NISSAN’S ELECTRIC VEHICLE STRATEGY IN 2011: LEADING THE WAY TOWARD ZERO-EMISSION case study Assignment
1. Perform SWOT Analysis of Nissan’s electric vehicle strategy in 2011: Leading the way towards zero-emission Case Solution.
2. To share thoughts on the case ‘Nissan’s electric vehicle strategy in 2011: Leading the way towards zero-emission’, which discusses the decision by Nissan, the Japanese car manufacturer, to develop and sell a range of zero-emission vehicles (ZEVs).All students should contribute by posting your thoughts such as what went well for you on case? What did not go well or what did you find difficult? What will you try to do differently? Join the discussion, and add some of your own key learning points.
3. Your task is to analyse Nissan’s external environment
and offer comments upon whether or not the group is as optimistic as Nissan
that ZEVs will make up 10% of the global car fleet by 2021. As a group you
should, briefly, make use of relevant BB835 concepts such as:
· The
PESTLE framework
· Porter’s Five Forces framework
4. To undertake a
comprehensive assessment of Nissan’s resources and capabilities. Your task is
to identify and assess Nissan’s e-vehicle:
· tangible,
intangible and human assets
· capabilities,
including a value chain.
and then to evaluate these assets in terms of their VRIO attributes. By the end of this task you should have reached a conclusion as to the potential of these resources and capabilities to offer for competitive advantage in the context of the external analysis.
5. Your task is to bring all of the work together and prepare a final presentation of both the outcomes of your analysis and the implications of this analysis. As part of this process you need to revisit the strategic choice Nissan has made and which is reported in the case and offer your views on whether the strategy is appropriate for the competitive environment you have analysed. Would you make any recommendations to Nissan? These recommendations can take any form – they can offer alternative interpretations of the data, identify opportunities or threats that Nissan may not have identified, reflect different potential uses of resources or capabilities or identify underlying weaknesses in the resource portfolio – short of simply endorsing the strategic decision taken by Nissan. As part of this work, you should identify what is the main strategic issue Nissan is facing as well as offer Nissan the potential for competitive advantage in this industry. Outline what you have discovered about Nissan’s resources and capabilities, and what conclusions you have drawn about its strategy.
6. Discuss the findings of your analysis and review the process by which these outcomes were produced. You will also return to the main themes and learning objectives of the tutorial, reflecting on the activities you have undertaken and the learning that has taken place.
NISSAN’S ELECTRIC VEHICLE STRATEGY IN 2011: LEADING THE WAY TOWARD ZERO-EMISSION Case Study Solution
1. SWOT ANALYSIS of Nissan’s Electric Vehicle
1. The LEAF, a five-passenger compact car, could go up
to 100 miles (US LA4 mode)1 on a single charge and could be fully recharged
with a home charger in about seven hours, or 80 percent recharged in 30 minutes
at a quick charging station.
2. The LEAF‘s retail price was $32,780, and after
the $7,500 federal tax credit the price dropped to $25,280 – less than the
average price of a new car in the United States.
3. The Alliance had committed to the project
included building assembly and battery plants, as well as designing,
developing, and launching the LEAF and other ZEVs that would be released later.
4. The Alliance sold a total of 7.3 million vehicles
– about 10 percent of total global sales.
5. While Nissan built the electric car’s lithium-ion
batteries with Japanese joint venture partner NEC, Nissan’s partnership with
Renault allowed for significant economies of scale.
6. Renault was developing its own electric cars and
was a key partner for Nissan in its zero- emission projects.
7. The two companies shared technical learning and
experiences about electric vehicles (EVs).
8. Ability to increase production capacity of EVs
and battery at different geographical locations.
9. Nissan’s EVs was an exciting and
lifestyle-changing car; it was quiet, had exceptional handling, and had
advanced IT connections such as smart charging. Each car was monitored through
IT support at Nissan’s data center, which connected to its service center and
service provider. Drivers also could check the status of the car’s charge via
the Internet. They could turn on the car’s heat or air conditioning from their
house or mobile phone before getting into the car without draining the battery.
