NASHVILLE -- More than three years after embarking on a plan to mass produce electric cars in America, Nissan North America is putting the final touches on its $1.6 billion factory in Smyrna, Tenn.
But it's all happening as the electric-vehicle market is falling far short of the rosy projections made back in 2009. Nissan and other manufacturers are facing a daunting scenario, and some are rethinking their EV strategies.
In late September, Toyota Motor Corp. shelved its plan to sell an all-electric Scion eQ. At the same time, Smith Electric Co., the Kansas City, Mo., manufacturer of electric delivery trucks, abruptly cancelled its plan for an initial public stock offering the night before it was to take place, saying the offering would not have delivered the valuation the company needed.
Battery supplier A123 Systems, which supports several electric vehicle programs, including General Motors' Volt, says it will diversify into other automotive uses for its lithium ion batteries -- such as start-stop technology, which shuts off and restarts engines at traffic lights -- because of the changing outlook for EVs.
The disappointing market was symbolized by a crowd that Nissan convened recently under sunny skies on the front lawn of its U.S. headquarters near Nashville. They were participating in Plug-In Day, a national celebration of electric cars and plug-in hybrids sponsored by environmental organizations. But only a small group showed up for the event, counting the company's own employees, local politicians and a few environmentalists.
A cross-town parade of about 50 electric cars included numerous vehicles owned by Nissan itself. A solitary, unsold Mitsubishi i-MiEV electric car came for the parade, supplied by a local Mitsubishi dealership.
The cheering was loud. Participating Leaf owners spoke enthusiastically about their vehicles. But the bottom line was clear: There simply are not very many of them.
That fact is painfully obvious around the industry.
Through September, U.S. consumers purchased fewer than 25,000 Nissan Leafs, Chevrolet Volts, Mitsubishi i-MiEVs, Ford Focus Electrics, and Toyota Prius Plug-Ins. Pike Research forecasts that by 2015, total cumulative EV and plug-in sales for all manufacturers since 2011 will reach just 410,000 vehicles.
That would fall far below the national target, set by President Barack Obama, of 1 million EVs and plug-ins on the road by 2015.
According to Pike, the 1 million mark will be achieved, but not until 2018.
Meanwhile, Nissan is just weeks away from starting EV operations in Smyrna. Using a $1.4 billion low-interest loan from the U.S. Department of Energy, Nissan has invested $1.6 billion to build capacity for 150,000 Leafs and 200,000 lithium ion battery modules annually at Smyrna.
The new battery plant, adjacent to its Smyrna vehicle assembly plant, is a state-of-the-art, clean-room manufacturing operation. In the next few days Nissan workers will begin cautiously making the first trickle of tabletop-sized battery modules before the start of Leaf production in December.
But how many takers will there be for EVs?
"The demand for electric vehicles won't be anywhere near 200,000 before the end of this decade," says Michael Holman, research director for Lux Research Inc. in Boston. "And the entire global market for electric vehicles won't be a third of what Nissan is planning. This is all the result of industry market projections that just weren't realistic."
Speaking to reporters at the Paris auto show at the end of September, Nissan CEO Carlos Ghosn defended his bullish vision for the EV production capacity in Smyrna.
"I think the capacity that we built is adequate for the potential we see for the mid term for the United States," Ghosn said. "When we decided to make our investment in electric cars, we didn't take a very short-term perspective. We took a longer-term perspective."
But Leaf sales have remained puny. Last year Ghosn and other executives predicted 2012 sales of 20,000, doubling the 9,674 Leafs Nissan sold in 2011. That doesn't seem likely now. Through September, Nissan dealerships had sold just 5,212 Leafs -- fewer than the 7,199 sold in the first nine months of 2011, even after the Japanese earthquake interrupted Leaf shipments from Japan.
Things also have been touch-and-go with Chevrolet's Volt plug-in hybrid. GM once envisioned building 45,000 Volts in 2012, but it sold just 16,348 through September. GM has backed off that forecast and temporarily suspended production in September.
GM and Nissan are cutting prices. According to Truecar.com, the industry pricing analysis firm, the Chevy Volt now is selling at a $10,000 discount from sticker, and the Leaf is selling at a $3,250 discount, including incentives such as dealer cash and low finance rates. In September, Nissan also reduced the standard monthly lease rate on the Leaf to $219 a month for 39 months, down from $249.