Ghosn – Renault-Nissan-Mitsubishi Alliance Are Only Automaker Profiting On EVs

FEB 19 2018 BY MARK KANE 34

Renault CEO: Synergies coming from autonomous, electric vehicles from CNBC.

Electric cars are a different species compared to conventional cars, which makes initial development expensive. With the lower sales volume, it’s hard right now to make any profit at the start.

Alliance chairman Carlos Ghosn

According to the most recent interview with Carlos Ghosn, chairman of the Renault-Nissan-Mitsubishi Alliance, the Alliance probably the only automaker(s) that is profiting on electric cars:

“We are probably the most advanced carmaker in terms of costs of electric cars and we have announced already in 2017 that we are probably the only carmaker who’s starting to make money selling electric cars,” Ghosn said.

“We know that there’s a steep curve before you start to make money out of electric cars. I think we are well advanced,” he added.”

Related: Porsche CFO Talks Huge EV Investments, Profitability Drop, More

It took a lot of time to be able to say that, as Nissan/Renault began electric car development in 2008 (having its own battery competence with NEC) and introduced the LEAF in December 2010, followed shortly thereafter by the Renault ZOE.

We are in 2018 now, so that’s around 10 years from start to profit.

The new plan is to introduce 12 new all-electric cars by the Alliance by 2022.

Carlos Ghosn adds that he believes that new battery technology and new kinds of batteries will offset the increase in raw material costs.

Source: CNBC

Categories: Mitsubishi, Nissan, Renault

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34 Comments on "Ghosn – Renault-Nissan-Mitsubishi Alliance Are Only Automaker Profiting On EVs"

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Will
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Will

???

Benz
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Benz

Good for the Alliance.

Clive
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Clive

Good for Carlos.

His leadership is key here.

Vexar
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Vexar

So the Chinese aren’t? We know Tesla is busy building new factories, not sure I’d call that a non-profitable factory. Their gross margin is there, they just /keep growing/.

Clive
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Clive

Barely.

The Chinese are doing it to break away from oil dependency not really for any other reason.

Dan
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Dan

I think that’s right. They are reducing oil imports and switching to switching to local coal fired electricity (75+% of electricity in China is from coal).

Assaf
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Assaf

@Dan, I must call out BS. China’s coal fraction in 2016 was 65%, and dropping faster than the US, so 2017 might have been <60%.
Takes no more than 5 google seconds to debunk the "75%" claim.
https://en.wikipedia.org/wiki/Electricity_sector_in_China

China far and away leads the world in wind and solar installation and installation rate, besides producing most of the world's solar PVs. So coal fraction will continue to drop like a lump of coal.

China-bashing is really the cheapest and stupidest form of consensus-seeking among Americans nowadays. No one is a fan of China's regime, but these EVs, solar and wind are produced by actual Chinese workers. Besides, on the one aspect on which the regime is doing right by its people and the planet, credit is due.

As to the more specific issue of whether Chinese automakers are making money on EVs, I presume that like most everyone else, Ghosn is excluding the largely-insulated Chinese market in his statement. I won't be surprised if BYD and BAIC, at the very least are also already making money on their EVs, as well.

Asak
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Asak

China is moving in the right direction, but as always when this topic comes up I like to mention that they are digging out of a deep hole. They are suffering from severe pollution right now, to a point far beyond what anyone in a developed country/democracy would not be willing to tolerate. They literally cannot do enough because things are already passed the point of being critical there.

In fairness, they did take over a lot of dirty manufacturing from the U.S. and elsewhere, but China really should have got serious about pollution two decades ago. Frankly I’d argue they shouldn’t even be allowing the sale of gas cars at all, granted that pollution from cars is far from their most serious problem.

Asak
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Asak

Also, as far as Chinese companies, it’s hard to say whether they’re necessarily making money or not. There’s a lot of state involvement with many companies over there, and not all of them are even managed to make a profit. I don’t know enough about BYD or BAIC to specifically say whether they’re making money or not, but I wouldn’t assume that they are.