10. The LEAF also had on-demand driving support,
which showed drivers where the nearest charging stations were or how to
maximize their driving range. In the near future, for on-demand taxis, the
system would be able to calculate which taxi had the battery capacity to pick
up which customer, depending on the distance a customer wanted to travel. The
LEAF would have functions such as the ability to download multimedia content
like movies or newspapers, which the car would be able to read out loud to the
driver. Nissan said that in essence it was selling a car plus its services.
11. The Alliance allowed the two companies to more
efficiently negotiate with authorities, governments, or third parties. Renault
dealt with the French government and Nissan dealt with the Japanese and U.S.
governments.
1. Nissan had not invested in hybrid technology when
its competitors were doing so because it was facing bankruptcy at the time
(1999-2000) and did not have the necessary financial resources.
2. Power of Nissan to persuade governments to invest
in the necessary infrastructure required for EV.
3. High cost of the battery and the sticker price of
the car was also a concern.
1. Electric cars would make up 10 percent of the
world car market by 2020.
2. Nissan and Renault each planned to produce four
EV models: a family sedan, a small city car, a light commercial vehicle, and a
luxury car.
3. Renault designed and developed EVs with some
different technologies for the motor and a different battery recharging method.
The two companies also had different EV business models. The Alliance wanted to
have multiple technical options and business models so it could quickly adapt
to the market demands of the future.
4. In the United States, 95 percent of Americans
drove less than 100 miles per day, and 75 percent drove less than 40 miles per
day.
5. Nissan is getting a lead in EV market.
6. Nissan wanted to make full use of its first-mover advantage to not only
sell the LEAF, but to change the face of the industry by making all-electric
vehicles an affordable, mass market reality.
7. Various governments
offered tax incentives and rebates to EV and PHEV buyers, and some offered
grants and loans to EV and PHEV manufacturers and battery manufacturers.
8. Very less or no
competition in EV market as in current situation.
9. The company’s research
showed that LEAF sales would come predominantly from the United States and
maybe Europe.
1.
Competition that will come from the all-electric vehicles manufactured by Ford,
Volkswagen, and Toyota, which had not come out yet.
2.
There was a “range anxiety” among customers and they were afraid of getting
stuck on the road after 100 miles because there was no back-up engine in an
all-electric vehicle.
3.
The top barriers to adoption of EV’s were price, concerns about performance and
range, and availability of charging stations.
4.
EV makers also faced increased competition with ICE vehicles that were becoming
more fuel-efficient, offering customers more choices.
5.
Buyers of EVs tended to fall into a very specific category: older, high income
people who held post-graduate degrees and liked to be the first to adopt new
technology.
6.
If the narrow demographic of hybrid buyers was extrapolated to EV buyers, EV
manufacturers might have a hard time finding mass market appeal.
7. For EVs to reduce the world’s carbon footprint,
electricity generation from renewable resources would have to keep pace with
the production of EVs.
Things that go well for Nissan's Electric Vehicle
1. It had a first mover advantage in launching a
global, mass market, affordable EV that had the same capabilities as an ICE
car.
2. Costs of raw materials and commoditized parts
were expected to remain relatively fixed over time.
3. NEC’s battery business was relatively small, but
they knew how to make specialty electrodes that were critical for the EV
battery. Nissan’s battery business unit itself employed about 50 people.
4. Nissan could control the number of batteries
produced to ensure it would have sufficient supply for its EV line.
5. Through simultaneous engineering, they were able
to coordinate and organize new ideas, which led to a quicker time to market and
lower costs. With Nissan and NEC engineers working together, there were daily
discussions about what Nissan needed for the LEAF, which eliminated
bureaucratic layers and delays.
6. The collaboration also meant that at any moment
Nissan could incorporate the newest battery technology into its cars. In
addition, Nissan and Renault could start with the car design and specify how
the battery must be, as opposed to the other way around. There also were
advantages for NEC.
7. The Renault-Nissan Alliance wanted to tap into
that market so that in addition to self-supplying batteries, it could sell
batteries to other companies.
8. The Alliance expected to produce that many EVs
annually by 2015, half by Renault and half by Nissan. These would all use
manganese lithium-ion batteries, which were high in durability.
9. Although Nissan could not benchmark BYD’s
batteries, technologically they were notably inferior to the batteries being
developed in Japan and South Korea.
