Professional Documents
Culture Documents
Andy Palmer
Executive Vice President and Head of Electric Vehicles
Nissans EV commitment began with the executive Nissan considers it socially equitable to close the
management team considering issues that are gap in vehicle ownership between the US and
typically associated with environmentalists the China standing at 77% and 5%, respectively
growing global population, rising prosperity, which necessarily triggers a major expansion of
limited resources and climate change. Andy the global auto market. In order for this belief to be
Palmer, Executive Vice President and on the compatible with its vision of sustainability, Nissan
companys Executive Committee, says to knew its strategy needed to be built on radical
understand Nissans EV journey you need to start rather than incremental change. Not only was the
with its corporate vision of sustainable mobility price of fuel rising, but it regarded climate change
for all an internal contradiction in the minds of as a real and growing problem.
many.
Nissan saw EVs, with their ability to run on non- Nissans analysis demonstrated that an EV would
hydrocarbon energy and being zero emissions, as be cheaper to the customer with the following
the ultimate end game. And it set about to find a assumptions:
business case to invest in EVs in the short term.
1. The price of oil was $80 a barrel or higher.
Building the business case 2. The vehicle weight was significantly reduced.
A number of factors were helping to build a
3. Customers have an option to lease or purchase
business case for EVs. The price of oil had risen to
the battery.
$80 a barrel, a point where the US consumer was
starting to factor fuel costs into vehicle purchasing 4. Production costs were based on production
decisions, and European governments were volumes of 500,000 batteries per annum.
implementing vehicle emissions reduction
5. Governments provide subsidies of 5k or
programmes.
equivalent.
Nissan also saw a significant reputational benefit;
Believing these to be reasonable assumptions,
a chance to associate its brand with a particular
Nissan was the first major automaker to commit
technology. Volkswagen was associated with diesel
to mass production of EVs in 2008, with a $4bn
leadership, Toyota with hybrids, and Honda with
investment programme together with alliance
petrol engines. For Nissan, it was an opportunity
partner, Renault.
to associate the brand with leadership in EV
technology, and leverage its EV heritage.
Zero emission leadership is one of the six pillars materials to be recycled. Nissan claims to be
of Power 88. In the shareholder Annual Report for the first car company to set a recycling target.
2010, Nissan states that it is taking a leadership
Enhanced environmental management
role in every aspect of EVs. It states that the
adopting TCO, and practising reduction and
intention of the Renault-Nissan alliance is to put
substitution with the supply chain.
1.5 million EVs on roads worldwide by 2016.
How impressive are these targets? Being absolute
An integrated sustainability programme targets, how impressive they turn out to be will
Whilst pioneering the EV may turn out to be depend on the level of business growth that
the single biggest step in making the auto Nissan achieves. The 2005 baseline testifies that
industry more sustainable, Nissan should also be Nissan has been monitoring sustainability for a
evaluated on its broader sustainability strategy. while. Nissan tells us that it reduced its worldwide
Research shows that 23% of standard vehicle carbon emissions per vehicle produced by 18%
emissions are generated in production 46% for between 2005 and 2010; which is probably ahead
EVs emphasising the importance of internal of its peers. And Nissan generates 7% of its UK
resource efficiency matching a product efficiency production energy needs from onsite renewable
programme.8 energy. Broadly speaking, these are compatible
Nissan launched its Green Programme 2016 on with a sustainability leadership position.
the 21st October 2011, with five objectives for Delivering a new business model for Nissan
2016. The first is EV leadership, with the other four
Nissans commitment to EVs is causing it to
summarised as follows:
innovate with its business model. It is forming
Improved vehicle efficiency by 35% from 2005 new partnerships, collaborating and changing its
levels, average across all vehicles. customer proposition. If the EV market does take
off, then it is the evolved business model that will
Reduced CO2 emissions for corporate create the biggest barriers to entry. These include:
activities by 20% from 2005 levels (27% for
manufacturing sites).
