several potential reasons for this, including a ‘clearing of the decks’ for the 2017 model which promises significantly more range and a much less geeky-looking design, similar (IMO) to the Ford Focus. But the end result is that there has been a transformation of attitude in the few Nissan dealerships that I have visited to charge my EV over the last 12 months.nnBefore, when I went into Nissan dealers, no-one seemed to care very much about the LEAF – knowledge of it was scarce and sales lack-lustre. Now, completely the opposite is true. I went into one recently where nearly every staff member owned one. The EV specialts in 3 of the dealers I know are knowledgeable and enthusiastic and in one I visited only a few weeks ago they had sold 5 LEAFs in the last week.nnSo, what does this tell me? I think motorists are keeping a canny eye on the EV market ready to jump ship from ICEV ownership ‘when the price is right’. For those motorists with a bit deeper pockets than most, the price is right, now. Nissan, either by design or accident have found themselves on the winning side and are rolling with it. Long may it continue.nnnnAs for battery costs, I would be very interested to know just how much of the ‘battery’ is made at Nissan plants. Are the battery packs merely assembled from parts made externally or do they actually manufacture the coated aluminium and copper foils used as the electrodes, the electrolyte (unlikely), the steel can the 2 x serially connected + 2 x parallel connected ‘pouch’-type Li-ion cells sit in, the battery management and monitoring electronics etc etc. If they just assemble the modules from the pouch cells then someone else is making the actual cells and there seems little way forward to reduce the battery cost.nnnOn the other hand, if, as I suspect, Nissan buys in the constituent parts of the pouch cells and then assembles the cells and then the packs in their plants then I can well see that buying in completed cells from a very large cell manufacturer, like LG Chem, may allow some considerable cost saving. Question is, are LG’s cells as good as Nissan’s?nnnnIt may be worth pointing out that LEAF ‘modules’ are already catching on in other EVs as they are considered to be of very high quality with very good energy density. A case in point is the Vectrix VX-1 electric motor scooter. This is a highway-capable large 2 seater scooter which originally had a NiMH pack which was good for, at most, 30 miles of mixed riding. With LEAF modules installed instead, the bike weighs 20% less, the pack uses 2/3 of the volume of the original and the range is *trebled*! MW

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