10. The Alliance had two distinct business models
for their EVs. The first was to sell the car and the battery as one unit, so
the buyer would own both. A second model involved selling the electric car but
leasing the battery. Customers would pay a monthly lease fee of varying cost,
depending on the region, with the ability to change the battery if there were
problems. In some regions, most notably Israel, customers also could take
advantage of Renault’s quick drop system; they could go to a special station
and in less than five minutes have a battery that was running out of charge
replaced with a charged battery. Thus Renault took on the uncertainty about the
life of the battery so customers did not have to worry about it.
11. Joint venture 4 R would reduce the initial cost
of the battery and help society accept the electric vehicle.
12. Nissan was developing both normal and quick
charge systems and was working to standardize as much as possible in order to
reduce the cost. The company had begun installing both regular and quick
charging units around the world. Nissan also partnered with third parties all over
the world to build the EV infrastructure.
13. In March 2011, Renault and Better Place opened
the first European Better Place center in Copenhagen, where customers could
test drive and order a Renault Fluence “Prime Time” ZEV sedan.
14. Nissan also joined forces with U.S. company
ECOtality North America (formerly known as eTec) to build 12,750 charging
stations and deploy 5,000 LEAFs in five U.S. markets: the states of Tennessee
and Oregon, the cities of San Diego and Seattle, and the Phoenix/Tucson region.
15. The Nissan plant in Oppama modified its assembly
line to produce normal internal combustion engine vehicles and EVs, making
manufacturing capability quite flexible. Given Nissan’s capability to allow
various type of vehicles to be produced in the same production line, there was
no need to create a dedicated line for EVs, allowing the company to reduce
investment costs significantly.
16. In addition to sharing technological
information, Renault and Nissan could communicate about distinct business
models for each region, which translated to significant synergies.
Things that did not go well or found difficult for Nissan's Electric Vehicle
1. “Range anxiety” – the fear that the battery would
run out and EV owners would be stranded on the road — had come into the lexicon
of the debate pitting the EV against PHEV and ICE.
2. The people do not yet understand the electric car
and the potential of the electric car.
3. Questions and concerns about the LEAF were mostly
centered on the availability of charging stations, dealer locations, and price.
4. The battery was by far the most expensive
component of the car.
5. Renault planned to buy some batteries from South
Korea-based LG Chem.
6. The price AESC charged Renault for batteries were
high. Renault wanted to buy the batteries as cheaply as possible, but Nissan
wanted to sell the batteries at a high price. However, Renault planned to buy
part of its batteries from LG Chem, which kept AESC’s prices competitive.
7. For battery development, Nissan was snatching up
as many chemical engineers as possible. Chemical engineering had not been very
popular among young Japanese, who saw a career path only to chemical factories.
Key Learning Points
1. Battery cost in EV is very critical and reduction
in its cost is utmost priority for the company.
2. Providing necessary infrastructure for EVs in
market is second most important consideration to be taken care of while
convincing customers to go for EVs.
3. Pricing is an utmost concern for the customers
even after tax relief on EVs.
4.The first mover advantage can help Nissan and
Renault to establish their brand in EV market if they were able to produce cost
effective and efficient cars with necessary infrastructure facilities in first
go.
5. Battery market can also help Nissan to increase
their profit if they will be able to achieve economies of scale and get ways to
reuse used batteries.
6. Looking into environmental concern, people will go for EVs but electricity is also generated from coal. Equilibrium with regard carbon is to be maintained which proves low carbon emission as compared to IEC.
Porter’s Five Forces framework
PESTLE FRAMEWORK
1. Customers will move toward EVs as Oil prices and
availability were continuously volatile, affecting consumers at the gas pump influencing
political decisions and even prompting military action.
2. Various governments offered tax incentives and
rebates to EV and PHEV buyers, and some offered grants and loans to EV and PHEV
manufacturers and battery manufacturers.
3. Tax incentives for buying electric vehicles were
in place only for a few years
1. Federal tax credit by government on EVs reduced
the price of Leaf in USA. Many states had additional rebates for electric vehicles (EVs).
2. Nissan’s partnership with Renault allowed for
significant economies of scale.
3. The Alliance’s goal was to sell a cumulative 1.5
million EVs by 2016.
