Nissan Battery Replacement Program

On June 20, 2013 Nissan announced preliminary details of their long awaited LEAF Battery Replacement Program. As many early adopters started hitting the 2 year mark of ownership with their LEAFs, thoughts had turned to the long term maintenance cost of replacing the traction battery sometime in the future.  The anticipation of being able to type in that one unknown number into their TCO calculations had reached a boiling point and Nissan promised pricing by Spring and they delivered on the day before Summer.

Instead of being given a price to purchase a replacement battery, Nissan announced plans to launch a Battery leasing program by early 2014.  There were no specifics released, only guidelines but basically the lease would cost about $100 a month and would guarantee at least a 9 bar battery forever.   Some basic FYI's

** There is no timeframe to when one can enter the program. Therefore, no one should sign up before the basic range warranty guaranteeing replacement after the 9th capacity bar is lost within 5 years/60,000 miles.  This means one can start the program after 150,000 miles and with a battery degraded to 50% if they so choose to do so.  However, one can enter the program AT ANY TIME.

** The terms of the program requires turning in the OEM battery which will be replaced by a 12 bar capacity battery of equal or greater quality. The capacity is covered for as long as the lease payments are made with no time limitations. Termination of the lease program by the customer will result in Nissan retrieving the leased battery WITHOUT return of the OEM battery.

** The replacement battery will be one with the most advanced technology available at the time. I could not get Andy to commit to a larger capacity in the future and without a major overhaul (and expense!) of the BMS, that might not be possible but what will happen is improvements making the battery pack more resistant to degradation by heat, greater cycling capacity, etc. (added for clarification)  This does not mean that a larger capacity battery may not be in the future. Advances in size/weight reduction could potentially allow a larger capacity pack to be retrofitted but its my opinion required changes to BMS hardware/software combined with dropping new EV car prices would make that an expensive proposition

** Nissan's goal of a lease program will "level the playing field"  across all dealerships. There will be no added installation fees, signup fees, etc at the dealer level. 

I was invited to a conference call with Andy Palmer, Jeff Kuhlman and Brian Brockman just before the announcement and they based their decision on results of the survey knowing that there are several people who want to "own" things and what is essentially a lifetime lease is something that is somewhat alien in the auto business but is actually commonly practiced in nearly every other business.  Nissan was faced with a tough decision and they really had no other car manufacturer to look at when making the decision. Other EV manufacturers want you to pay several thousand dollars years in advance for a battery (Tesla) or just quotes a price nearly equal to half the cost of the car (Ford)  neither of which I personally would have been happy about so its easy to see why Nissan did not choose either of those paths. If I was creating a score card to critique;

Currently innovations in the chemistry of Lithium batteries are improving on average every 6 months. A flat one time price for a new battery (which would be with exchange so no options to have two batteries) means a very large cash commitment (with associated loan fees, interest payments, etc) which would probably result in payments more than double the $100 monthly lease fee for several years.  Phoenicians with high rates of degradation could easily see replacing batteries every two years under the warranty program so flat purchase would not be in their best interests.  This also allows them to pay a very modest fee until a battery chemistry robust enough is developed to handle the escalating heat issues of the Arizona desert. This allows them to continue to drive EV without worrying about the large investment in the near term due to range losses.  This is a big big plus for the program.

No option to buy another pack is a drawback. The process to change out the packs should not be done by anyone who is not qualified but the process is not complex and well within the abilities of the practiced DIY'er with a well stocked garage.  Special lifting equipment would be needed to maneuver the pack but it could be (and has been) done.  Many had hoped to buy a new pack from Nissan and use the old pack as a battery backup for their solar systems. This is really just a small minus. There is little doubt in my mind that few would consider a purchase of a new pack without exchange simply because of the very high cost.

