Is the Traditional Concept of Car Ownership on the Ropes?

It may be if Nissan/Renault and Project Better Place have their way.

By George Straton

03.05.2009

image-2Over a century ago, Henry Ford wanted to make his products affordable to all Americans. He foresaw the exponential growth of urban sprawl and economic prosperity as a result of personal transport. The proliferation of cars occurred through more or less traditional means of ownership. Ownership of automobiles was considered a sign of prosperity.

In its infancy few could have predicted the transformation of the wireless phone to the ordinary. The wireless phone was not proliferated through traditional notions of consumer ownership. The consumer signs a contract for service for a fixed period of time. They purchase a non-user serviceable handset which is locked to the carrier. Part of the purchase price of the handset is subsidized by the monthly service fee to the carrier. Typically the device battery starts to malfunction a few months past the warranty’s expiration. By that time handset features have so evolved further. Instead of paying for a new battery the majority of consumers just re-up and sign another contract for which they select another handset in return.

It is part of a potentially endless cycle.

Which is what may become of the automobile if a joint venture between the world’s third largest auto maker Nissan/Renault and Project Better Place is successful. This is the same joint venture that will set up pilot programs for municipal vehicle fleets for the cities of San Francisco and Portland. Those pilot programs were outlined by Autosavant’s Brendan Moore in his November 2008 article.

image-1Nissan/Renault will build the cars while Project Better Place and local electric utility companies will implement the charging station infrastructure and battery exchange facilities. Automotive Energy Supply is the partnership in which Nissan will build Li-Ion batteries developed by NEC. A plant in Japan is set to have an annual output of 65,000 batteries by 2011.

PBP has already secured $200 million in venture capital, predominantly from Morgan Stanley for setting up the charging grids. In the Israeli market, Project Better Place (PBP) will be responsible for setting up 150,000 charging stations by 2011 (a number set to increase to 500,000 by 2013) for a country of 4 million people which covers an area the size of New Jersey. Charging stations’ grids are to be powered by solar fields and wind turbines in the Negev Desert.

Plug in electric models planned for production are based on the current Renault models: (city car) Twingo, (sub-compact LAV) Kangoo and the compact Megane. Projected range on a full charge is 70-120 miles. (Here in the U.S. a plug-in version of a model based on the Nissan Versa is expected as an initial offering.) The Kangoo version is scheduled to make its splash as official courtesy cars at the 2012 London Olympic Games. Other performance attributes are projected to be on par with Renault’s current line of 1600 cc inline-4 cylinder gas powerplants. That should translate to 0-60 mph in about 13 sec and a top speed of about 85 mph. Charge times would be 8 hours for a full charge with plans for 15 minute “fast charges” at high current locations that would permit 30 miles of range. What about electric car drivers who are more pressed for time? For those procrastinators there will be 150 automated battery “swapping stations” where a fully charged battery pack will be swapped for a depleted one in a matter of a few minutes. The recent announcement by Nissan/Renault CEO Carlos Ghosn that the companies will devote up to $1 Billion to plug-in electric car development by 2012 puts their proverbial money where their mouths are. Here in the U.S., out of 75 applicants for the Department of Energy’s $25 Billion, Nissan has made the first qualifying cut, and is seeking finds to make the necessary changes at its Smyrna Tennessee plant where the U.S. market electrics would be produced.

Israelis will purchase the cars at a price partially subsidized by the government. Subsidies will come through a combination of “cash for scrap” rebates, gasoline taxes, and new car taxes of as high as 60% for “non-green” models. PBJ, the Israeli Government and Renault/ Nissan claims that by 2011 the cars should be available at a subsidized price comparable to the current price of a gas powered Megane, or, roughly $16,000 U.S.. New car purchase subsidies are hardly novel, as they were used in Euroope in the late 1980s to get consumers out of cars that ran on leaded gasoline.

What about the batteries? Batteries lose their ability chemical ability to conduct ion transfer which is needed to store electricity and convert the chemistry back into usable electricity. Current Li-Ion automotive batteries ready for production claim life-cycles of at least 3500 complete charges and discharges. That can translate to 8 years of typical usage. The estimated current replacement cost for these battery packs is about $7-$8K. That cost is more or less on par with the cost of replacing an engine and transmission in a car powered by an internal combustion engine (perhaps a bit higher). The average American keeps their passenger cars on average for about 8 years. But the expectation of consumers is that the conventional gas engine and transmission could last on average 20 years or more with proper maintenance. So how can you convince consumers on a mass scale to buy cars whose primary means of propulsion would have to be replaced entirely within 8-10 years? Renault/ Nissan’s solution is to offer it’s electric plug-ins with a “lifetime warranty”. The condition for the warranty is that the consumer enter into a protracted agreement to lease the battery pack. That lease would also cover “battery swapping”. Of course the details on the warranty terms are quite sketchy. Leave it to the lawyers to have the last say.

Sounds like another endless cycle.

Rather, it may point the way to the consignment of traditional car ownership to the history books. A footnote under the heading of “Henry Ford”.

COPYRIGHT Autosavant – All Rights Reserved

Author: George Straton

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2 Comments

  1. I think the second paragraph makes quite a stretch in comparing the cell phone industry to electric cars and doesn’t really help the article. I’ve owned cell phones for 9 years and have rarely had battery problems, and when I have I’ve replaced it myself for under $15. Non-serviceable models like the iPhone are the exception, not the rule. It’s much more likely for someone to replace their phone because of self-inflicted damage, or having it lost or stolen, or (as mentioned) getting a newer, more advanced unit at a heavy discount in exchange for re-upping their contract.

    In addition, wireless technology has and continues to introduce services that were previously not possible, whereas electric cars are simply an alternative version of an existing technology.

  2. I can see this happening if both the battery and the operating system fail at the same time in an electric car, but how often will that happen?

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