4. During the oil price spikes in 2008, there was
evidence that high gasoline prices affected drivers’ habits. Many consumers
began to change their buying habits, switching from sport utility vehicles
(SUVs) to more fuel efficient cars and motorcycles. SUV sales dropped
precipitously in 2008. As oil prices dropped in 2009 and 2010, U.S. drivers
began reverting back to buying less efficient cars.
1. Nissan and Renault each planned to produce four
EV models: a family sedan, a small city car, a light commercial vehicle, and a
luxury car.
2. Americans had “range anxiety” and were afraid of
getting stuck on the road after 100 miles because there was no back-up engine
in an all-electric vehicle.
3. Buyers of EVs and HEVs tended to fall into a very
specific category.
1. The two companies shared technical learning and
experiences about electric vehicles (EVs), but Renault designed and developed
EVs with some different technologies for the motor and a different battery
recharging method. The two companies also had different EV business models.
2. They have multiple technical options and business
models so it could quickly adapt to the market demands of the future.
1. To combat climate change and pollution,
governments around the world began enacting emissions regulations.
2. New federal U.S. and global mpg
mandates would act to accelerate improvements in ICE vehicles.
3.
Nissan’s development of electric vehicle batteries was spurred on by new
California regulations that required automakers to have a very small percentage
of electric vehicles in the market, which for Nissan translated to about 100 or
200 EVs.
1. Nissan want to change the face of the industry by
making all-electric vehicles an affordable, mass market reality.
2. Transportation accounted for one-third of the
country’s carbon emissions and two-thirds of total emissions from petroleum in
USA.
3. Air pollution was an enormous problem created by ICE
vehicles, especially in emerging nations.
4. Although electric vehicles were emissions-free,
there was still the question of carbon footprint. A large percentage of global
electricity generation came from coal. Coal-powered plants were environmentally
unfriendly, and coal was the largest source of global carbon emissions.
5. For EVs to reduce the world’s carbon footprint,
electricity generation from renewable resources would have to keep pace with
the production of EVs.
Porter’s Five Forces framework
The top barriers to adoption of EVs were price,
concerns about performance and range, and availability of charging stations.
These factors reduce the entry of new companies into EV market in current
situation..However auto companies will soon enter into EV market once they will
be in a position to develop infrastructure for the same. Government is offering
incentive to buyers in terms of tax incentive to promote use of EVs.
In the United States, the LEAF was often compared to
General Motors’ Chevy Volt, which was a plug-in hybrid electric vehicle (PHEV)
with an estimated retail price of about $41,000 ($33,500 with the federal tax
incentive). EV makers also faced increased competition with ICE vehicles that
were becoming more fuel-efficient, offering customers more choices. “Range anxiety” – the
fear that the battery would run out and EV owners would be stranded on the road
— had come into the lexicon of the debate pitting the EV against PHEV and ICE.
3. Bargaining power of suppliers
The bottleneck for the EV
was the battery supply, which Nissan is producing in joint venture with NEC. One
of the main objectives for Nissan, and all EV makers, was reducing the cost and
complexity of the battery as quickly as possible. Costs of raw materials and
commoditized parts were expected to remain relatively fixed over time. These
costs equaled about 25 percent of 2009 battery costs.
4. Bargaining power of customers
New federal U.S. and global mpg mandates would act to accelerate improvements in ICE vehicles. A new competitive landscape also was opening up with the push for cheap, fuel-efficient cars (for less than $3,000), especially in emerging automotive markets. However price of Leaf was $32,780, and after the $7,500 federal tax credit the price dropped to $25,280.
Competition that will come from the all-electric
vehicles manufactured by Ford, Volkswagen, and Toyota, which had not come out
yet, giving Nissan a lead in the EV market. These companies would be releasing EVs
between late 2011 and 2014. Competition would then be on other features:
external and internal design, acceleration, comfort, range reliability,
charging, and IT interconnectivity. The only mass marketed PHEV was the Chevy
Volt. Toyota had plans to offer a PHEV by 2012, but with a limited range of
about 13 all-electric miles per charge. Right now, Nissan does not have direct
competitive rivalry but substitute rivalry is present.
