Will Skipping the Hybrid Step Allow Nissan to Emerge as a Leader?

Nissan Motors has been recognized for its climate efforts and innovation in zero emission vehicles. Will the company’s efforts be enough to increase the penetration of electric vehicles around the world?

On October 15, 2016 Nissan Motor Co. made the CDP “A List” for Climate Change Efforts for a third consecutive year. This recognition adds to a list of awards that the Japanese auto company has received for its performance in the area of sustainability. The company was recognized for its transparency in disclosing environmental information and for a plan to reduce CO2 emissions from new vehicles by 90 percent by 2050 from 2000 levels. Nissan was further recognized for pioneering the Nissan LEAF, the world’s top selling zero emission vehicle, that enables owners to power their homes from their vehicles during peak power usage times. [1] While this strong stand on sustainability is the right thing to do for the environment and the well-being of future generations, it also represents a business opportunity to protect long-term growth and remain relevant as competitive tensions emerge.

Industry Background

The automotive industry has grown at an average rate of 3% over the past 20 years, doubling the pace of the global population growth. While growth in North America, Europe and Japan has remained flat, emerging markets have led the upward trend. Over the same period, the industry has remained very stable in terms of disruption. [2] While the communications industry has experience the entrance of ten new handset players, only two new players have appeared on the list of the top-15 automotive original-equipment manufacturers (OEMs). As the disruption begins and new forces such as mobility providers (UBER), tech giants (Apple, Google), and specialty OEMs (Tesla) emerge in the competitive landscape, traditional manufacturers are likely to start feeling the pressure and adapt their business model. [3]

The Emergence of a New Leader? 

Nissan has focused on becoming one of the most sustainable companies as a mean to ensure long-term growth and fight the emerging threats cited above. The company has made electric vehicles a priority in product development and is hoping to deliver self-driving cars by 2020. Being a leader in these new segments represents a great opportunity to gain more market share over the next few years and position Nissan as an industry leader in geographies where its market penetration is low. The company has sold more than 200,000 units of the Nissan Leaf worldwide and the model is currently the world’s bestselling electric vehicle. [4] Yet, the ability to penetrate specific markets will not only depend on the company’s ability to innovate but external factors such as regulation.

Governments have historically played a significant role shaping the industry and are increasingly addressing infrastructure and environment issues. Thus, developed cities with stricter emission regulations as well as consumer incentives such as recharging stations, tax breaks and subsidies will have higher adoption rates. By 2030, electric vehicles are expected to represent 10 to 50% of total car sales, with lower penetration in developing nations and rural areas. It must be noted, that this category includes hybrid electrics, a segment of the market that represents an intermediary step and that Nissan has decided to stop further developing and jump directly into zero emission vehicles. [3]

Going Forward

Nissan must keep working on two fronts if it wants to maintain its leadership and influence in clean energy vehicles over the next decades. On the innovation front, it needs to reduce battery costs to make electric cars more affordable. The company is currently developing a quick charger in-house so that it can be offered at lower prices. [4] As these costs go down, clean energy vehicles will become more competitive with respect to regular vehicles and people will be more likely to give them a chance. Second, the company needs to keep pushing for further vehicle charging infrastructure. Nissan has been a pioneer partnering with governments and corporations to develop such infrastructure and has installed its own charging stations at dealer outlets. However, if the Japanese company wants to expand its footprint worldwide, it needs to reach agreements in new geographies, especially in emerging markets. Until car owners feel comfortable that they will be able to charge their cars worry-free, electric cars won’t be able to compete head to head with carbon emitting vehicles.

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Citations

  1. “Nissan Recognized for-Sustainability-Leadership by the CDP Climate Change Report for the Third-Straight-Year”, press release, October 25, 2016, on NISSAN website, https://newsroom.nissan-global.com, accessed November 2016
  2. Paul Gao, Russell Hensley, and Andreas Zielke, “A Roadmap to the Future of the Auto Industry”, McKinsey&Company, October 2014, http://www.mckinsey.com/industries/automotive-and-assembly/our-insights/a-road-map-to-the-future-for-the-auto-industry, accessed November 2016
  3. Paul Gao, Hans Werner Kaas, Detlev Mohr, and Dominik Wee, “Disruptive Trends that Will Transform the Auto Industry”, McKinsey&Company, January 2016, http://www.mckinsey.com/industries/high-tech/our-insights/disruptive-trends-that-will-transform-the-auto-industry, accessed November 2016
  4. http://www.nissan-global.com/EN/ZEROEMISSION/

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3 thoughts on “Will Skipping the Hybrid Step Allow Nissan to Emerge as a Leader?

  1. Interesting read, Alejandra. It is especially interesting that Nissan has made such strides in R&D without that intermediary step, perhaps because their single-minded focus has allowed them to achieve results faster and more reliably than if they had split attention in going after the hybrid marker also. How do you see Nissan’s products and sales changing as various providers like Uber begin to plan for a sustainable future by buying entire fleets of electric (and self-driving) cars years ahead of the actual release of those vehicles? Does Nissan want to play in that “corporate transit” space or are they focused on the consumer for the long term?

  2. I truly do believe Nissan can become the industry leader in Electric Leaders. Its constant efforts to innovate in the field of green energy for automotive use are helping reduce costs by commoditizing this technology which is he main barrier electric cars face to become mainstream.

  3. Two thoughts in reaction to your two thoughts!:

    1. Leaf sales have been slowing down over the past few years (22K in 2013, 30K in 2014, 17K in 2015 and 10.6K through October 2016). [1] I imagine this has to do with the oil glut since 2014. However, that’s projected to diminish by the end of 2017. [2] Sales growth should resume.

    2. Nissan definitely needs to cut down on battery costs. Perhaps there’s an opportunity to partner with a 3rd party manufacturer – such as Tesla or Samsung? Battery development is a massive investment, and they’ll need to invest Tesla gigawatt money to compete in the long term. Otherwise, Tesla has a legitimate path to undercut them while offering a better quality product.

    [1] http://insideevs.com/monthly-plug-in-sales-scorecard/
    [2] http://www.bloomberg.com/news/articles/2016-09-13/iea-changes-view-on-oil-glut-sees-oversupply-persisting-in-2017

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