Nissan CEO: LEAF Is Now Profitable, 80% Of Its US Sales Come From 4 Cities

3 years ago by Jay Cole 60

"Force Push" Incoming

“Force Push” Incoming

The LEAF is quickly becoming a larger and larger portion of both Nissan’s corporate image and its sales.

Carlos Ghosn Promotes The New Renault Espace From The Paris Motor Show

Carlos Ghosn Promotes The New Renault Espace From The Paris Motor Show

In the US, Nissan announced another 3,000ish sales month for the LEAF in September, which represented over 5% of the company’s sales in America; it also bested any product sold by luxury brand Infiniti (just edging out the Q50 at 2,742 units).

The reason behind the success?  Nissan CEO Carlos Ghosn’s seemingly endless dedication through out the Nissan-Renault Alliance to plug-in vehicles.

At the Paris Motor Show this week, Mr. Ghosn underlined his enthusiasm for the EV business once again by making it a frequent topic of discussion.

At one point the CEO quizzed the reporters in his vacinity about which city in the United States sold more than 1,000 LEAFs in August.  And as we weren’t around at that moment, nor any other ‘green-aware’ persons, the guesses were way off the mark.

  • New York?
  • LA?
  • Portland?
  • San Francisco?

Eventually the CEO pitied the gas-loving media in attendance, “Atlanta! Atlanta is the No. 1 city in the sales of electric cars. Atlanta!” 

We will note he did not explain that a state-level discount in Georgia of up to $5,000 was available in addition to the federal credit of $7,500, helping to boost those numbers – but we will let him slide…he is still an auto executive after all.

The Nissan boss then took the time to give a rundown of the next best selling LEAF cities in America,

“Number 2 is San Francisco, number 3 is Seattle and number 4 is Los Angeles. These four cities represent 80 percent of the sales. So when 80 percent of the sales are concentrated in four cities you can imagine the potential you are going to unleash when the other cities follow?” reports Automotive News

Nissan LEAF Sales In US Made Up 5% Of The Company's Sales For The Month In September

Nissan LEAF Sales In US Made Up 5% Of The Company’s Sales For The Month In September (click to enlarge)

We can’t imagine any other CEO knowing these sort of stats off the top of their heads about any car, except perhaps for Elon Musk – who only has 1 car to manage globally.  (The Nissan-Renault Alliance sold more than $8.3 billion worth of cars globally last year with over 60 major nameplates)

Of course, as a CEO when you start talking about electric vehicles too much, you are bound to get the question of profitability from the traditional media, and Ghosn was asked if the LEAF actually earns money for Nissan.

Measuring his response, the Ghosn said, “We are getting there.  Are we amortizing and depreciating everything we have spent? (more than $5 billion reportedly)  No. But if you look at margin of profit — the direct cost of the car and the revenue of the car — we are getting into positive, which is good for this technology.”

Using our CEO decoder-ring on Ghosn’s statement to summarize:

“All-in, we lost a ton of money getting into the EV business in a big way.  Not minding that cash pile spent already, the LEAF eeks out a small profit – but you just wait for the next ones this is going to payoff someday.  Now stop asking me that question already” – or something like that.

Automotive News

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60 responses to "Nissan CEO: LEAF Is Now Profitable, 80% Of Its US Sales Come From 4 Cities"

  1. Josh says:

    Ghosn is holding onto his #2 spot on the Executive EV fanboy list. That is good to see.

    I look forward to the suite of Gen II Nissan plug-in products.

    1. Bonaire says:

      We are definitely interested in a USA-built e-NV200 eventually (not build in the USA yet).

  2. kdawg says:

    So they are making a gross profit. I think all plug-ins are making a gross profit. The companies just need to pay off all that R&D and equipment. Then it’s net profit.

    1. JRMW says:

      But this is the same as ALL R&D. People for some reason really focus on this in the EV world, but not anywhere else.

      The $5B R&D budget was not ONLY for the LEAF. It can and will be used across many vehicles, including EV, PHEV, Hybrid, and even their ICE cars (such as the aerodynamic testing, etc).

      And yet, when there was only 1 LEAF made, analysts make it sound like it was a $5B LEAF. When there are 100,000 LEAFs made, they pretend that each one costs $50,000. But it doesn’t work that way anywhere in Corporate America.

      This is a long term game, and Ghosn has put Nissan WAY ahead of everybody except for Chevy and Tesla.

      An 80 mile AER LEAF is definitely a niche product. But a 150 to 200 mile LEAF with different styling can/will broaden the market.