Improved resource efficiency 25% of vehicle
Nissan recognises the importance of having an element of the unknown in how targets will be met, a
feature of many of the best target setting strategies. Nissan describes it as stretch but not break, which
combines bottom up and top down thinking. The stretch element is seldom more than 50% of the target.
The bottom up targets are referred to as Monozukuri, or the art of making things in Japanese Nissan ask
its managers what they think they can achieve, and look at what is demanded by regulations. Monozukuri is
generally conservative. They then look to Kotozukuri for stretch.
Kotozukuri means the art of storytelling in Japanese, and broadly speaking accounts for the more
ambitious 30-40% of its targets. Management looks at what their experience suggests is achievable,
factoring in changes in technologies that may not have been identified by factory workers, and they look at
how the targets fit with the story being told by Nissan.
2
Mr Ghosn bets the company. The Economist, October 17th, 2009. http://www.economist.com/node/14678942
3
Why Nissans Electric Car Will Flop. Jerry Flint. Forbes. February 29th, 2010. http://www.forbes.com/2010/02/19/flint-nissan-leaf-business-autos-electric.html
4
UBS Investment Research Q-Series. October 2010
5
Sustainable Energy, without the hot air. Professor David MacKay. UIT Cambridge, 2008. http://www.inference.phy.cam.ac.uk/withouthotair/c20/page_127.shtml
6
Ricardo report for The LowCVP. June 2011. www.lowcvp.org.uk/assets/pressreleases/LowCVP_Lifecycle_Study_June2011.pdf
7
Nissan 2010 Annual Report, Message from the CEO. http://www.nissan-global.com/EN/DOCUMENT/PDF/AR/2011/AR2011_E_All.pdf
8
Ricardo report for The LowCVP. June 2011. www.lowcvp.org.uk/assets/pressreleases/LowCVP_Lifecycle_Study_June2011.pdf
9
EV Spring Coming Soon. Chris Vander Doelen. Windsor Star. October 18th, 2011. http://www.windsorstar.com/cars/Spring+coming+soon/5562839/story.html
The Prius may indicate the growth profile Nissan may be reassured by the slow sales start
for the Toyota Prius, the pioneer of Hybrids, which
Sales of the Nissan Leaf to date, represent less sold 921,000 in its first 10 years, but less than 2%
than 0.5% of Nissans 2010 global vehicle sales, of these sales were in the first two years. Nissan
and there is going to need to be a big pick up in has a significantly faster global roll-out for the Leaf
EV sales for the Renault-Nissan alliance to hit their than Toyota had for the Prius.
target of 1.5m sales by the end of 2016.
Nissan is not out of the woods yet. If the price of diesel increases
from the current 1.39 to 1.70 over the next year, which could
happen with a return to global economic growth, it will be in a
good position. But lets not rule out a Eurozone crisis having the
opposite effect.
Dynamic Charging allows EVs to recharge their batteries wirelessly while in motion. A number of
companies are developing solutions that will allow vehicles to recharge from wireless points embedded
in the road, and pay using their mobile phone. It means the battery size, and cost, can be reduced by
over 75%.
Halo IPT is one of the companies that is developing a technology that is already proven in the medical
arena. It has estimated that 15% coverage of the UK road network is all that is needed for EVs to be able
to reduce battery sizes by 75%, with dramatic impacts for TCO calculations.
The chairman of Halo IPT, John Miles, will be speaking at Green Strategy 2011 on 16th November.
Conclusion
Prior to the arrival of Carlos Ghosn in 1999, Nissan Nissan describes its EV investment as: Not
was not associated with innovation. The first betting the house, but would be pretty painful if
period of his tenure was about returning Nissan it doesnt work. What we can say with certainty
to financial health, and the second is focused on is that it is one of the bravest and most inspiring
introducing innovation and leadership in a way sustainability strategies we have seen, and it has
that has not previously been associated with the potential to see Nissan emerge as one of the
Nissan. Its EV programme is at the heart of this business stories of the next decade.
change.