For GM and Nissan, it's less grudge match than learning lab
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The month-by-month sales competition between the electric Nissan Leaf and the plug-in hybrid Chevrolet Volt has been watched intensely all year.
The Leaf outsells the Volt. The Volt outsells the Leaf. The Leaf outsells the Volt.
But a competition? Not really.
The Chevy Camaro and Ford Mustang -- that's a competition. The Volt and Leaf are, by comparison, just simultaneously occupying the same new, barely understood space: the electric-drive segment.
But there's another layer to this sales-contest-that-isn't-really-a-sales-contest, both General Motors and Nissan Motor Co. agree. It's called a learning curve.
Chevrolet and Nissan are still selling to early adopters and green enthusiasts and will be for most of the coming year. Their real challenge is to learn how to market the high-profile cars to mainstream U.S. consumers in mass-production volumes in 2012 and beyond.
To prepare for that, both automakers are using 2011 as a sort of practice year, taking notes, tinkering with tactics and honing their marketing messages.
"We've learned that this product is a different experience," says Cristi Landy, the Volt's product marketing manager at GM. "No customer who buys this vehicle is replacing a vehicle that was anything like it. So it's new for the customers; it's new for us.
"And we've also learned that it is confusing to people."
What that means for the marketing mission, Landy adds, is that "we have two issues: There's marketing to the people who are going to buy it, and then there's marketing to people who just want to know about it."
No question, it is a market that fascinates consumers, says Mike VanNieuwkuyk, J.D. Power and Associates' executive director of global research. Consumers are expressing keen interest in electric vehicles.
But he and others at Power doubt the interest will result in strong sales.
"So far it's a technology for a limited number of buyers," VanNieuwkuyk says. "It's going to take something to move it beyond the small niche position they are in and into the big volumes they're envisioning."
Competition is coming
Other EV players are following GM and Nissan, including Ford Motor Co., BMW AG and Toyota Motor Corp. -- not to mention the lesser-known new brands such as Tesla, Fisker, Coda and Wheego. But now there are only two heavyweights in the ring.
In one corner there is the Volt, a four-passenger model that retails for $39,995, including shipping. It uses a battery-powered electric motor to drive for about 35 miles, at which point a gasoline engine kicks on and generates electricity for another 300 or so miles.
In the opposite corner is the Leaf, a $36,050 five-passenger hatchback that runs solely on a lithium ion battery-powered electric motor. The Leaf gets 100 miles per charge, depending on how heavy-footed the driver is.
Both are eligible for a $7,500 federal subsidy.
Through August, Nissan sold 6,168 Leafs in the United States, to Chevrolet's 3,172 Volts. For both, supply has been limited, although that is changing. GM added Volt factory capacity this summer, and Nissan is speeding plans to open additional U.S. markets for the Leaf.
But in reality the models hardly compete against other. Their two new technologies target slightly different consumers.
More significantly, they haven't been available in the same U.S. cities. The Volt sells in Detroit, the Leaf in Seattle. Consumers in Connecticut have been able to buy a Volt but not a Leaf. And consumers in Phoenix can buy a Leaf but not a Volt.
Brendan Jones, Nissan's chief marketing manager for the Leaf, says surveys of his Leaf owners reveal that only 6 percent have owned a Chevrolet. And just 13 percent even looked at the Volt before buying the Leaf.
"And by looking," clarifies Jones, who started in the auto business with Chrysler in 1985, "that could mean they simply read an article about the Volt on the Internet. It doesn't mean cross-shopping at all."
The assumption that Chevrolet and Nissan dealers are fighting over the same environmentally motivated individuals has captivated the media. What's really happening is that the automakers are working independently of each other to understand who will be motivated to buy a vehicle that operates on a technology that is different from that of every other vehicle ever purchased. And they want to know what they must do to support the segment.
It is an ongoing learning lab.
 | Cristi Landy, GM: "When you try to explain the Volt to people on just a piece of paper or with a few quick words on a screen, they don’t necessarily get it. You have to remember that most consumers have still never driven a hybrid." |
CHEVY'S LESSONS: 'Fun to drive'
So far Chevrolet has learned this:
• The Volt is skewing toward more of a luxury customer, often with a luxury trade-in.
• Volt owners are environmentally conscious but moderately so. They mainly like the idea of not buying foreign oil, Landy says.
• Once they own the car, customers' impression of it changes. Instead of describing it as an environmental purchase, they describe it as "fun to drive." Joel Ewanick, GM's head of global marketing, recently commented that the Volt's marketing must sell the vehicle as a car first -- meaning as a product that appeals for the same reasons that any other GM model appeals.
• In order to sell Volts, dealers need a demo car. That wasn't part of the plan. For that reason, GM is goosing production for the next few weeks to make sure all 2,600 participating Chevrolet dealers have at least one demo.
• Even as it focuses on the Volt as fun to drive, Chevrolet also has to educate consumers. According to Landy, future advertising will focus on how the Volt differs from other vehicles.