      The LEAF alone may not pay back that $5B R&D budget. But that doesn’t mean it wasn’t/isn’t a success, nor that the $5B was poorly spent. It could lead to hundreds of billions in profits if Nissan plays it right.

      The only question is whether or not Ghosn can keep the naysayers within Nissan at bay long enough to get a mass market hit.

      This is one of the reason it is so important for us to use our wallets to support these visionaries, to prove them right and their critics (cough Toyota) wrong.

      1. kdawg says:

        I agree on the R&D. As an engineer, I feel it’s just the cost of doing business.

        Now, about setting up those lines and building a battery plant…. Hopefully after selling several hundred thousand Leafs, and spin-offs, this all pays for itself.

      2. DaveMart says:

        There are all sorts of definitions of gross and net profits.

        Any innovative company, with GE the classic example, spreads its R & D costs across its entire product line, and so products never directly pay that back, or at least by the time that ‘electric cars’, not just the Leaf are net contributors to that R & D budget the cutting edge has long moved on.

        But gross costs also include monies spent specifically to produce the Leaf, ie the battery factories, assembly factories for this model rather than the spending for electric cars in general.

        I would imagine that since the sales projections for the Leaf were way higher than actual, covering this narrower definition of gross costs is still a long way ahead.

        So what he is talking about then is simply covering the ongoing marginal costs per car to build the Leaf.

        IOW it is still a money sink.

        That however is not unusual in new technology, although of course higher sales and/or higher petrol prices would have reduced the deficit considerably.

        So long as Nissan’s wider business can carry the costs, and the cost of production and the rate of sales are going in the right direction, it is fine.

        True ‘profitability’ is very distant however.

        1. Brian says:

          “So what he is talking about then is simply covering the ongoing marginal costs per car to build the Leaf.

          IOW it is still a money sink.”

          I hear what you’re saying, but if the Leaf is truly making money on a marginal basis, the best way to pay back the other costs is to sell more Leafs.

          IMHO, that is the good news here. Nissan has every incentive to sell more Leafs. Killing the entire program would be counter productive, since that wouldn’t let them reclaim costs sunk into assembly lines.

          1. DaveMart says:

            I agree Brian, and I don’t think that anything I said was unduly critical Nissan or the Leaf.

            Its worth folk realising how enormously tough it still is to move to anything resembling an economic battery car though, particularly as subsidies and perks are removed.

            Sales without them at present would be minimal, and they are what keeps electric cars,not to mention away from home charging, afloat at all.

            1. Brian says:

              I apologize for my errant use of the word “but”. My intent was not to disagree with anything you said, but to add to it.

              Yes, the EV crowd seems to want the world from automakers. How quickly we seem to forget that these are for-profit organizations that exist to make money, not to change the world.

              We owe a lot to Tesla, Chevy, and Nissan for heavily investing in their future ability to change the world of transportation for the better.

              1. DaveMart says:

                I am a mild man (not really! ;-)) but admit that when I see a new electric car come out and folk comment:

                ‘I don’t like the AER. The first car company to sell a plug in SUV with 80 miles of electric range for $20k will get my money and make a fortune!’

                I feel a passing urge to seize them by the hair, drag them to a library and make them study economics 101!

                I think the carmakers are doing an astonishing job, led in my view by Mitsubishi and the Outlander PHEV.

                1. Mint says:

                  I too think Mitsubishi’s PHEV is a solid effort. And Nissan is to be commended for providing the most value for an 80-mile EV, as is BMW for innovation.

                  But everyone else? Sorry, no props from me. They’re all using EVs as high margin products.

                  PHEVs should cost roughly hybrid+batteries+$1000. All the other parts are the same. After tax credit the premium over a regular should be minimal. If they did, we’d see 2-3x the plugin penetration today.

                  Ford, GM, Toyota, and Honda all get a fail by this metric. VW Group is only a little better. Hyundai doesn’t even offer a PHEV. Hell, people made aftermarket plugin kits for the Prius that had more range at lower cost.

                  As an engineer, I’m just not impressed by most automakers on this front.

                  1. QCO says:

                    Not sure Ford is off the mark by your measurement…

                    For most of the past year around here the Fusion Energi has been selling for about 4k more that the similarly equipped hybrid version (all manufacturer incentives considered), which is about the same as the federal tax credit. Essentially the plug in version, with its modest 19 mile AER, is free.

        2. Dr. Kenneth Noisewater says:

          Once the marginal cost of production is lower than MSRP, you should be selling it as hard as possible to help recoup all those losses.

          It would also help to expand the platform out to more customer-pleasing formfactors and sizes. Compact cars are just not as popular (in the US at any rate) as midsize CUVs, pickup trucks, SUVs, etc.

