The decision by the two arms
of the Renault-Nissan alliance to go their separate ways over
battery supply for their electric vehicles illuminates consumer
concerns, reports Fred Crawley.
Go deeper with GlobalData
They seemed, on the surface at least, strange
decisions by the two wings of the Renault-Nissan alliance.
First came Nissan’s announcement in
May that the battery leasing scheme for its upcoming Leaf electric
car was to be scrapped; closely followed by Renault confirming it
would keep just such a scheme for its own ZE electric vehicle
range.
Renault’s battery lease programme
will reduce residual value risk for early adopters of its vehicles,
while dispersing the packs’s hefty cost across a lease agreement
rather than putting it upfront. Nissan, on the other hand, is
pricing its vehicle with batteries included – a strategy which many
in the industry are saying is the only practical solution to
determining EV residuals.
In any case, the choice by
Renault-Nissan to approach the market via both pricing strategies
speaks volumes about the uncertainty among manufacturers
surrounding residual value risk on EV batteries.
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By GlobalDataQuite simply, no-one knows how they
will hold their value after years of daily use, making it tough to
convince consumers and lessors that the assets they are being urged
to buy are not bound for rapid depreciation.
Logistical and legal
battles
Some, such as valuation firm
EurotaxGlass’s (Glass’s), feel that removing the risk of battery
value depreciation from the customer (most easily accomplished
through a separate battery lease, but also achievable through an
extended warranty offer) is essential to promoting a volume sales
market for EVs.
Others, however, hold that the
logistical and legal difficulties thrown open by separate battery
leasing – whether it preserves RVs or not – make it unworkable.
According to a spokesperson for the
Renault-Nissan alliance, both firms have “worked closely” with
Glass’s to mitigate RV risks, with the upshot being that:
“EurotaxGlass acknowledges that neither Renault nor Nissan purchase
models should suffer from the battery residual value risk
highlighted in the press release by their UK office.”
They continued to say that exact
details for the Leaf/ZE range battery’s warranty would be announced
in the run-up to launch, and that Renault-Nissan was “confident” it
would give its EVs “a market competitive residual value”.
Nevertheless, the fact that the
Renault-Nissan alliance, headed by CEO Carlos Ghosn, has taken both
approaches to the RV problem shows just how finely balanced the
debate is.
Meanwhile, other manufacturers
tackling an EV debut on the British market over the next two years
– Mitsubishi and Peugeot Citroen – have gone firmly for the option
of including batteries in car pricing. Both factions will be using
Mitsubishi’s i-Miev body and battery, with Peugeot Citroen
rebadging it as the iOn and C-Zero across its two brands. The
i-Miev itself will be sold at around £38,500, while the re-badged
models are understood to be aimed nearer £30,000.
A spokesperson for Mitsubishi
justified the manufacturer’s pricing strategy, commenting that
“separate battery leasing schemes, as well as battery exchange
schemes, are unrealistic”. They continued to explain that
Mitsubishi was absolutely confident of its i-Miev battery retaining
80% of its potential life after 10 years of operation, making an
active secondary market for the vehicles possible.
The spokesperson added: “Looking at
data coming back from the scrappage programme, it seems many
vehicles are on their third owner by the time they are 10 years’
old. Mitsubishi has been developing electric vehicles since the
1970s, and we can be confident our batteries will not depreciate
significantly during this period of time.”
Yet, while manufacturers are in no
doubt about the potential of their batteries to retain value, this
confidence has not yet infected the market.
Glass’s managing director Andy
Carroll said: “For whatever reason, those who will be in a position
to underwrite these vehicles simply do not know what to
expect.”
Carroll continued: “We have over a
hundred years of experience of owning vehicles with internal
combustion engines. Until the facts prove the manufacturers’ claims
regarding battery life and performance in real-world conditions,
they need to put their money where their mouth is and take all risk
and uncertainty away from the consumer.”
Manufacturer relationship manager
Martin Ward, of fellow valuation provider CAP, agrees with Carroll
on the issue of uncertainty, but he disagrees that battery leasing
is a workable solution.
“Apart from anything else, the idea
of having two finance agreements for separate parts of a single
vehicle opens up a number of legal issues,” Ward said, listing a
number of scenarios – such as a dispute in which the battery lessor
had decided to make the decision to repossess – in which the
concept could cause problems.
‘Does not suit
leasing’
CAP said in February it was
currently “impossible” to put an RV on an electric vehicle, but
amended its position to preclude only vehicles without a
battery-inclusive price to reflect the huge number of unknown
factors thrown up by the batteries-separate model.
However, Mark Norman, of the
valuer’s electric vehicle review group, said: “In a perfect world,
Renault’s idea of owning the component most liable to depreciate is
probably the better way – it just does not suit the world of
leasing as it stands, which is based on the law of title.”
Norman felt that, just as the
development of a mass market for EVs will require new physical
infrastructure such as a charging point network, it will also
require new products on the part of finance providers.
“If you look at the way the advent
of mobile phone technology created new pricing models, such as
call-inclusive monthly rates, it is not too hard to see how a
similar situation could apply to EV finance,” Norman added.
Interestingly enough, this could be
Renault’s next move. The manufacturer is known to be looking into
deals with energy companies, with the possibility of including
electricity at a set rate on top of a monthly battery lease cost,
and is thought to be investigating ways to sell various services in
addition to the battery lease platform.
For the time being though, while other EV pioneers stick with
traditional pricing, Renault will have a lot to prove. If the
company succeeds it will have an impressive head start in terms of
innovation.
