Nissan LEAF
Douglas Stansfield's picture

Nissan Can Avert LEAF Pending Crisis If It Makes This Single Change

Nissan’s recent offer to existing LEAF lease holders of $5000 to reduce their residual value has presented an interesting dilemma for the automaker.

The secondary electric car market isn’t holding its value as originally anticipated, so Nissan’s answer was to help reduce the LEAF's residual value and move the cars from lease to own. This thereby shifts the steeper than normal depreciation rate from Nissan to the now LEAF owners. The question is will this solidify the secondary EV market?

As an arm chair economist, I firmly believe that value is held in the prices one pays for the goods they purchase. At this point, the value of a Nissan LEAF is weighed by the current market availability and the anticipated future availability. As with the law of diffusion of innovation, EV sales are in the early adopter phase of the product life cycle. Consumers that are the early adopters most likely anticipated the battery improvements that have been evolving so opted to lease rather than buy their first Nissan Leafs. This leaves them open to the next generation EV which would be available in the future. As anticipated, that philosophy will be holding true and many Nissan LEAF leases will just give back their cars at the end of the lease and buy or lease a new EV. This is mostly because EVs with 200 mile range are coming.

So what is Nissan to do?

Can it develop a strategy to uphold the value of the secondary market Nissan Leafs? I believe it can. The published rate for a replacement Nissan LEAF battery pack is $5499 as previously published.

What if Nissan Retrofits 2011 LEAFs to 2016 Range?

Well, what if Nissan developed a kit, that would be able to be installed at the local dealers to retrofit 2011 to 2016 Nissan LEAFs with an add on battery that would push the Nissan LEAF cars on the road today up to the 200 miles range of the next version Leaf. Instead of a $5000 give back just on residual value, give back $5000 worth of batteries and keep the value of the overall used car higher?

There are many benefits to this.

  • It would help solidify the used EV car market.
  • It would help keep existing leases in the Nissan Family.
  • It would drive future brand growth by word of mouth.
  • It would increase publicity for the brand.

Also See:

  1. Nissan's Smart Strategy Regarding LEAF Inventory is Not a Crisis
  2. Nissan LEAF Battery Charging Difference Explained
  3. Three Reasons I Prefer Nissan LEAF over Kia Soul EV
  4. Month to Month Leasing of Nissan LEAF a Good Alternative to Buying a Used One