          That _should_ be ‘How to run an automaker 101’.

        3. LuStuccc says:

          Come on guys, this is only marketing BS! Did Tesla spend 5B on R&D? No, they made the best car in the world with laptop batteries!
          Any big car corporation has 1000 times more ressources than Tesla and did nothing! The leaf is no accomplishment and Goshn is no visionnary. Big car corps and their big brother big oil do not want to sell good EVs because there is way less profit to be made from them. The Altra-EV from 1999 did much better than the Leaf!
          The Leaf’s batteries are ordinary li-ion with a different form, and a good electric motor is no secret at all!

      3. Scott says:

        Correct. The Leaf has been profitable since early ’13 from what I can tell. I’ve done the math and there is no way Nissan has been losing money on this car. Production costs do not exceed $12.5k (US) -No way.

        1. LuStuccc says:

          The Leaf is a good car, but it is only a modified Versa, built around the same B platform. Period.

    2. vdiv says:

      JRMW is right. Hopefully that doesn’t happen and the automakers continue investing in innovation and in their commitment to make it happen the way Nissan has.

    3. Alonso Perez says:

      I believe the compliance plug-ins are losing money. The 500e supposedly sold at a 14K loss (according to Fiat’s CEO). I’d bet the Focus EV is losing money too, as well as the RAV4 and several others.

      To make gross profit you need a reasonable unit cost and you can’t have that with low volume. The Leaf is making a gross profit because sales are now higher than “low volume”, though still not high. I expect the i3 will enter this category as well. The Volt is borderline, probably losing money now, but the second generation Volt will probably do better. The Model S is gross positive as well, though that is not just from higher volume, but also because Tesla has been able to defend its pricing.

      Everybody else is losing money. Zoe volume is too low, but hopefully that will change. Some Chinese models may get to profitability soon.

      For all the EV’s out there now, the people who are serious about this are still few.

      1. QCO says:

        By definition the compliance car economics must include the EV credits, so the individual vehicle P/L is not really meaningful.

        The production cars (Leaf, Volt) have to come close to breaking even from an operational perspective, hence their high price.

        But the second generation cost reduced/optimized versions are where the payback is. And both Nissan iand GM are definitely going to be well positioned to benefit.

  3. ELROY says:

    What are they going to do when they get the flood of lease returns?

    1. Sublime says:

      Lease returns are not directly their problem. There is an underwriter to the lease deals. Its kind of like an insurance policy. The underwriter sets the residuals and charges Nissan a fee. When the lease comes back, if it sells for less than the residual, the underwriter covers the difference.
      It becomes Nissan’s problem, when the underwriter needs to drastically lowers residuals or increase fees if off-lease LEAFs don’t sell well.

      1. vdiv says:

        The “flood” of lease returns would ostensibly compete with newly minted LEAFs and that would be Nissan’s problem unless the new LEAFs are much improved — more R&D.

        1. Ocean Railroader says:

          I really hope their is a flood of lease returns so it will drive price of the used leafs below $9000 dollars so I can afford one.

          In that the leaf in it’s current state of 80 mile ranges and no DC quick chargers makes it a very limited car. I wouldn’t want to have 30 grand locked up in it as going after the EV idea. But under 10 Grand now we are talking go after a dream.

    2. DaveMart says:

      Probably try not to talk about whether they are edging towards or away from gross profitability!

      That question will become even more pressing as subsidies and privileges expire.

      There are good reasons to be hopeful, but unquestionably so far electric cars have been a money sink, and that is not going to change any time soon.

      The Nissan program was presumably based on the likelihood that fuel prices would be much higher than they currently are, which would be transformative.

      1. Alonso Perez says:

        But low oil prices will cut off investment in expensive unconventional plays, reducing supply, and eventually a price shock will result when demand exceeds supply again.

        A paradox here is that EVs are reducing demand. The effect is modest, but the oil market is inelastic so even a small drop in demand can have a big price effect.

        In a perfect world, we want EVs to take over on their merits, not just as gas saving cars. In this way, low oil prices would not be a problem. The way to starve the oil beast is through low oil prices (reflecting a lack of demand). High oil prices mean more money for tar sands and other risky, costly extraction methods.

        1. Brian says:

          You make a very valid point. When prices drop, the worst sources of oil get that much less attractive.

          When I talk about driving electric with neighbors and friends, saving on gas is actually low on the list of topics brought up. The more interesting topics are convenience (yes, EVs are more convenient if used for the intended purpose), reliability, and fun. This is a good sign, since it does point to EVs catching on by their own merits.

        2. Ocean Railroader says:

          I think battery prices are more of a factor then oil prices are for the cars.

