Nissan/Renault EVs price competitive by 2014

10 percent EV penetration by 2020 easy?

Nissan Leaf as cheap as a Versa in just 3 years?

Demand for Nissan plug-in electric cars will far outweigh supply for the next few years, but by 2014 Nissan aims to produce at least 500,000 plug-in vehicles per year. And production should continue to grow thereafter as Nissan research suggests that 10 percent of world auto consumers are ready to purchase electric cars.

Even more interesting, CEO Carlos Ghosn believes that by 2014 electric cars could be competitive without the help of tax incentives.

But what does “competitive” mean?

Don’t get me wrong. I hope Mr. Ghosn is right. Already Mr. Ghosn is the by-far biggest advocate of electrification in the mainstream auto industry, and his bullishness is exciting, particularly since so few others in the auto industry concur.

But, for fun, let’s just play with some basic numbers.

Today the Nissan Leaf costs $32,780, but after federal tax credits the cost can drop to $25,280. On the other hand, the Nissan Versa – almost the same car as the Leaf minus the powertrain – costs just $13,520. So, if manufacturing improvements and scale can reduce Leaf costs by $7500 per vehicle – the amount of the tax credit – a Leaf would still cost $11,760 more than a Versa.

According to the government, the average Versa driver spends about $1500 per year in gasoline costs. That’s almost 8 years of gasoline and completely free electricity before energy cost parity between the two vehicles.

Now, certainly, this isn’t an apples to apples comparison, and their are situations where the numbers will be more or less price competitive. Nevertheless, most consumer studies regarding plug-in vehicles resemble studies regarding hybrid interest. Consumers are interested, but they don’t want to pay much extra to buy a hybrid – or probably to buy an EV – and years of sales data has regularly proved this conundrum.

Might EVs start changing this dynamic? Maybe. Might there be even bigger cost reductions? Maybe.

Therefore, how much would EV costs have to come down before plug-ins seem price competitive to non-plug-ins for more than just 3 percent of early adopters buying battery-powered technologies? Would a $20,000 Leaf do it? An $18,000 Leaf? Or, is a $25,000 Leaf already enough to achieve 10 percent penetration?