Evaluation of Nissan Leaf Company as a Investment Manager

Background of the company

The Nissan Leaf is the first modern battery electric car to go on sale in the U.S. First delivered in December 2010, the Leaf is one of just a handful of plug-in cars sold in volume--and Nissan has big plans for this compact five-door electric hatchback. It competes with a number of other plug-in vehicles, both "pure" battery electrics--including the Mitsubishi 'i' minicar and the compact four-door Coda Sedan--and a couple of others with both plugs and gasoline engines, including the Chevrolet Volt and Toyota Prius Plug-In Hybrid. The Leaf is the first of several all-electric models expected from Nissan, which has placed a large bet on all-electric cars versus plug-ins that are either adapted conventional hybrids (like the Prius Plug-In) or use a range extending engine (like the Volt) to provide longer travel distances. Coming soon are both an electric Nissan local delivery van and an Infiniti electric luxury coupe(Cusumano, pp. 05-108).

The Nissan Leaf uses a 24-kilowatt-hour lithium-ion battery pack built into the car's floorpan to power an 80-kilowatt (107-horsepower) electric motor driving the front wheels. The EPA rates its electric range as 73 miles, though owners say range can vary from 65 to 100 miles depending on speed, temperature, and how much they use the car's heating in cold weather.

While the Leaf's purchase price of around $35,000 before incentives is roughly twice that of a comparable gasoline compact hatchback, its running costs will be far lower--though the cost of electricity across the country varies far more than even the price of gasoline. But at the U.S. average cost for electricity (about 11 cents per kilowatt-hour), the Leaf costs about 3 cents a mile to run on electricity--versus 16 cents per mile for a 25-mpg car running on $4/gallon gasoline.

Incentives available to Leaf buyers include a $7,500 Federal income-tax credit and a remarkable array of state, regional, local, and corporate initiatives. Two of the best areas to buy a Leaf are in Hawaii (which offers a $4,500 purchase rebate) and California (whose rebate is $2,500) (Loveday, pp. 13-15).

Recharging the Leaf takes 5 to 8 hours using 240-Volt power (the same kind that's used for electric stoves and clothes driers), or up to 20 hours on conventional 110-Volt household current. Leaf buyers can arrange through their dealer to have a 240-Volt charging station installed in their garage, generally for less than $2,000 depending on the pre-existing wiring and electric service. Most Leafs can also "quick-charge" up to 80 percent of their battery capacity within 30 minutes at special "Level 3 direct current" charging stations that work on the so-called "CHAdeMO" standard. These stations are still rare, but are being rolled out in regions--Oregon and Washington; parts of Texas--that are working aggressively to adopt electric cars.

The compact Leaf offers interior room close to that of a midsize car, and its weight of well over 3,000 pounds is clearly more in line with the larger category. Like all electric cars, which can ...