Can China Be the Answer to Nissan Motor Co.'s Electric-Vehicle Dilemma?

Though Nissan has spent billions on electric vehicle technology, it’s yet to reap the returns. The latest developments in China could be an answer to Nissan’s prayers.

May 31, 2014 at 2:15PM

Jun Seki, head of Nissan's (NASDAQOTH:NSANY) Chinese joint venture with Dongfeng Motor, has recently told Bloomberg that "China is serious about pushing the adoption of new-energy vehicles, and no other country can compare with the subsidies that it's giving out". This aptly summarizes the situation at the Middle Kingdom where the government is battling alarming air pollution levels that have followed the waves of urbanization.

Automakers from all around the world are sensing enormous opportunity in the Chinese green car market that has triggered the start of a fight for market share. Nissan, with highest market share in the global electric vehicle space, is obviously at the forefront of action. Let's take a look at the company's playbook.

Nissan LEAF, Source: Nissan.

EV challenge
Ever since the Nissan and Renault strategic alliance was formed in 1999, the duo has poured billions of dollars in EV technology. In 2013, the alliance dominated the zero-emission car market with 63% share. The alliance sells several EVs, including the the global EV best-seller Nissan LEAF. In 2013, the alliance sold around 66,809 EVs, 52% higher than a year-ago. LEAF posted a sales gain of 77% in 2013, commanding 45% of the global market. 

Despite these encouraging numbers, concerns remain over the slower than expected worldwide adoption of EV technology. In 2013, out of the 85 million global auto sales, EVs found just 200,000 buyers. The high price tags and lack of frequent charging stations for these cars remain big hurdles.

Speaking about the alliance's goal of selling 1.5 million electric vehicles by 2016, Carlos Ghosn, chief of both Nissan and Renault, had told Financial Times last November that "We will not be there, at the speed right now, I'm seeing it more four or five years later."

China focus
China's government has a strong preference for EVs, and is taking aggressive actions to popularize this technology. Last year's sales of 14,604 purely electric vehicles are next to nothing given that 22 million vehicles were sold there. But the government is planning to build close to 400,000 charging stations by end of 2015, which could give EV sales a boost. The government also offers subsidies up to 60,000 yuan ($9,800) in several Chinese cities, and exempts EVs from the stringent license-plate regulations. 

Many global automakers are betting on China's EV market evolution and making aggressive announcements. Volkswagen (NASDAQOTH:VLKAY) is planning to launch more than 15 electric cars in China by 2018. In April, Reuters reported that the German auto giant intends to roll out electric versions of the up! city car and the Golf hatchback later in the year. Plug-in hybrid versions of the Audi A3 and Golf GTE would be out next year.

BMW is also convinced that China could be the planet's biggest EV market by 2019. The company's electric model i3 is expected to run on China's roads by September this year. Seki expects EV sales in China to rise annually to 100,000-400,000 vehicles by 2018, and wants Nissan to capture 20% or even more market share by then. 

Road map
Until recently, Nissan's EVs were imported from Japan and there was huge price gap with the EVs locally manufactured by companies like BYD or Chery Automobiles. Chery's QQ3 electric powertrain is available at a sticker price of around 49,800 yuan  ($7,985 at current exchange rate) whereas the imported Nissan LEAF is priced around 200,000 yuan ($32,071 at current exchange rate). 

To counter this, Nissan has decided to make EVs locally in China through its joint venture with Dongfeng. The first model named Venucia e30 could hit the market by September 2014. The Venucia e30 is basically the Chinese LEAF but without the import duties, giving the company the bandwidth to price the car competitively and take on the local rivals.

The Venucia e30 will be more spacious than the original LEAF and will run about 160 kilometers on full battery charge -- quite comparable with the locally built Chery's QQ3 which is a popular electric vehicle with a driving range of 100 kilometers. Nissan has already begun the pilot run of its e30 in the cities of Guangzhou, Xiangyang, and Dalian.

The Japanese automaker plans to invest around $322 million, and hopes to produce 10,000 units this year. This could increase to 50,000 units by early 2016.

The Venucia e30, Source: Nissan.

Last words
Nissan has taken a bold step by deciding to share its technology with its Chinese partner in order to manufacture EVs locally, but the price advantage could be worth it. The Chinese government is trying hard to make EVs and alternate energy vehicles a viable option for car buyers in the country. Nissan, with its global supremacy in EVs, is among the best contenders to reap rich returns if this happens.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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