Will Nissan Abandon Its $1.4B Stimulus-Backed Battery Factory?

NLPC ^ | September 30, 2014 | Paul Chesser

[jazusamo]

Reuters sources inside Nissan are saying the production of batteries inTennessee for the all-electric Leaf, which stimulus-subsidizing U.S. taxpayers backed with a $1.4 billion loan, could be eliminated.

According to the report, at minimum there is sharp debate over whether the company will continue to manufacture electric vehicle batteries in-house or contract with an outside supplier. Nissan partner Renault, which has 43.4 percent shareholder ownership in the joint company, is said to be pushing for outsourcing battery production – possibly to LG Chem. None who revealed the information were identified for the Reuters story.

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

If they’re really thinking about a move as dramatic as outsourcing, it would seem that Nissan is much farther behind LG Chem than 6-12 months. The change – which would come only two years after Nissan launched the auto- and battery-assembly plant for the Leaf near Nashville – is said to be the result of a “tense procurement review” with Renault. Even with the benefit of $1.4 billion, this global auto manufacturer can’t make up the cost difference with what LG Chem would produce?

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

The report dismissed any chance that Nissan would default on its stimulus loan from the Department of Energy, but nevertheless the use of a billion and a half dollars of Other People’s Money for another green energy flop would add to the shame of Obama’sRecovery Act. It would also taint the image of Renault-Nissan CEO Carlos Ghosn (pictured), who has stood strong in his commitment to the company’s pursuit of electric vehicle development – if for no other reason than to reap the massive government subsidies for alternative energy boondoggles around the world .

That Nissan might unload its EV battery production to someone else wouldn’t surprise, however. For all the hoopla, the Leaf isnot an efficient orsensible car, and just recentlylostits Consumer Reports recommendation because of safety problems. There are no signs that electric vehicle sales have grown, or will grow, beyond fringe interest. And the company keeps coming back to its dependence on government subsidies to try to keep EV production viable.

“Yeah, [government support] is the key,” said Francois Bancon, Nissan’s global general manager of product strategy and planning, in June 2012. “This technology is expensive; the car is expensive. Where we sell the best is where the governments offer their support…which is not only the incentive for the direct purchase, but also they are investing in the infrastructure.”

And in a sign that Nissan was less-than-excited when the Tennessee battery plant was finally ready to open, the automaker abruptly cancelled a grand opening ceremony celebration in November 2012 after more than two years of build-up and anticipation for the big event. Only a month later a top Nissan official admitted the company was “a little bit arrogant” in boasting about the demand and expectation for the Leaf roll-out.

“Global electric car sales will remain shy of 1 million in 2020, according to forecaster IHS Automotive, less than one percent of the total vehicle market, and one-tenth of the demand Ghosn had predicted,” Reuters reported.

Now here we are with Nissan having an internal discussion about whether battery making in-house was worth all the money and trouble. Laughably, they are eyeing another dependency case as the alternative: LG Chem. The Korea-based manufacturer built its own plant in Michigan with $151 million in federal stimulus funds and $100 million from Wolverine State taxpayers . Not long after its opening it was discovered that employees at the plant had no real work to do, and they spent their time playing games, reading magazines, watching movies or helping charities like Habitat for Humanity – that is, when they weren’t off-duty on their cyclical furloughs. After an Inspector General’s report, LG Chem was forced to return a small amount of the money it had been given by the Department of Energy.

It’s not clear whether, if the change is made, where the production of Leaf batteries would be focused, but the justification for Nissan’s Tennessee plant was to have the batteries built closer to where the U.S. cars are produced. Meanwhile the company’s public relations flacks have issued non-denial denials, stating that Nissan is still “100-percent committed” to EVs without saying where they plan to make batteries. But Ghosn reportedly said, “we can't get stuck with supply monopolies — even internal ones.”

Yes, a huge pile of unwanted batteries and paying back $1.4 billion that you borrowed to make them is a lot to swallow.

Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com , an aggregator of North Carolina news.

