Buying a Car Minus the Engine - and Fuel

Carmakers have been toying with a novel marketing strategy to take the sting off the electric vehicle's punishing price premium: selling EVs batteries-not-included. The idea is to lease the lithium batteries separately, shaving a third or more of an EV's $30,000-plus package cost. Nissan poured some cold water on the idea last week but EV observers think the idea is just getting started, even for Nissan.

Nissan thinks car buyers are ready for its LEAF EV (see teaser ad above) but not for battery leasing. It closed out a pre-sale national tour of the LEAF with news that the compact will be offered as a complete package. As Energywise reported last month, the package includes installation of a home battery charger. Now we know buyers will own the battery too. “Based on the data we have, consumers prefer to buy the full car with batteries,” Nissan Americas chairman Carlos Tavares told the New York Times.

Greentech Media's Michael Kanellos calls leasing a "conceptual leap" too far: "Imagine if you went to a car dealer today and they offered to sell you the car and lease the engine." But his analogy may be missing a cog, if one considers the comparative cost of charging an EV versus fueling that internal combustion engine. Per mile, charging the EV will cost roughly a third the cost of gassing up. Imagine if you went to a car dealer and they proposed selling you five years' worth of fuel up front!

"The EV minus the battery and charge is like an [conventional car] minus the gas," says Pitt Moos, who runs Daimler's development program for an EV version of the Smart ForTwo. Moos thinks leasing may ultimately succeed if consumers can be educated on the difference in charging and fueling costs. "It will need explanation," says Moos.

That will be the challenge for leasing components: educating consumers to recognize the EV battery and charge as a fueling package. This is the business model for Project Better Place, the Palo Alto-based EV infrastructure firm that picked up $350 million in financing last month. Who is working most closely with Project Better Place to test the concept in Denmark, Israel and other selected markets? The Nissan-Renault partnership.

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