          A example is the leaf without tax credits is at least $28,000 to $35,000 with a 80 mile range. If battery prices where to fail by say $20 to 40% they could sell these cars for less with the same 80 mile range which would open more markets for it. Another thing is if they added 40 to 60 more miles range to the existing model it would open up more doors and markets for it.

          The Mitsubishi i-miev’s horrible sales are a example of this in that the car costs $22,000 new and yet has only a 62 mile range.

          1. Jay Donnaway says:

            The i-MiEVs horrible sales are an indictment of Mitsubishi’s production planning and marketing departments, and not the car. I’m in my third year of putting over 18,000 miles per year on the car, and it’s a fun ride. The only rational explanation would seem to be continued battery supply issues due to the runaway success of their Outlander PHEV. “Only” 62 miles of range is plenty for a one-way commute of up to 50 miles, provided you can charge near work. That’s twice as far as the average US commute.

            1. Ocean Railroader says:

              I’m looking at getting a used Mitsubishi i-miev due to the costs of a used i-miev has gone down a great deal compared to the leaf.

              I have been reading several stories that the batteries going into the i-miev might be obsolete now in terms of energy density. In that I remember reading there are new batteries out there that would allow me to put 25 to 30 kilowatts of power into the same space as the 16 kilowatts.

    3. Scott Franco says:

      Used leafs are a good deal. For $10k to $15k, you get a leaf that still has %80 or more of its battery life yet, given a 3 year lease.

  4. David Murray says:

    I wish Nissan would put their EV technology into some of their other cars. I’d also love to see a PHEV. I think the Rogue would be an excellent choice for a PHEV.

    1. vdiv says:

      Agree, all vehicles would be excellent choices for electrification. 🙂

      1. kdawg says:

        If all cars had a “plug” option for $4k, that provided a 6kWh battery pack, seems like it would be a no-brainer for people to always go for this option (assuming they have a place to plug in). Of course, we get back into consumers doing math again. Maybe they need to market it as “EV-Boost” and let it get you from 0-60 in a much faster time than the ICE version. That would probably help sales more than the fuel savings, LOL.

        1. Brian says:

          That would be a wonderful option. But ironically, you’d have all the plug-in fanboys complaining about how pathetic the AER or electric-only acceleration is. That they shouldn’t have even bothered building the car because it does not leapfrog the Volt (or whatever the state-of-the-art is at the time).

          1. kdawg says:

            I just threw out the amount of 6kWh, but it could be more. Just talking about the concept in general. I do think below a certain amount (*cough* PiP), the plug is pointless.

            1. Brian says:

              Well, the PiP would burn less gasoline in some cases than a Volt. For example, in 2013, I drove my hybrid less than 5 miles for 90% of trips. The other 10% were mostly greater than 200 miles. The trips in between were covered by the Leaf.

              My point is that at this (still) early stage, we shouldn’t poo-poo ANY car with a plug. Not even the PiP.

        2. GeorgeS says:

          I disagree kdawg.

          Making it an option never works as the customer just looks at purchase price not TCO.

          1. kdawg says:

            OK, make it standard on all cars, and you can choose to plug in if want 🙂

            I did mention the lack of people doing the math, and instead selling it as a performance booster. Seems like people want as much HP as they can get.

    2. Scott Franco says:

      “I wish Nissan would put their EV technology into some of their other cars. I’d also love to see a PHEV.”

      Nissan has had great success exactly BECAUSE they didn’t go the hybrid route, not in spite of it. What is the point of paying more for a car that simply gets better gas mileage, instead of getting rid of gas completely?

      This choice is only going to get better with time. The volt was sold to people who didn’t really believe EVs could do they job, and they will wise up.

      1. Bonaire says:

        Really? The Volt allows someone to drive entirely electric – or go as far as they want on gas. It’s up to the driver and their normal driving route. I have seen people with 20,000 miles on their Volt using no gas. Jay Leno drove his 2011 Volt 10,000 miles around L.A. without using any gas.

        The Volt is a no-compromises car. Too bad it is viewed with the ‘religiousness’ of BEV purity and shunned when it is helping drivers reach 70-80% or more miles without using gas.

      2. william edwards says:

        For the foreseeable future most will need liquid fuels for some trips. So being able to drive on EV for 99% of the time and gas 1% of the time would be of great interest. One could always rent a car for greater trips, but that involves more costs, including time to deal with each transaction. PHEVs are a great fit for many more people than EVs and cars like the Volt can function as an EV for a LOT of people.

  5. GeorgeS says:

    They may have a minimal gross profit but it’s a bare bones EV with no TMS.