The best known all-electric vehicle on the road was the Tesla Roadster, a
sports car that cost $109,000 which was much higher than Leaf price. There was competition
from the Chinese brands BYD and Chery, which were running some test programs in
Europe. BYD’s electric car, the e6, was set to go on sale in the United States
at the end of 2011 or in 2012 for about $35,000.
· Tangible,
intangible and human assets
1. The Renault-Nissan Alliance was building capacity
for 500,000 ZEVs. The $5 billion the Alliance had committed to the project
included building assembly and battery plants, as well as designing,
developing, and launching the LEAF and other ZEVs that would be released later.
2. Nissan would begin building LEAFs and batteries
in its new plant in Smyrna, Tennessee, which had the capacity for 150,000 EVs
and 200,000 batteries. Nissan was investing about $2 billion in this plant.
3. In 2007 Nissan decided to make battery production
a separate business in Japan and set up a joint venture with Japanese battery
maker NEC called Automotive Energy Supply Corporation (AESC). Nissan owned 51
percent of the JV, and NEC owned 49 percent.
1. Nissan built the electric car’s lithium-ion
batteries with Japanese joint venture partner NEC.
2. Technical knowhow of producing powerful lithium
batteries for EVs.
3. Continuous R&D through 4 R to
1. Nissan was using the same talents and analytical
skills that it employed with the ICE to test crash modes and safety.
2. Nissan’s battery business unit itself employed
about 50 people.
3. AESC combined the mechanical engineering talents
of Nissan’s engineers with NEC’s chemical and electrical engineers, and
together the two companies could come up with more innovation choices.
The collaboration with NEC meant that at any moment Nissan could incorporate the newest battery technology into its cars. In addition, Nissan and Renault could start with the car design and specify how the battery must be, as opposed to the other way around. The company got the perspective of the automotive world, which it could translate to its industrial applications. It also could scale up significantly, as the number and size of the batteries produced for electric vehicles was much larger than for NEC’s other products.
the increased number of units brought costs to a
very competitive level. Yamashita noted that overall, “the volume effect is
probably endless. significantly more benefit to purchasing raw materials like
lithium and magnesium.”
Value Chain analysis of Nissan's Electric Vehicle
Capabilities including Value chain:
The Nissan plant in Oppama modified its assembly
line to produce normal internal combustion engine vehicles and EVs, making
manufacturing capability quite flexible. Given Nissan’s capability to allow
various type of vehicles to be produced in the same production line, there was
no need to create a dedicated line for EVs, allowing the company to reduce
investment costs significantly.
Value chain model According to Porter (1985),
The primary activities are:
The main components of EVs are battery which Nissan
in joint venture with IEC manufactures itself. Raw materials for batteries and
other components are bought locally.
Nissan has set up plants
at different locations worldwide to manufacture EVs and fulfill the demand.
They are also in process of setting up new plants.
In 2010 and 2011 the LEAF
was assembled in Japan at its Oppama plant, in Yokosuka. Nissan expected the
Oppama plant to have a capacity of 50,000. Beginning in 2012, Nissan would
begin building LEAFs and batteries in its new plant in Smyrna, Tennessee, which
had the capacity for 150,000 EVs and 200,000 batteries. Nissan was investing
about $2 billion in this plant. Plants were planned for the United Kingdom and
Portugal by 2012, mainly to serve the European market.
Nissan did not conduct an
initial media blitz, but rather, was letting “influencers” do the marketing for
the company. Nissan was Public relation to advertise it EVs.
The Alliance had two
distinct business models for their EVs. The first was to sell the car and the
battery as one unit, so the buyer would own both. A second model involved
selling the electric car but leasing the battery. Customers would pay a monthly
lease fee of varying cost, depending on the region, with the ability to change
the battery if there were problems. In some regions, most notably Israel,
customers also could take advantage of Renault’s quick drop system; they could
go to a special station and in less than five minutes have a battery that was
running out of charge replaced with a charged battery. Nissan was developing
both normal and quick charge systems and was working to standardize as much as
possible in order to reduce the cost. The company had begun installing both regular
and quick charging units around the world.
Nissan procures raw
material and other inputs from local markets to keep cost competitive
Across the Alliance, there
were 2,000 people working on the EV, including 5 percent of the Alliance’s
engineers.