"When you try to explain the Volt to people on just a piece of paper or with a few quick words on a screen, they don't necessarily get it," she says. "You have to remember that most consumers have still never driven a hybrid."
• Volt owners enjoy talking about their ownership experience with prospective buyers, and prospective buyers seem to enjoy hearing from current owners. Chevrolet hopes to tap into that consumer-to-consumer communication in future marketing.
 | Carolin: Long chats with customers |
NISSAN'S LESSONS: Educate consumers
And here is what Nissan has learned:
• Consumers need more education on how the Leaf works, Jones says. Nissan intends to put more effort into explicitly showing consumers what is involved with recharging the car, where charging stations are in any given city, and how much everything costs.
• Shoppers also need more insight into their own driving reality, Nissan has realized. The car's battery range is intimidating to some consumers who fear being stranded. But the average U.S. driver travels less than 50 miles a day.
In coming weeks, Nissan plans to unveil a mileage tool on its Web site to help. Customers will be able to plug points onto an online map tabulating everywhere they might go in a given ordinary day to compute a realistic total. The process tends to show consumers that they don't drive as much as they think they do.
Nissan has already been using the tool at public exhibitions of the Leaf. Those who use it typically claim the tool underestimates distances.
• Leaf buyers are more engaged than Nissan expected. They want more information than Nissan is accustomed to providing, including information about the car's technology and the materials it uses. They also want to provide more feedback than the company is used to getting.
Nissan is having senior company executives telephone owners to spend a few minutes asking about their experience. Brian Carolin, Nissan North America's senior vice president of sales and marketing, has found that his average customer phone call runs 45 minutes.
• The electric-car ownership experience is so out of the ordinary that owners want to fraternize among themselves, independently of Nissan, at spontaneous "Leaf Meet-ups."
• Those who buy Leafs are giddy to get them. One U.S. buyer accessed sea-lane information from the Pacific shipping company responsible for bringing over his Leaf, and followed the container ship's daily progress.
When news got out that a Leaf shipment was sitting at the docks in California, consumers who had ordered the car began peppering Nissan with questions about why the cars were waiting there. Nissan had to begin distributing information about how its port distribution system works.
• Opening new retail markets does not have to follow an orderly contiguous map, Nissan has decided. A case in point: Chicago. Nissan brand penetration is relatively modest in Chicago. For that reason, Nissan was planning to launch the Leaf in Chicago next spring. That plan has now changed.
"We've gotten so many hand-raisers from Chicago that we're pulling that plan forward," Jones says.
Not a normal ramp-up
Nissan and GM have the rare luxury of being able to mull all this because they are not in a normal ramp-up. Mass production is more than a year away. But it's coming.
GM just expanded and reopened its Volt line at the Detroit-Hamtramck assembly plant. The plant is scheduled to build 16,000 Volts this year and up to 50,000 next year. That is still a modest volume in the industry scheme of things.
Meanwhile, Nissan North America is spending $1.6 billion to build a lithium ion battery module plant in Smyrna, Tenn., and to add 150,000 units of annual Leaf capacity to its assembly plant there. That is 15 times the volume that Nissan expects to sell this year. Until that capacity begins to come on line early in 2013, Nissan has only 50,000 units a year of Leaf production from Japan to divide among all the markets of the world.
Both automakers -- along with the competitors soon to join the fray -- believe bigger volume is coming to EVs.
Skeptics aren't so sure. J.D. Power and Associates forecasts that all EVs and plug-in hybrids combined will claim a mere 177,000 U.S. annual sales in 2016.
"The demand for EVs is significantly lower than the production capacity being planned," says a doubtful Mike Omotoso, Power senior manager of global powertrain forecasting. "We just don't see the demand or any real motivation for it to increase."
Earlier this year, Power published the findings of a survey it had conducted among environmentally conscious consumers who expressed an interest in nontraditional vehicles. Two out of 10 of them categorized themselves as "advocates" of green living. But they said the prices of EVs are beyond their means.
The next seven out of 10 said they also like to be environmentally conscious in their daily lives. But their chief motivation was saving money, and for one reason or another an EV wouldn't be right for them.
"Combining those two groups, that's 90 percent of your market saying, 'I like your vehicle, but I don't see how it would work for me,'" Power's VanNieuwkuyk says.
"Something has to change from where things stand right now to make this segment pan out. The cost has to come down. The technology has to change. The price of gas has to spike again, dramatically, which no one wants to happen.
"Or the automakers have to devise some new way to help interested consumers finance the cars. I don't know what that would be."
Making changes and honing their messages are exactly what GM and Nissan are busy doing this year. Luckily, they have some time.
• Leaf: A $36,050, 5-passenger EV that gets 100 miles per charge
• Volt: A $39,995, 4-passenger plug-in hybrid; electric range of about 35 miles, augmented by gasoline engine that generates electricity for 300 miles ... with limited production and minuscule sales so far. U.S. sales through August
• Leaf: 6,168
• Volt: 3,172
Note: Prices include shipping.
Source: Automotive News Data Center
You can reach Lindsay Chappell at lchappell@crain.com.