    Next iteration will have either air cooling like the e-NV200 or liquid cooling like the Zoe.

    That will cut a little into their profit.

  6. Assaf says:

    IMHO this is now a starvation game between Nissan and the larger two Japanese company.

    They are deliberately pulling out of BEVs, in order to restrict their growth, and pressuring governments heavily to subsidize FCEVs for them.

    It’s not really about which technology they believe in; it’s about trying to deal Nissan a fatal blow.

    I assume they think it’ll be much easier for them to hop back on the BEV bandwagon in case it dominates and the FCEVs don’t pan out – than vice versa.

    Meanwhile, it is Nissan who needs to carry the weight of introducing BEVs to new markets.

    Fortunately, the Japanese are not the only ones in the game, and so Tesla and the Germans are spoiling this plan.

    1. DaveMart says:

      Personally I blame the Illuminati…..

    2. Scott Franco says:

      I can hear the black helicopters coming over the hill…

    3. … don’t forget Korean’s and Chinese.

      FYI: China has mandated 30% of all government vehicles will be electrified by 2020.

      Oil/Gas companies are are happy to assist with funding NG & H infrastructure, but Electric Utilities are not interested in providing EV infrastructure. Seems odd that electrc utilities not interested in growing use of their product?

      1. william edwards says:

        I have not kept up with Kia, but a guy on an EV panel last week said they were shooting for volume with the car that goes on sale this week.

    4. vdiv says:

      The Germans jumping in the plugin market is huge. It took them 4 years longer, but they are doing it. Their influence in the automotive space cannot be overstated.

      The actions of Toyota and Honda have rather crystallized my view on them and made the choice for my future automotive needs simpler.

  7. ClarksonCote says:

    Glad the Leaf is prospering, but it’s a little scary to me that 80% of sales are from only 4 cities. Hopefully as alternative vehicles are more widely accepted, that portfolio can be diversified a bit.

    1. Brian says:

      Indeed. I bet that we will see that happen when the 2nd generation Leaf arrives in 2017. It wouldn’t hurt for other cites / states to install some infrastructure as well.

      Until one or both of those things come to pass, the Leaf sales will likely remain driven largely by those same 4 cities.

    2. kdawg says:

      If you add up the metro population of the 4 cities:

      Atlanta: 4.3 million
      San Franciso: 7.2 million
      Seattle: 3.6 million
      Los Angeles: 18 million

      That’s a total of 33.1 million
      Or 10.5% of the US population.
      Doesn’t sound as bad as ‘just 4 cities’.

      I wonder how many people are going into the city to buy their cars, but then driving them back to their home cities/townships.

  8. DaveMart says:

    ‘ the direct cost of the car and the revenue of the car — we are getting into positive, which is good for this technology.”’

    That is not ‘LEAF Is Now Profitable’ as the headline says.

    Nothing like it.

    Covering your direct costs is not the same as making a profit.

    I do hope this site stays solvent, as confusion on this matter is fatal to a business.

    1. Kubel says:

      Also, “are getting” implies that they are working on it, but not there yet.

  9. jmac says:

    Yeah Dave, and the Prius and other Toyota hybrids have just passed 7 million in global sales.

    All these cars were sold of course at a loss ……..ha ha ha ….. LOL.

    1. DaveMart says:

      I did not know the Nissan Leaf was the same car as the Prius.
      You live and learn.

      I’m glad to know that you solidly support the Toyota engineers, as many of the same team who brought you the Prius are now working on the FCEV.

  10. ModernMarvelFan says:

    So, 3 out of the top 4 cities offers significant cash toward leasing.

    Leasing LEAF in Atlanta get you additional $5K on top of the $199/month deal.

    Leasing LEAF in SF/LA get you additional $2,500 on top of the $199/month deal.

    So, LEAF is doing well when the leasing dealers are heavily subsidized by the State.

    Incentives push plugin sales…

    1. Ocean Railroader says:

      Places like Richmond Virginia and Washington DC show the reality of what the leaf would do in a world with out heavy subsides.

      1. ModernMarvelFan says:

        I am sure those “commuter lane access” is worthy a lot of money in heavily congested urban commuting area…

        How about somewhere like Chicago, Tulsa, Cinncinati, large enough, but no special incentives for EVs? That is the true reflection on how well EVs would do.

        I am NOT saying that we shouldn’t support EVs thru incentives. We should. But it just shows that EVs can’t stand on its own without heavy government incentives…

  11. Kubel says:

    Just a parallel: It took Toyota 4 years to turn a profit on the Prius. The benefit of that costly start was an early advantage in hybrid technology, which ultimately won them the biggest chunk of the pie and a very profitable product.