Under current U.S. Federal legislation, there’s a little-known quota worked into the federal tax credit for plug-in vehicles. Today, while anyone buying a qualifying plug-in vehicle can look forward to somewhere between $2,500 and $7,500 of tax credit at the end of their tax year — assuming their tax bill is equal or greater than the credit due that is — only the first 200,000 plug-in vehicles produced by each manufacturer are eligible for the full incentive.
Which means after each automaker has produced and sold 200,000 plug-in vehicles to U.S. customers, the incentives available to that automaker’s customers disappear.
It’s essentially the price an automaker pays for producing a popular car.
With nearly one-third of its allocation of 200,000 tax credits used up and sales of its LEAF electric car rising ever-upward, Japanese automaker Nissan knows that it, like nearest plug-in rival General Motors, will soon reach a point where its customers will no-longer be eligible for a federal tax credit. But as Wards Auto (via GreenCarReports) details, Nissan isn’t worried about that day.
First on the list, says Pierre Loing, vice president for product planning at Nissan North America, is to see if the goal posts can be moved.
“One thing is to see…is there room for negotiations?” Loing posited in his recent Wards Auto interview. “Being the first ones on the market, we should be among the first to reach 200,000 and you penalise those who’ve tried to be first?”
While lobbying for a change in the current legislation is Nissan’s preferred method of attack, Loing says Nissan will be ready and willing to take appropriate steps as necessary to ensure the LEAF and other Nissan electric vehicles aren’t priced out of the market as a consequence of their own success.
This would take the form of a price reduction, bringing the LEAF down to a price comparable with other cars on the market with or without incentives.
Detailing the massive improvements Nissan has made to battery chemistry and range since the LEAF first debuted in 2010, Loing admitted that the cost of producing lithium-ion batteries hasn’t fallen as quickly as Nissan would like.
“The reduction on the cost of the battery is so important,” he said. “And of course, with oil at $47 a barrel, it makes it even more challenging.”
We should note however, that flies in the face of several studies proving that gasoline prices have little effect on electric car sales.
Confirmed by various sources, including Nissan CEO Carlos Ghosn, the next-generation LEAF electric car — due some time next year as a 2017 model — is widely expected to come with a range of up to 150 miles per charge from a brand-new, next-generation battery pack.
Unless Nissan can convince the U.S. Federal Government to extend its tax credits for plug-in cars beyond the 200,000 manufacturer limit however, we believe it has three choices to keep its cars competitively priced.
First, it could continue its plans for a longer-range, high-end LEAF model, while simultaneously offering an entry-level car with range equivalent to today’s LEAF. That would enable buyers who couldn’t afford a longer-range car to enjoy the benefits of driving electric, without paying extra due to the lack of tax credit. This would be a sensible, pragmatic move enabling Nissan to cater to a wider audience without pricing itself out of the market.
Second, it could opt to reduce the planned range of all of its cars, offering a 130-mile car instead of a 150 or 200-mile model. Given some of the other cars due on the market in a year’s time (most noticeably the recently-confirmed 2017 Chervolet Bolt electric car) are promising ranges of at least 200 miles per charge, that’s an unlikely outcome.
Thirdly, Nissan could choose to underwrite the cost of a next-generation, larger, more expensive battery pack, amortising the cost of development and production over the next five or ten years, similar to Toyota’s approach with both the original Toyota Prius hybrid and the soon-to-launch Mirai fuel cell sedan. While this would be of highest financial burden to Nissan, this approach would allow it to capitalise on its existing success with the first-generation LEAF by offering a high-spec, long-range electric car at a price point that its competitors would then have to match.
We think the latter is the most likely outcome, but what do you think?
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