What Does A Sub-$20k EV Mean For The Industry?

In mid-January, just prior to the famed Detroit auto show, Nissan announced a more than $6,000 price drop for the base model of its all-electric LEAF. Compared to 2012’s base model price of $35,200, the 2013 Leaf S sticker price of $28,800 makes it the least expensive five-seat EV for sale in the U.S. In some states, the combination of federal tax credits and state incentives will bring the LEAF in under $20,000; in California, it comes in under $19,000, according to TIME.

There’s been plenty of speculation as to why Nissan dropped the sticker price: shifting production from Japan to the U.S., reduced trim and features, higher production volume and economies of scale, continued battery cost reductions, the possibility that the LEAF might be a loss leader for Nissan.

Regardless, crossing the $20k threshold is a major milestone. It will potentially make a big difference for consumers considering an EV and put pressure on other EV and PHEV competitors. In fact, in the wake of Nissan’s announcement, Chevy likewise announced a forthcoming “thousands of dollars” price cut for its plug-in Volt. A future with much greater EV adoption may be coming into sight, with prices likely dropping across the board for EVs in the foreseeable future.

2013 Nissan Leaf

image via Nissan

U.S. drivers average 37 miles per day (13,476 mpy). But nearly 20 percent of U.S. drivers average more (15-20k mpy). An equal number travel even farther. For those higher mileage drivers, the economics of LEAF ownership are starting to look very good.

Consider the appeal of a $20k LEAF for a two-car family with a longer-than-average commute. One of their cars is about to kick the bucket. They plan to keep a conventional gas-fueled auto for longer road trips, but they’re contemplating an EV replacement for the other. How do the numbers shake out? In the following chart, we’ve compared the Nissan LEAF’s 2012 and 2013 prices with the 2012 Nissan Versa Hatchback, the LEAF’s gas-powered equivalent, using nationwide 2012 averages for prices for gasoline and electricity per kWh.

Chart

Consumers might not—and likely would not—get excited about a 6.5-year payback. But a three-year payback? That just may signal a turning point for EVs; the three-year payback is within many consumers’ preference window. For many higher mileage drivers, then, the numbers just make sense. They certainly do for Tom Wieringa.

Wieringa, a long-time RMI friend, specializes in transportation solutions for the food industry. He describes himself as a lightweight auto kind of guy who also knows a thing or two about heavy-duty trucks. Oh, and he’s also a former Indy car driver. This is a guy who knows—and loves—his cars. And he loves his Nissan LEAF. He’s been driving it since fall 2012 and has already logged 6,500 miles, though he’s been a proud and very satisfied EV owner for over ten years.

“You think I’d be driving a Ferrari,” he says. “But I like technology, and I like efficiency. The cost to run my LEAF is so low that it’s ridiculous.” (He does also have a diesel Mercedes-Benz, but prefers his LEAF.)

Wieringa is exactly the kind of higher mileage commuter for whom the Nissan LEAF’s economics are really beginning to pay off. His daily round trip commute is 76 miles, fully double the average daily miles of LEAF owners in 2011. Many days he’ll drive his LEAF upwards of 150 miles, thanks to a level two charger he installed at his Golden, CO office with a kit purchased at Home Depot.

With the low electricity rates he pays in his home of Longmont—roughly $0.07 per kWh, two-thirds the national average—he estimates it costs him just over $0.02 per mile to drive the LEAF. “I essentially got a free car,” he says. “With my commute, I save about $300 per month on gasoline, which more than offsets the monthly car payment.”

“You feel almost guilty pulling into a gas station to get a pop,” Wieringa says, smiling, “because you have no business being there.”

Wieringa may be head over heels for his LEAF, but EVs and PHEVs need not work for everyone right away to be successful. Such vehicles need only to grab a foothold, and the nation’s higher mileage commuters—people like Wieringa—just may be the place to start, just as rooftop solar PV first grabbed its foothold in markets such as California and has been steadily building from that foundation.

Some 14.4 million vehicles were sold in the U.S. last year, half of them cars. Compared to 2011, EV sales were up nearly 20 percent; plug-in hybrid sales were up more than 400 percent, according to the National Automobile Dealers Association. With barely a market a few short years ago, percent growth is not the best indicator. But EVs like the LEAF and PHEVs like the Volt can triple their sales from 2012 by capturing just one percent of the market.

This is an aggressive growth trajectory, but with prices dropping and EV ownership looking that much sexier, it could happen. The century-old auto industry and the related fueling/charging infrastructure won’t change overnight. But with the likes of Ford, GM, Honda, Tesla, and a long—and growing—list of others offering increasingly affordable EVs, we just might be seeing signs of it turning over a new (and cheaper) leaf.

rockymountain-instituteEditor’s Note: EarthTechling is proud to repost this article courtesy of Rocky Mountain Institute. Author credit goes Josh Agenbroad & Peter Bronski.

Rocky Mountain Institute is an independent, entrepreneurial, nonprofit, 501(c)(3) think-and-do tank. Co-founded in 1982 by Amory Lovins, who remains an active thought leader as Chairman and Chief Scientist, the Colorado-based organization now has approximately 75 full-time staff, an annual budget of nearly $12 million, and a global reputation. RMI excels in radical resource efficiency, especially via integrative design. We drive progress chiefly by transforming design, identifying and busting barriers, and spreading innovation.