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Nissan Facing Battery  Plant Cuts
World Economy

Nissan Facing Battery Plant Cuts

Nissan boss Carlos Ghosn is preparing to cut battery manufacturing, people familiar with the matter said, in a new reversal on electric cars that has reopened deep divisions with alliance partner Renault.
The plan, which faces stiff resistance within the Japanese carmaker, would see U.S. and British production phased out and a reduced output of next-generation batteries concentrated at its domestic plant, two alliance sources told Reuters.Nissan would follow Renault by taking cheaper batteries from South Korea’s LG Chem for some future vehicles, including models made in China.
“We set out to be a leader in battery manufacturing but it turned out to be less competitive than we’d wanted,” said one executive on condition of anonymity. “We’re still between six months and a year behind LG in price-performance terms.”“Renault would clearly prefer to go further down the LG sourcing route, and the Nissan engineers would obviously prefer to stay in-house,” another insider said. “The write-off costs are potentially huge.”
Renault-Nissan “remains 100-percent committed to its industry-leading electric vehicle program” and has no plans to write down battery investments, director of the Renault-Nissan Alliance Rachel Konrad said.
“We have not taken any decision whatsoever to modify battery sourcing allocation,” Konrad said, adding that the alliance “does not confirm or deny procurement reviews.”
But Nissan is already negotiating with manufacturing partner NEC Corp. on the shift to dual sourcing, with Chief Executive Ghosn’s backing, the sources said. Nissan currently makes all its own electric car batteries.

 New Option
One option being explored would see LG, which supplies some Renault models, invest in its own battery production at one of the overseas Nissan plants as the carmaker halts operations at the sites.
The alliance is also in talks with LG on a deal to supply batteries for future Renault and Nissan electric models in China, one of the sources added. Under Ghosn, who heads both companies, Renault-Nissan bet more on electric cars than any mainstream competitor, pledging in 2009 to invest 4 billion euro ($5.2b) to build models including the Nissan Leaf compact and as many as 500,000 batteries per year to power them.
Nissan and NEC invested 23 billion yen ($215m) in their Zama, Japan battery plant and electrode manufacturing, backed by government aid. U.S. and British taxpayers also helped with the $1 billion invested in Tennessee and 210 million pounds ($341m) in Sunderland.
Global electric car sales will remain shy of 1 million in 2020, according to forecaster IHS Automotive, less than one percent of the total vehicle market, and one-tenth of the demand Ghosn had predicted.
The alliance has begun a belated push into faster-selling hybrids, combining electric and combustion-engine propulsion. Upscale electric rivals such as Tesla’s Model S meanwhile hog the limelight, backed by big investments in newer, cheaper battery technologies.
Today’s Nissan batteries come in at $270 per kWh, based on replacement prices thought to be below cost, according to consulting firm AlixPartners. The true manufacturing cost is believed to be over $300, inflated by the amortization of unused plant capacity and the burdensome electrodes deal.

 

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