Replacing the lease pack below 9 bars capacity is a HUGE minus. This could potentially mean driving a LEAF with a freeway range of 55 miles for a significant amount of time while waiting for that 4th bar to disappear. That 55 miles is in Summer. In a Northwest winter it would be closer to 45 miles. Most of the people I know well who have a LEAF could not easily make that much loss work in their daily driving needs without a lot of compromise and the key here is understanding that compromise.  It is one thing to buy a car, pay it off and reap the benefits of driving at a quarter to half the cost of their ICE counterparts. That benefit alone makes one's ability to accept compromise pretty high. But the level of acceptable compromise drops fast if one is paying $100 a month for a leased battery. Add to that the requirement to charge away from home and potentially away from the home PVC means another additional cost making TCO as much if not more than gas purchases.

The lease program is a huge plus for high mileage drivers. Here many easily save more than $250 a month in fuel costs which is what someone averaging 30 mpg paying $3.75 for gas logging 2000 miles would save minus electricity costs. In Steve Marsh's case, his employer provided him a charger at work so he only pays for half his electricity costs charging at home but will soon be paying for public charging (a price I strongly think is still being considered despite some recent announcements )  In reality, $100 a month for long term coverage against degradation is really unheard of in the automotive industry. With his driving needs, the highest mileage terms would be eclipsed in 3 years.  The lease would cover him to a million miles if he so chose to do so. Keep in mind; prices are not set but a predictable cost is always a plus.  Try doing that with your gasoline budget!

But there is the flip side here.  People with low to moderate needs will be screwed. Driving 1000 miles a month means an additional cost of 10 cents a mile. With the lower annual mileage, the need for a replacement of the leased battery might outdistance the ownership of the car meaning the money paid into the program would never be recouped. Like the flat $5 Blink fast charge fee or the WA State $100 EV registration tax,  flat fees simply DO NOT WORK.  Sure its great for the company providing them. Easier software and accounting needs and in most cases, flat fees do work for a reasonably large percentage of the customer base so this is a small minus.  A lot of talk at MNL over what would be a good purchase price for an exchanged battery and the consensus seemed to be in the $3500 range which would be more than 3 years at $100 a month after interest charges, inflation, etc are considered.

My thoughts of the announcement which are very preliminary and may be based on incorrect understanding of the information I have received thus far are understandably mixed but all of my concerns could be easily fixed by the "flat fee" issues.

Nissan feels that most LEAFers will not exercise the exchange program for the life of their LEAF driving the car 5-10 years then getting then purchasing LEAF II or III.  So the lease program was the best solution to make sure that early adopters were taken care of and I agree with their decision 100%.  A very large purchase price for a replacement battery to own would not work in high degradation areas even if it was under $3,000.  By making it a lease program, its a predictable flat fee per month without the options of dealer added services. The pricing would be assumedly handled by their leasing arm.  Although there was no mention of a lease processing fee, i could understand one of modest terms of a few hundred bucks.

But if I were Nissan, I would want a program that covers more needs.  A tiered option would be the best.  How about plans that cover both high mileage AND low mileage LEAF drivers?

What about $50 a month for a LEAFer that covers capacity to only 7 bars with steps to 10 or 11 bars with an increasing cost.  The higher tiers should implement a time factor (replacements no sooner than 12-24 months) with a $150 (or whatever) a month lease rates.

During the conference call, Nissan stated that there are several legal issues that needs to be hammered out as the reason for the delayed 2014 launch date.  Palmer did state that this lease program was Nissan's original intention when the LEAF first came out but was unable to do it based on laws and the terms of the Federal tax rebate which the LEAF would not have qualified for unless the pack was a part of the car purchase price.  It is also my hope that Nissan announced the lease program to judge the reaction of the EV community and will consider that reaction when fine tuning details of the program.

I understand many of you are disappointed because we did not get the battery pack price but Nissan's reasoning is sound on this and this is really the best course of action.  Its one thing to get an early model that does not have the seat heater, more efficient heat exchanger, etc but to be saddled with a 2nd very large bill for a battery is not in anyone's best interest. Traction battery technology is still in the state of rapid change and will be for years to come.

Finally; Nissan has only announced the basic intent. There were no other details provided, so the actually monthly cost, mileage limitations after entering the program, termination fees, conditions for exchange besides capacity, etc.  have not been revealed and guessing its because the technology is evolving so rapidly that they simply dont know what will be available in 6 months.