The Alliance had a
structure called EVCCT (Electric Vehicle Cross Company Team), and a
subcommittee that exchanged information between Renault and Nissan. So from a
technical point of view, the two companies shared new findings and experiences
throughout the development phase. Infrastructure - serves the company's
needs and ties its various parts together, it consists of functions or
departments such as accounting, legal, finance, planning, public affairs,
government relations, quality assurance and general management.
VRIO
Framework of
The collaboration with NEC meant that at any moment
Nissan could incorporate the newest battery technology into its cars. In addition, Nissan and
Renault could start with the car design and specify how the battery must be, as
opposed to the other way around. The company got the perspective of the automotive
world, which it could translate to its industrial applications. It also could
scale up significantly, as the number and size of the batteries produced for
electric vehicles was much larger than for NEC’s other products.
The Alliance had two distinct business models for
their EVs. The first was to sell the car and the battery as one unit, so the
buyer would own both. A second model involved selling the electric car but
leasing the battery. Customers would pay a monthly lease fee of varying cost,
depending on the region, with the ability to change the battery if there were problems.
In some regions, most notably Israel, customers also could take advantage of
Renault’s quick drop system; they could go to a special station and in less
than five minutes have a battery that was running out of charge replaced with a
charged battery. Thus Renault took on the uncertainty about the life of the
battery so customers did not have to worry about it.
In September 2010, Nissan and Sumitomo Corporation
established a joint venture called 4R Energy Corporation to conduct research on
second-life use of lithium-ion batteries previously used in electric cars. After
the life of the vehicle, a battery typically had 70 to 80 percent capacity
left. It would reduce the
initial cost of the battery and help society accept the electric vehicle.
Recycling of used battery
which was still unknown to auto industries. 4R was reusing batteries for non-EV
applications and recycling or safely disposing of batteries. Its goal was to
use materials from existing batteries for future batteries. The company first collected the battery pack, disassembled it, and
checked for secondary use for each module. Then it added a battery management
system to operate or control the battery. To add more value for customers, they
were thinking of making it an energy
storage system by adding a power conditioner, a device that could convert
energy such as solar power from direct current (DC) to alternating current
(AC), allowing it to operate as a storage battery for the home.
In setting up the EV business unit, Nissan very
consciously protected it to make sure it did not get cut or lose resources. Nissan encouraged the
team to take risks and not be scared to try new things. They didn’t want to bet
everything on the project, but trial and error was a learning process. AESC
combined the mechanical engineering talents of Nissan’s engineers with NEC’s
chemical and electrical engineers, and together the two companies could come up
with more innovation choices. Through simultaneous engineering, they were able
to coordinate and organize new ideas, which led to a quicker time to market and
lower costs. With Nissan and NEC engineers working together, there were daily
discussions about what Nissan needed for the LEAF, which eliminated
bureaucratic layers and delays.
Would you make any recommendations to Nissan? These recommendations can take any form – they can offer alternative interpretations of the data, identify opportunities or threats that Nissan may not have identified, reflect different potential uses of resources or capabilities or identify underlying weaknesses in the resource portfolio – short of simply endorsing the strategic decision taken by Nissan. As part of this work, you should identify what is the main strategic issue Nissan is facing as well as offer Nissan the potential for competitive advantage in this industry. Outline what you have discovered about Nissan’s resources and capabilities, and what conclusions you have drawn about its strategy
1. Successful Renault-Nissan alliance
The alliance allows both companies to:
- Engage
in costly R&D activities;
- Invest
in the new global projects;
- Negotiate
better contracts;
- Enter
new markets;
- Share the design, manufacturing and procurement costs.
2. Effective
R&D spending resulting into the best-selling electric vehicle in the world.
Focused R&D spending has allowed the company to
produce the best-selling electric vehicle Leaf.
3. Strong
presence in the leading and emerging automotive markets
Nissan through its alliance with Renault and various
acquisitions have increased its market share in the global automotive market.
The company successfully competes in the U.S. and grows its market share in
other emerging markets.
