‘Demand’ for Nissan Leaf is All Hype and Subsidies

Nissan Leaf photoReports have trickled out lately that, all of a sudden, demand is so great for the all-electric Leaf that Nissan’s production just can’t keep up.

“We’re going to be short on inventory all through the summer,” said Erik Gottfried, director of electric vehicle sales for Nissan, to Automotive News. “It will be late fall before we can produce enough to satisfy everybody.”

Then the appropriate question from taxpayers should be, “What did we pay $1.4 billion for you to do in Smyrna, Tennessee then?!?”

That’s how much stimulus-backed money went to the Japan-based automaker to design a factory outside Nashville to crank out up to 150,000 Leafs and 200,000 Leaf batteries per year. The plant began production late in 2012, and according to the Department of Energy, was to create 1,300 permanent “green” jobs, remove 11,000 gasoline-powered cars from the road annually, and lead to 51,000 tons of carbon dioxide “avoided” per year.

But sales for the plug-in languish. Through June Nissan had reported sales of 9,839, which “green car” enthusiast blogs have proclaimed as some sort of major achievement, which is true if only compared to last year’s sickly total of 9,819. CEO Carlos Ghosn and other officials had blamed that partially on the logistical challenges of assembling the Leaf in Japan and then shipping to the U.S. (as if it was never done before), which also added to the cost and thus making it even less attractive. They reasoned that once production could begin in the U.S., Nissan could deliver the Leaf at a lower cost and thus demand would be greater.

A cheaper model was introduced this year, which shaved $6,000 from the standard Leaf model. Upfront costs, in addition to limited driving range and long recharging times, are the Devil’s Triangle of consumer obstacles to EV adoption, and the discounted Leaf still has a ways to go. The lower-priced model comes in at $29,750, but Nissan is enjoying a slight uptick in purchases only because (still) of the $7,500 federal tax credit for electric vehicles, which gets the Leaf down into the $22,000 range. So not only is the Smyrna plant subsidy needed, but so also do customers demand the tax credit.

The traditional increase in summer gasoline prices is likely contributing to the sales bump as well. But a comparison to the gas-powered subcompact Versa, which delivered 113,327 units in 2012, is all you need to know about the “success” of Leaf sales to date this year.

Nevertheless the electric car cheerleaders want you to believe demand for the Leaf has skyrocketed to the point where the lil’ ol plant in Smyrna just can’t keep up. A look at some circumstantial facts might make you wonder otherwise.

It turns out Nissan isn’t making much of an effort to keep Leafs rolling off the Smyrna lines. According to a report earlier this month on the automotive Web site Jalopnik, only 300 employees are working on Leaf production. That’s less than ¼ of capacity if you measure by manpower. Presumably assemblers are dedicating their time to putting together Nissan gas-powered models that actually sell.

But there’s something about the electric vehicle industry (like the renewable energy business) that compels it to exaggerate every accomplishment like it’s a major milestone. In the case of Nissan’s suddenly “booming” demand for the Leaf, company officials attribute the newfound public thirst for plug-ins to its discovery in new cities outside of its traditional strongholds in places like Seattle and California (where even greater subsidies for EVs are offered). Dallas, Atlanta, St. Louis, Chicago and Raleigh, N.C., are said to have had difficulty satisfying potential Leaf customers.

“If a Nissan dealership in Dallas sells the one Leaf that they have in stock and another prospective buyer comes in,” Torque News reported, “there probably aren’t a half dozen other dealerships in the area with a Leaf to sell. Since these budding areas are slower to accept the all electric Leaf, Nissan is less likely to just send a bunch of vehicles into that area when higher volume markets (like California or Atlanta) are more in need of those same vehicles.”

Gottried, the Nissan director of EV sales, said, “They really want more Leafs in Dallas. I assured them that we’re doing everything we can to get them more inventory. But it’s taking some time.”

We’ve already debunked the “we’re doing everything we can” myth, with the Smyrna plant at less than ¼ capacity. So let’s also look at the Dallas market.

According to Cars.com, within 50 miles of downtown Dallas, there were 86 Leafs available yesterday (a number virtually unchanged over the last several days, by the way). One dealer, Don Davis Auto Group in Arlington, had six Leafs available. Another, Texas Nissan of Grapevine (which is northwest of Dallas) had seven units. That would presumably mean there are plenty, and enough to move around to where the area customers are.

A similar situation exists in Atlanta, where 74 Leafs are available in the metro area. St. Louis and Raleigh had 34 and 29 of the model, respectively. The issue with the Leafs that are still sitting on dealer lots is that they are the more expensive SV and SL models, which sell for $34,000 on up. That isn’t low enough to get the plug-ins within the economic feasibility range with desired gas-powered cars like the Versa, which sells for $14,000 to $17,000.

If there is any real demand for a Leaf, then it’s for the $29,000-range basic S model, which needs the buyer tax credit to compete with other models. What happens if/when that goes away? And an electric car demands an extremely expensive home charger, which requires special wiring and an outlet for the garage – which either must come out of the customer’s pocket or also be subsidized by taxpayers, many which already have. And then there is the public charging network, which is also mostly paid for with government money.

It all adds up to an EV demand mirage, which dissipates upon closer scrutiny. If there was true clamor for the Leaf, there would be a lot more than 300 workers putting the things together in Tennessee.

“Not every dealer has pursued selling the Leaf yet,” said Gottfried to Automotive News. “But what we’ve seen lately is that one dealer in a city will start marketing the car and have great success with it. Then the other dealers in the market will realize there’s a real opportunity and start marketing it, too.”

That is, as long as the taxpayer money lasts. Ginning up artificial hype apparently is all that $1.4 billion in subsidies gets you these days.

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