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Can Nissan start weaning the auto industry off petroleum?

by Mark Schreiber

On Dec. 3, BBC News reported that the prices of petroleum on both sides of the Atlantic hit their highest levels since the financial crisis, with Goldman Sachs forecasting an increase to $100 per barrel in 2011.

This ominous news item seems to have been largely eclipsed by the stream of coverage of Nissan Motor Company’s launch of the LEAF, an all-electric five-door hatchback launched by the Yokohama-based automaker this month.

LEAF is an acronym for “Leading Environmentally friendly Affordable Family car.”

While Nissan’s promotional activities have largely avoided hints concerning higher prices at the pump, the success of what Nissan is billing as the first mass-produced EV (electric vehicle) may very well be bolstered by rising gasoline prices. America’s Environmental Protection Agency rates the LEAF as achieving fuel economy equivalent to 99 miles per gallon (42 km per liter), about double that of hybrid cars, which are powered by both a gasoline engine and an electric motor.

Moreover, according to AP reports, the estimated cost to charge the LEAF’s batteries (assuming normal use) will come to $561 a year. Depending on distance driven, the $46 a month in added electric bills is likely to be considerably less than outlays for gasoline. And as an added incentive, buyers of EVs will be eligible for tax credits ($7,500 in the case of the United States, for example).

But if monetary saving is the sole objective, the figures can be tweaked to work both ways. Those of the “drive it ’till it drops” school have been able to demonstrate that sticking with one’s old clunker for another, say, five years still achieves considerable savings over those who trade in for a new EV, even after outlays for oil changes, periodic maintenance and the usual operating costs.

TV commercials and print media ads invariably pander to the emotional aspects of car ownership — prestige, excitement, family togetherness or innovative design, etc. — and ads appealing to thrift are rare. Apparently drivers, even when motivated by genuine economic concerns, don’t like to be reminded of it.

While taking a multifaceted approach to its new model’s capabilities — such as pointing out that owners will be able to use their cell phone to turn on the car’s air conditioner before going out to the parking lot on a hot day — Nissan is emphasizing the LEAF’s status as a “zero emissions” vehicle that will be kinder to the environment. (Although arguably the plants that generate the electricity to charge the batteries will still give off emissions.)

Apart from personal taste preferences and budget, buyers are most likely to be wary of the practical aspects of EV ownership such as maximum cruising range and battery recharging time. Nissan has been doing a lot of proactive groundwork, such as efforts to ensure that owners who drive their LEAFs into the nation’s remote hinterlands will be able to reach the next recharging point without running out of juice.

At stake in this venture is more than just a single automaker’s R&D investments. In recent years, Japan’s electronic firms lost market share due to the unfavorable yen exchange rates and lower labor costs in developing economies such as China. But other factors should not be disregarded. Shukan Economist (Nov. 23) makes the point that that while Sony’s Walkman personal audio player initially competed successfully on the basis of performance and design, the current market leader, Apple’s iPod, grasped the consumer market from a completely different perspective based on networking, attracting customers by providing both hardware and content.

By the same token, the magazine writes, it may no longer be sufficient to treat the family car as a stand-alone product. If EVs are to succeed, then in addition to such necessary attributes as safety and passenger comfort, manufacturers will ultimately need to differentiate their products through tie-ups with appliance makers, home builders and IT businesses.

Even while parked in the garage, for example, what’s to keep an owner from utilizing his EV as a virtual concert hall for listening to hi-fi audio? Or, through additional value-added innovations, using the glass windscreen as a panoramic video display on which cinema or games can be enjoyed?

Commenting in Nikkei Business (Nov. 8), Nissan CEO Carlos Ghosn expressed the view that “Japan, so to speak, is like a ‘test laboratory’ that spawns new work methods, logistics, technology, procurement and so on, which it deploys from the grass roots level to the rest of the world. This role will continue in the future.”

According to what are called “conservative estimates,” by 2020, 10 percent of the world’s passenger cars will be EVs. What remains to be seen is whether a Japanese auto maker, headed by a visionary French-Brazilian- Lebanese CEO, will set a new standard that steers the auto industry away from the internal combustion engine.