4. Well-managed company’s operations
Carlos Ghosn, Nissan’s CEO, has been managing the
company since 1999. His management style and reforms inside the ailing Nissan
company, have been featured in many business cases. He successfully turned
around the company’s operations and returned the company to growth.
Poor marketing
and advertising capabilities resulting in poor brand awareness
Nissan could improve its marketing and advertising
capabilities. No major brand rating agency has included Nissan brand between
the world’s top 5 automotive brands or the world’s top 100 largest brands,
proving that the company has poor advertising and marketing skills.
1. Increasing government regulations
Many governments around the world are committed to
reducing the greenhouse gas emissions and are encouraging fuel efficiency
initiatives. Such environmental initiatives may increase production costs for
the car manufacturers and these costs will be either passed to price sensitive
consumers or will decrease the company’s profits. Nissan may take advantage of
this by introducing more car models running only on electricity and bypassing
all the government regulations associated with the greenhouse gas emissions.
2. Improving U.S. economy
Signs of an improving economy and rising consumer
confidence have been reflected in the strongest increase in new vehicle sales
for more than a decade in the U.S. market. 17.5 million new units were sold in
2015, a 5.7% increase over 2014. Interest rates in the U.S. have been low for
several years and are forecast to remain that way for the foreseeable future.
In such economic conditions, Nissan has an opportunity to capture the higher
market share and increase its sales in the U.S. automotive market.
3. Timing and frequency of new model releases
The market share of the automotive companies is
significantly impacted by the timing and frequency of new model releases.
Historically, new models have tended to have major upgrades every 4 or 5 years
with only minor modifications in between. However, due to the rising consumer
expectations in relation to in-car technology and the competitive nature of the
industry, there is an argument to release upgraded models more frequently.
Nissan is well-positioned to be able to do this.
1. Increased competition
Nissan is faced with an ever increased competition
from the traditional automotive companies and the new players. In China, one of
the key company’s markets, new home based Chinese manufacturers are competing
by offering lower prices and the similar features. Nissan’s international
rivals, such as Toyota, Ford, General Motors and Volkswagen, all have bigger
budgets and higher brand recognition and could easily expand in China, U.S. and
Europe’s markets by taking the market share from Nissan.
New companies, such as Tesla with its electric cars
are competing directly against Nissan’s Leaf. In addition, Google, which tries
to build self-driving cars are also threatening the traditional automotive
industry. The competition is further fueled by the fact that the global
automotive production capacity far exceeds the demand. In 2015, there was an
estimated global excess production capacity of 31 million units.
2. Rising Japanese Yen exchange rates
More than 50% of Nissan’s revenue come from the
international markets, which means that the company has to convert foreign
currencies to Japanese Yen in order to calculate its revenues and send profits
back to Japan. Currency rates are volatile and company’s profits and revenue
highly depend on the fluctuating exchange rates. The company cannot control
currency exchange rates, therefore it is at risk, if Japanese Yen exchange
rates would start to rise. In this case, the company’s profits would decrease
significantly.
3. Natural disasters
Nissan has manufacturing facilities in Japan,
Thailand, China and Indonesia. These countries, including others, are often
subject to natural disasters that disrupt manufacturing processes and result in
lower production volumes and profits.
4. Low fuel prices could negatively impact Leaf
sales
Currently, fuel prices are the lowest in a decade.
Such situation has encouraged consumers to buy big fuel-inefficient vehicles
such as SUVs and pickup trucks. The company has its own SUVs and pickup truck
lines, but suffers from the decreasing consumer demand for Nissan Leaf cars.
The trend of low fuel prices is likely to stay and Nissan may suffer from investing huge amounts of R&D into electric vehicles, for which the demand may significantly decrease.
(1)
Reflect EV development policy to national policy and prepare roadmap:
In order to produce a notable effect by EV
development actions, it is necessary to introduce as many EVs as possible. For
this, medium- and long-term policies on EVs should be carried in the
coordination among the related agencies and organizations. Besides the central
government, there are many other stakeholders whose opinion must be sought,
including those groups which may be affected negatively by the introduction of
EVs. Therefore, EV development should be included in the national policy to
effectively promote the implementation of related projects and actions.
Furthermore, showing concrete EV policy in the short, medium, and long term can
help clarify the direction of relevant agencies, and facilitate the sharing of
the progress of the policy among these agencies.
