With Leaf, a new electric car, Nissan plugs affordability

By Peter Whoriskey
Wednesday, March 31, 2010

The Nissan Leaf, the first of several pure-electric vehicles being developed by major manufacturers, will be roughly comparable in price with conventional autos, the company announced Tuesday, posing what may be the first mass-market test of consumer interest in battery-powered cars.

Although a small number of electric cars have been traveling U.S. roads for years, their production cost has kept manufacturers from making them for a mainstream audience, and the relative affordability of the Leaf surprised some industry observers.

The Leaf will sell for $32,780, with consumers paying $25,280 after a $7,500 federal tax credit is included. The cars will become available in December on the West Coast and next year in the rest of the country.

The Leaf is "the first affordable, zero-emission vehicle for the mass market," said Brian Carolin, a senior vice president for Nissan North America.

During the 2008 presidential campaign, then-Sen. Barack Obama pledged to put 1 million plug-in vehicles on the road by 2015, and whether he succeeds depends in part on whether cars such as the Leaf, or the forthcoming Chevrolet Volt from General Motors, are priced low enough to be quickly embraced by consumers.

Federal efforts

Congress and the Obama administration have committed billions to nurturing the development of a mass-market electric car, citing the goal of reducing pollution and the nation's dependence on foreign oil.

The government efforts will benefit Nissan in at least two ways.

The United States has loaned $1.4 billion to the company so that it can expand its Tennessee plant to manufacture the cars beginning in 2012. Until then, they will be built in Japan.

More immediately, the federal government is offering the $7,500 tax credit to defray the cost of the new technology for consumers. Lawmakers had estimated that an electric car would cost $10,000 to $15,000 more than its conventional equivalent.

"I wanted a consumer incentive large enough to put a big dent in that extra cost but not enough to turn it into a government boondoggle," said Sen. Orrin G. Hatch (R-Utah), who introduced the tax-credit legislation along with Sens. Maria Cantwell (D-Wash.) and Obama. "Being solely reliant on one type of energy exposes our nation to risk."

Whether electric cars will appeal to drivers remains an open question. Although the Leaf is priced lower than many had expected, it is still thousands of dollars more than comparably sized cars such as the Honda Civic or the Ford Focus.

"There appears to be a small premium" for the Leaf even after the federal tax credit, said Philip Reed, senior consumer advice editor for the automotive Web site Edmunds.com. But he noted that in California, where the state offers an additional $5,000 tax credit, the Leaf may be less expensive.

Pluses and minuses

The practical aspects of battery-powered cars also pose advantages and disadvantages. The Leaf can go 100 miles on a single charge, far less than the range of a conventional gasoline-powered car. And when the charge is depleted, there are few places to plug in and recharge besides home, at least for now.

The economics of electric charging are similarly complicated. Drivers intending daily use of the Leaf are encouraged to buy a home docking station that allows the car to be recharged more quickly -- in about eight hours from empty. The cost of the docking station, including installation, is expected to average about $2,200, and a federal tax credit is expected to offset half of that expense.

Although that may strike some consumers as too expensive an undertaking, it does avert the need to ever visit the filling station. Moreover, the cost of powering the Leaf is roughly one-sixth that of gassing up a conventional car, according to Nissan, based on $3 a gallon for gas and 11 cents per kilowatt-hour for electricity.

"Based on the price and what we've seen of the product, Nissan is on track to become the first of what may be a real wave of electric cars," said John M. DeCicco, a lecturer at the University of Michigan and former senior fellow at the Environmental Defense Fund. "But it may be a long slow-breaking wave. We're at the beginning of a learning curve."

Skeptics, moreover, note that hybrid cars, though they were introduced to the United States more than 10 years ago, still represent less than 3 percent of the cars and light trucks sold each year.

Enthusiasts and some environmentalists, however, say that the Leaf will tap into a vast, pent-up demand for electric cars, especially among those seeking to pollute less.

"For the first couple of years, every Leaf built will be spoken for before it ever gets to a dealership," said Dan Davids, president of Plug In America, a group that has pressed automakers to make electric cars.

Nissan is planning to produce relatively small volumes for the United States at first. The company expects to have 25,000 firm customer orders in the United States by December.

It will probably be unable to fulfill more orders than that until the Tennessee plant expansion is completed in 2012, but after that Nissan officials hope for a rapid increase in production.

Even before the price announcement Tuesday, the company said it had received expressions of interest from 81,000 people.

"Today, most of those people are driving hybrids," said Mark Perry, director of product planning and advanced technology at Nissan North America. "They were looking for a zero-emissions solution, but there wasn't one."

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