Nissan's Electric Future

Automobile manufacturer Nissan is branching into the electric car market according to an article in the Wall Street Journal.  The article is entitled, “Nissan Turning Over a New Leaf” (11/18/09, Section D2).  According to the Journal: “By 2040, 75% of the driving done in the US should be done using electric power instead of petroleum combustion.”  Nissan is planning on launching three electric cars in the US.  The article cites Ghosn as saying: “’Our forecast is that sales of electric vehicles will be 10% of the total market…by 2020.’”  Mr. Ghosn also makes no mistake about the fact that Nissan is going in this direction due to the government incentives being offered to companies and consumers regarding electric cars.  “The government is offering $7,500 tax credits to buyers of electrical vehicles, and is spreading around billions in loans and stimulus program grants to launch electric vehicle production,” according to the Journal.  Nissan clearly sees an opening here to take advantage of the government assistance, and grab a large foothold in an emerging market.  There is risk associated with this approach however, as government funding could wind up being cut.  In addition, despite projections for growth, consumer demand for electric cars is not that strong currently.  Nissan and Mr. Ghosn are taking a big gamble on this.  I think it is a wise move, however.  The market for electric cars is only going to get stronger over time.  Also, should oil go back up to record highs, and gas hit $4 or $5 a gallon—Nissan is going to look pretty smart.  The challenge for Nissan, or any electric car manufacturer, will be achieving a price point where the average consumer will be able to enter the electric car market.  The article does not discuss how Nissan is planning on pricing its cars.  Its Nissan Leaf, however, is designed to be “a light commercial vehicle for use by companies such as FedEx.”  I think it is a great idea to also try to appeal to businesses.  Companies such as FedEx are incredibly sensitive to the cost of oil, and an electric fleet could help them develop more consistent energy costs.  Overall, I think that Nissan is doing exactly what needs to be done in their industry, and should be applauded.