(2)Establish implementation system:
There is no
foundation to introduce and promote EVs. Because the full-fledged development
of EV technology in developed countries is expected to start from around 2015,
the period between 2012 and 2015 is a good opportunity to establish an
implementation system.
It is advisable to conduct the following as
preparatory steps:
(i) Establishment of EV preparatory committee:
The committee will be the core body which will
conduct preparatory tasks to promote EVs. The MPWT will be the lead agency in
coordination with relevant agencies.
(ii) Prepare EV master plan: This study will propose
the basic directions for EV development. However, it is also necessary to
further study by region and by issue, after which, the EV master plan will be
formulated.
(iii) Build the basic regulations related to EVs: It
is necessary to develop regulations on import, registration, as well as
operation and management of EVs because private enterprises have already
introduced EVs. Meanwhile, the minimum required regulations will be prepared to
respond to market needs.
(iv) Develop human resources: The mechanism to
develop human resources will be developed in both public and private sector.
(3)
Conduct model project:
The implementation of the model project is very
effective to evaluate the feasibility and the impact of EV introduction and to
conduct capacity building which mentioned in the above. The model project can
enable to collect the necessary information for full-fledged EV development and
to strengthen the implementation capacity of relevant agencies. It is advisable
to utilize the support from the developed countries to implement the model
project.
1)
EV Diffusion in the World
Both
developed and developing countries have become more active in EV introduction
and diffusion. In developed countries, the government has led the promotion of
next-generation environment-friendly vehicles. In the industrial world, not
only conventional auto manufacturers but also large and small enterprises have
joined the EV business as new business opportunities. In accordance with the
implementation of many pilot projects and EV related events, public expectation
on EVs is high. However, there is no clear indication for full-fledged
diffusion. This is because of high prices of EVs, limited models, lack of
charging infrastructure, and lack of trust in the market in terms of life span
of EVs and safety. On the other hand, big auto manufacturers have become bolder
in EV development, which is seen to address the above-mentioned problems and accelerate
EV diffusion.
2)
Significance of EVs
Countries can gain significant benefits from EV
diffusion. One of the biggest benefits is energy saving. If all motorcycles and
mini buses and 50% of other types of vehicles are replaced with EVs by 2030, world
will save fossil fuel and also reduce
carbon emission and control pollution around the globe. The environmental
benefit is clear. The emission of PM, NOx, CO and THC will be zero. The zero
emission transport system will bring the positive impact on the society. The
traffic pollution such as air pollution and noise will be disappeared. The
attractiveness of cities will be increased. In addition, EV can change the
value chain of vehicles which create new business opportunities.
3)
Establish a System for Accepting EVs
EVs have been already introduced by the private
sector without related regulations. However, it is important to establish a
basic system to avoid the inappropriate operation of those EVs and to promote
appropriate information of EVs to the society.
1. Nissan had first mover advantage in terms of EVs
in the whole world and the company had chance to establish itself as a world
recognised brand in EV market.
2. Nissan in joint venture with NEC manufactured
Lithium ion batteries which give them a competitive advantage in the market
against other auto manufacturers who were still in process of developing
batteries for EVs.
3. Nissan had done enough investment to fulfill
demand requirements of EVs in future.
4. Company was working on recycling of used
batteries to reduce its cost of operation thus availing EVs at lower price in
future and compete with other EV manufacturers.
5. Both Nissan and Renault were developing EVs on
different technological lines to adopt changes in near future and remain
competitive in market.
5. Nissan in joint venture with local vendors,
dealers and distributors were creating infrastructure for battery recharge
stations in all its market where they were planning to sell EVs.
6. They were focused on increasing production line
in Europe and USA to cater demand of those areas.
7. They were working on technologies which could
reduce cost of batteries in future.
8. Nissan and Renault alliance were creating
synergies to obtain loans in the market as well as convince governments of
different countries to promote EVs.
9. there was a huge opportunity in the market in
terms of selling EVs by convincing customers about zero carbon emission benefits
of EVs and how it would help create a clean and pollution free environment.
10. Investment in EVs would get sound return if the
product will be positioned rightly in the market and by eliminating the concern
of customers with regard to EVs.
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