Nissan braces for falling Leaf sales

NASHVILLE -- Sales of Nissan's Leaf electric vehicle plummeted by a third in May from a year ago -- and more problems are coming.

Atlanta, which Nissan has identified as the Leaf's hottest market, faces a steep falloff in demand after July 1 when Georgia's up to $5,000 state tax credit for EV purchases disappears.

Scott Middleton, sales manager at Town Center Nissan in Kennesaw, Ga., northwest of Atlanta, says he expects his monthly Leaf sales to drop to five to eight starting in July from about 100 now.

"It's going to drop like a cinder block off the side of a boat," Middleton says.

Nissan also faces a wave of Leafs coming off lease with diminished resale value. The company has begun offering Leaf lease customers a $5,000 credit toward buying their cars at the end of their lease period.

"There will be some takers for the $5,000, but we don't expect it to completely turn things around," says Fred Diaz, Nissan senior vice president for U.S. sales, marketing and operations. "It's just a way to offer them something."

The immediate problem for Nissan's campaign into battery-powered cars is the low price of gasoline in the United States.

Nissan has tackled one challenge after another in launching and marketing the Leaf. Among them: educating consumers on the new technology, pressing cities and power companies to invest in public charging stations, and assuring skeptics that the lithium ion battery-powered Leaf was a long-term solution to escalating regulatory demands for zero-emission transportation.

But few counted on U.S. retail gasoline prices falling well below $3 a gallon, or consumers swarming back to dealerships to buy large SUVs and other trucks on the scale of recent months. 

Consumers' shift to larger vehicles is benefiting the Nissan brand. For the first five months of this year, Nissan Division sales are up 2.6 percent to 557,960 cars and trucks. Its truck sales have risen 17 percent for the period. 

In May, Nissan dealers sold 2,104 Leafs, down 33 percent from May 2014. For the first five months, Leaf sales are down 26 percent. 

Diaz blames lower gasoline prices. The Leaf does not use gas or oil. Sales of the Toyota Prius hybrid -- one of the industry's most fuel-efficient nameplates -- similarly dropped 27 percent in May. 

But Diaz also acknowledges that the demise of Georgia's up to $5,000 EV tax credit -- which has been available to Georgia residents on top of a federal $7,500 tax credit for EV purchases -- will further hurt Leaf sales. Base price for the Leaf is $29,860, including shipping. 

"We don't know how severe the impact will be yet," he tells Automotive News.

For a Georgia customer who leases the Leaf for 24 months at approximately $250 a month, the windfall of a $5,000 credit translated to a new-vehicle ownership cost of less than $50 a month, Middleton points out. 

"We haven't been selling Leafs because people are environmental," he says. "We've been selling them because of the state credits." 

Nissan clearly intends to soldier on elsewhere. This month, Nissan began offering its "No Charge to Charge" program in Denver, for which Leaf owners can charge their cars at no cost at public fast-charger stations for the first two years of ownership. Colorado offers an EV-buyer credit just more than $5,000. 

Nissan has introduced No Charge to Charge in 16 markets, including Los Angeles and Houston. 

Recent media reports also speculated that Nissan plans to introduce an improved Leaf battery with the 2016 model, due out in late summer or early fall. 

The Leaf is rated by the EPA to deliver 84 miles of driving on a full battery charge. According to the reports, which a company spokesman declined to discuss, the 2016 model could have a 105-mile battery range.