Mikael
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Mikael

It’s not the first time you have come with the same ignorant statistic and have been corrected. When are you going to learn?

Or is it just part of some agenda so that you are also unwilling to learn?

https://insideevs.com/the-ev-revolution-has-been-ignited-and-now-its-unstoppable/

Pushmi-Pullyu
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Pushmi-Pullyu

“So the Chinese aren’t?”

Probably not, no. Chinese auto makers are heavily subsidized by the government. So probably most or all of them are running at a loss but propped up by heavy subsidies.

G2
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G2

True, but then again their main motive is not yet profit but mobility without pollution from the vehicle…right?

Another Euro point of view
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Another Euro point of view

Likely true for many reasons:

1/ the Leaf 2 is a glorified Leaf 1 so R&D expenses were probably kept reasonable.
2/ As the group sells around 10 millions cars per year the selling, general & administrative costs (SG&A) are optimized (yet existing & very large amortized show rooms & service centers network)
3/ It will still be the best sold EV worldwide at least up to second quarter 2018 if not all of 2018. The more car you sell the more bargaining power you have with your suppliers & the easiest it is to amortize tooling + R&D.
4/ They test their cars extensively before release as to keep repairs under warranty in check (famously Tesla owners don’t mind the little bugs they experience with their cars as the “service centers staff are bending over backwards to fix them”, OK but “bending over backwards” has a cost).
5/ Arguably (and according to Pushevs) their approach of making battery packs result in cheaper manufacturing costs (assembling hundreds of tiny cylindrical cells is neither fast/easy (as recent production bottle neck of Model 3 seems to show) nor cheap).
6/ Amortized tooling used for manufacturing Leaf 1 is likely still used for Leaf 2 as same platform.

Roy_H
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Roy_H

+1

The +1 below was supposed to go here.

Tom
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Tom

I think that’s referred to as manufacturing 101. Nissan put up with several years of losses to be in a leadership position. Tesla has yet to master manufacturing. They are working on it. We shall see if they succeed. Hopefully they do but the odds are still against them. Size matters.

Allen Wilford
Guest

After the wonderful I-Meiv Mitsubishi produced the stupid hybrid. Why. If that suv was EV they could not build them quickly enough. Who was responsible for the move backwards? Fire them! The knowledge and ability to build the I- Meiv which was a wonderful to own and drive should have put you in the lead to bigger and better. The only hope is to build a Electric pickup truck. They you can destroy the Ford fake concern for the environment

Spider-Dan
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Spider-Dan

They haven’t been able to build the PHEV Outlander quick enough for many years, so I’m not sure where you’re going with that.

And if the PHEV Outlander had the battery pack in the i-MiEV (to say nothing of a larger one), several effects would cascade:

1) A vehicle which has already been battery-supply-limited would require even more batteries, and therefore be more limited. But that probably wouldn’t be as big of a deal as one might think, because…

2) The total range of the vehicle would decrease substantially (to significantly less than that of the i-MiEV), which would kill demand. That, or…

3) The size of the battery pack would have to
drastically increase, which would exacerbate problem #1 and explode the price (which would also kill demand).

The Outlander PHEV is an example of a vehicle that is correctly sized and positioned as a compelling PHEV. It is a terrible target for a BEV conversion.
3) The

Roy_H
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Roy_H

+1

John
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John

Why does this constant EV waffler continue to get press?

Assaf
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Assaf

hahaha,

funniest comment on this thread.
It’s never ceases to amaze how oblivious and self-important the medium of anonymous online comments can make us sometimes.

Indeed, next time we should tell Insideevs to seek your personal permission before posting anything about Carlos Ghosn πŸ™‚

Spider-Dan
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Spider-Dan

The #1 global seller of EVs (excluding China) is a “waffler”? I’d hate to hear what that says about everyone else!