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Comments

The problem is not the armchair economics it's the engineering. Right now Nissan can fit only up to 30 kwh of battery in the spot the current 24.5 kwh battery fits and that isn't even available yet. Where would an "add on" battery go? My trunk? 200 miles would require a 55-60kwh battery. The new Leaf will have around that capacity but i guarantee you it'll require a differently shaped and larger area to hold that battery despite the increases in energy density. The current 24.5 kwh batt is huge and the current cars framing is built only for that shape of a battery. I think more homework is needed here
There have been increases in battery density so making an old LEAF go further is certainly doable. Will it possible to attain the full extra range of a brand new LEAF? Probably not, however also expect Nissan to offer LEAF's with different battery capacities, so they could easily package a battery that will fit both the old and new cars with less range than the top end new LEAF, but still be better than the original. But that's not the point. The problem with putting $5000 of batteries into old cars instead of discounting residual values is all about cashflow. If Nissan can convince a lessee to buy a car at a discounted price, they get paid money. If they instead install batteries in old LEAF's, they pay out money, not receive money. The $5000 discount is Nissan accepting they would get $5000 less than the residual market value if they took the car back from the owner, the money has already been lost. You can't spend what you have already lost, its already too late.
How would this proposed upgrade to 2011 LEAFs affect sales of 2016 LEAFs?
I would think it would hurt sales of the 2016. Anybody that dumps $5500 plus labor, parts and tax into a 2011 is not going to be in the market for a new car for the next few years. Resale value effects lease price which drives sales(Leases).
A $5000 downgrade in residual value hurts Nissan and the dealers. A $5000 investment in their existing Fleet inventory is an equity investment in the brand. The engining could remove some in the rear trunk space and add in extra cells. While it might not have as much range as Genereation II it will assist in adding value to depreciating residual value that they will inherit either way!
First, the new leaf will only have 6 more Kw. So why keep saying "it wont have the range of a new leaf..."
@Adarondax The way I see it an upgrade to an older model car will increase the desirability of the LEAF model new and old. The EV market is expanding, so they would not necessarily sacrifice future sales by offering upgrades. The opposite could be true as owners of older LEAF's brag about how their cars are NOT being made obsolete by new technology but benefiting from the new technology. Nissan currently sell replacement batteries for about $5,500. If they offered an larger capacity battery for about the same price many old LEAF owners would do this since its an 'upgrade'. Tesla are about to sell Roadster upgrade batteries boosting range to about 400 miles. This sends strong message to Model S owners in that Tesla will probably offer them an upgrade in 5 years as well.
Forget 200 miles, just upgrade me to 120 miles and I'll be super happy. After 46K miles, my range has dropped to about 50 on the slow lanes of the freeway.
When I put my $99 deposit down a year before the Leaf was first introduced, I had time to ponder all these things. Resale value was the biggest unknown because it could theoretically be $0 at the time of battery replacement. But the replacement cost for the battery turned out to be very reasonable. I have lost 3 bars at 4 years and 41K miles, but still have adequate range for my daily needs. I would expect to replace the battery in about 3~4 more years are current rate of degradation and expect by that time a next-generation technology will be available for replacements. Also, the cars seems to living up to theoretical maintenance expectations, which is basically they don't need much. I've replaced tires and wiper blades and is otherwise as new.
This "Crisis" is Nissan's own fault. If you remember the lease price on this car was almost $400 when it was first introduced. Over the years Nissan cut that price in half to drive sales and this dropped the resale value of the cars coming off lease. Lower sale prices and lower resale prices means way lower margin on the car line. Don't know if they can recover any of the cash by selling ZEV credits in California.
There is no way that Nissan can shoehorn a 200 mile battery into the existing Leaf. If they wanted to convert some leases into sales they would get a bit more creative. Instead of just offering a reduction in residual, they could offer a discount on a batter replacement. $6,000 it a steep cost for an used car. If they were to offer a $3,000 coupon for replacing with the updated 100 mile battery I bet that they would convert many leases into sales. This would also have the benefit of not hitting Nissan's bottom line immediately. Please will likely delay cashing in the coupon for as long as possible which would mean that Nissan would be incurring increasingly lower costs. It would also send a strong signal to the market that these cars can be upgraded beyond their initial specs over time. Someone mentioned that upgrading existing vehicles would hurt sales of the 2016 Leafs. I think that with a bump in range Nissan will open up the market considerably more than the impact of loss repeat buyers.
James, I believe that Nissan could actually fit a 200 mile range pack into a Leaf pretty easily in my view by doing the following. 1) add in extra capacity in the rear cargo area to level the truck area with the bummer. That would increase the overall capacity. 2) change the battery Low Voltage Cutoff. Currently, there is very little depth of discharge on the Leaf's pack. I bet they could lower it slightly more and by doing so increase the range. Those are my thoughts as to how this could be accomplished.
My thinking is that if they have to custom engineer something then their costs probably are going to be higher than just providing a discount. If, however, they already have a batter pack that will fit, it will likely cost them less in the long run to offer an upgrade coupon. But even thinking though your statement I am not sure how practical getting 200 mile capacity in the existing Leaf would be. If we believe the there is a 30kWh capacity in the existing battery tray then Nissan would need to add an additional 30kWh's worth of capacity in the back storage area. While this may be possible there are two problems: 1) the battery pack would consume about 2 feet of vertical space leaving almost no room from groceries or luggage, and 2) with the additional rear concentrated weight Nissan would have to modify the rear suspension. While 200 mile range sounds great, this just sounds like engineering costs that would never be recouped and a storage compromise that many people would accept.
I doubt it would be as easy as dropping in a new battery even if it did fit. New software would be required too.
Software is easy to update. Adding in a new battery to the existing is possible and have the new software switch it on when the existing pack gets depleted.
Software is easy to update if you have access to the source. If Nissan chooses not to update software, that's pretty much it.
The software in the cars is getting more and more complex and for the car lover that likes to work on cars, in the future will have a tough time modifying cars with the incredible amount of software in the cars. This fix in general has to be a Nissan sponsored fix.
Problem with upgrading older Leafs range by increasing battery pack size weight is not so simple. If the pack would fit in the same tray and weight the same, not such a big deal but as soon as Nissan adds weight or size to the battery system then the vehicles safety test and crash tests become suspect. I'm no expert by any means on such matters but I'd think these kind of changes would require new testing and I'd think that may be cost prohibitive.