[jazusamo]

Some manufacturers of EV's are starting to realize the sales are not what many predicted.

GM has reduced the price of Chevy Volts by $5K and admitted they were losing money on each one before that reduction but wouldn't say how much.

The Cadillac ELR is a flop so far:

Cadillac ELR Getting Discounted Up To $14,000 Due To Low Sales

Here's a laugher on the Fiat 500e:

Car Exec Loses Money On Electric Cars, Says ‘I Hope You Don’t Buy It’

[GeronL]

Robbing the taxpayers to benefit corporations, thanks Occupy Wall Street leftists

[Haiku Guy]

If Nissan produces their own batteries, they have to have huge sales of electrics to make it make sense to operate the plant.

If Nissan buys batteries, they can afford to have smaller sales of the LEAF, because they will be paying a unit cost for the batteries.

Abandoning this plant, even with the subsidies, will be a sure indicator that Nissan is betting against the eV market.

Of course, all of the stories last week were about Tesla landing billions in subsidies to build a new battery plant in Nevada. Why don’t they just buy Nissan’s plant, and save the taxpayers a ton of money?

[jazusamo]

Exactly...Taxpayers subsidizing EV’s in any way is criminal in my view plus the government should not be in the business of picking winners and losers.

[GeronL]

I don’t even think state governments should be giving tax breaks to favored companies to get them to move there, it is unfair to businesses that are already there.

[Blood of Tyrants]

“the company keeps coming back to its dependence on government subsidies to try to keep EV production viable. “

If you have to rely on government money, it isn’t viable.

[jazusamo]

Agree and I believe Nissan has already decided the fate of their EV’s.

There’s a lot yet to come out about Tesla and they may surprise many when it gets down to make or break, they’re not profitable without subsidies yet.

[jazusamo]

Bump

[RayChuang88]

The answer is no. Reason: Nissan can use those battery packs in a smaller size for hybrid vehicles--and Nissan developed their own system (originally found on the Altima sedan) and could adopt it for other Nissan models.

[Reaganez]

Every automotive plant built in the last 30 years has had government funding/subsidies of some sort.Nissan is considering changing suppliers from Japanese NEC to LG Chem. They will still assemble batteries in their own factories. They never manufactured entire batteries simply assembled them

BTW: I think is generally a good Idea to stop funding the Russian-OPEC-Jihadi oil-terrorist complex. Drive Electric Drive American on American fuel.America will one day run out of oil,and it will run out of affordable oil sooner, but will never run out of fuel sources for electricity.

[jazusamo]

Got a long way to go selling 10K to 15K a month to reach a million and that’ll still be a drop in the bucket compared to total car sales.

[buckalfa]

"I don’t even think state governments should be giving tax breaks to favored companies to get them to move there, it is unfair to businesses that are already there."

Agreed, kind of. Classic crony capitalism. South Carolina, through it's taxpayers, is serving as an investment banker to the world. Yet without those jobs generated by Boeing, BMW, and Michelin where in the 19th century would those existing businesses be?

[redreno]

Nissan is getting out of the battery business, because their batteries are weak and awful. Not to mention, there’s no lithium in Tennessee. Telsa is partnered with Panasonic. Together, they’ll make more then just car batteries for Tesla. Why Nevada? Lithium mines. It’s going to make the gold & silver booms look puny.

[Rockpile]

I still think that instead of passenger cars that the logical early market area for electric vehicles is in the delivery area. FedEx, UPS, USPS, DHL, taxis, hybrid buses and other machines that end up back at set locations at the end of the workday.

Passenger cars would benefit from developments in the commercial area.

[GeronL]

jobs generated by robbing Peter to pay Paul? Paul loves it and then he smacks Peter “You are better off with me!”

[Haiku Guy]

It is OK to advocate for electric cars, but that is one stupid graph. It gives the mistaken impression that the eV and Plug In Hybrid markets are doing well, with an upward sloping sales curve. But it is the curvature of the line that indicates whether or not sales are increasing or decreasing.

Sales are flat for the last 30 months. There is no market penetration.