Another Euro point of view
Guest
Another Euro point of view

Interesting that he acknowledges the increase of raw materials price issue. What he says is that battery manufacturing process & technology improvement will compensate this raw material increases. In substance he says exactly what another big car maker is saying, that is Hyundai group. That is that the sharp raw material increase will likely stop the decrease of the Li-ion battery at pack level for a little while. Any way, likely for at least a couple of years (more according to pessimist) we should see battery packs prices leveling.

ffbj
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ffbj

I think the Leaf will suffer more as better alternatives at the mid-range price of evs come into the market.
Also you could step up to the Model 3 if you want to wait a while for a much better car, but for quite a bit more money.

Will
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Will

Keep on waiting for base model 3 unitll infinity

Get Real
Guest
Get Real

And I’m sure that serial anti-Tesla trolls like yourself will continue to spread FUD into infinity.

Pushmi-Pullyu
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Pushmi-Pullyu

Oh, stop whinging about Tesla putting the Model 3 into production, and starting even earlier than their own goals. Tesla did, production is ramping up, and all of your Tesla hater whinging is not going to slow that by so much as a single second.

Go Tesla!

orinoco
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orinoco

The way I understand his statement is, that Renault-Nissan is just _starting_ to make profit, meaning still ahead of making profit with BEVs.

Jeff Songster
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Jeff Songster

Love it… but really… If you spent some of that profit by investing in a more useful charger network… I would be buying next year’s LEAF now rather than driving this Year’s Model X… which I bought after Nissan chose profit over position… with a 40kW battery and underdeveloped charger net. If the New Nissans came with Tesla Supercharger compatibility Renault/Nissan/Mitsubishi and Tesla would be ruling the EV world.

arne-nl
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arne-nl

Building a charging network is not in the dna of car manufacturers. They grew up under “we make the ride, someone else will provide the juice”.

Their lofty EV adventures notwithstanding, even The Alliance suffers from petrified thinking and will not change their thinking.

Magnus H
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Magnus H

There are lot of different providers of chargers, i cant see the benefit of chargers owned by manufacturers.

Jason
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Jason

Just imagine what the situation would have been if they had styled the Leaf a bit better. That was the main reason a lot of people didn’t consider it, a very bizarre front end.
I read they spent $5bil developing the Leaf. Hard to imagine given the base chassis is built on the Tiida, really the battery and electronics would have been the biggest investment. Pretty much everything else they have been doing for decades.

jimi seko
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jimi seko

I’m no business expert but I know the difference between net profits and gross profits. Tesla’s gross profits have increased 93% per year! That’s more than than the gross profit growth rate of Google and Amazon combined.

Pushmi-Pullyu
Guest
Pushmi-Pullyu

Ghosn – Renault-Nissan-Mitsubishi Alliance Are Only Automaker Profiting On EVs”

I’m sure this will come as a great surprise to everyone at Tesla, whose gross profit margin is comfortably above that of Renault, Nissan, and Mitsubishi. πŸ˜‰

(And don’t bother posting a response repeating the FUD that Tesla is “losing money”. Tesla would certainly be making a net profit if it wasn’t reinvesting profits and borrowing money to grow the company rapidly.)

Terawatt
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Terawatt
Gross margin *alone* does not tell you ANYTHING about whether a business is profitable or not. Wiki: “Gross margin is the difference between revenue and cost of goods sold (COGS) divided by revenue. Gross margin is expressed as a percentage. Generally, it is calculated as the selling price of an item, less the cost of goods sold (e.g. production or acquisition costs, not including indirect fixed costs like office expenses, rent, or administrative costs).” Example: a company makes and sells fantasticos at five cents a piece. The direct cost of making them are just one cent a piece. This company has a gross margin of 80%, whether it sells one fantastico in a year or a hundred million. And it is the same whether fixed costs, nevermind R&D investments in future products, amount to a dollar or a trillion dollars. If this company has fixed costs of 300k, and doesn’t have to spend anything on R&D simply to continue business as usual, it can break even by selling 25*300k = 7.5 million fantasticos. In practice, fixed costs are never quite fixed except possibly in some automated services. You can’t scale car manufacturing by 100x without more equipment, employees, buildings and… Read more »