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On Monday, August 3, 2009, Renault-Nissan's (OTCPK:NSANY) "head," Carlos Ghosn, who until recently was a naysayer to vehicle eletrification made his Japanese unit temporarily the center of the electrified-car-hype world. Ghosn sitting beside a former Japanese prime minister "took the wheel," whatever that means, of a new Nissan model, the "Leaf," at its press introduction in Yokohama.

I doubt whether anyone on Mr. Ghosn's payroll would today point out his 180 degree turnabout on the electrification of cars, but no one could have said it better than he, himself, who was quoted in Yokohama as saying "We don't see the electric car as a niche car," although he did indeed see it that way not so long ago. "We see it as a mass market car," he continued to the memory challenged reporters present who couldn't find it in their saki fueled hearts to ask him why he is now to be considered a prophet instead of the last time when he pooh-poohed the electric car, well the hybrid one anyway, as a niche product.

I will give Mr. Ghosn credit for one thing, though, he has solved a problem that will vex his competitors and, in my opinion, kill their chances of making a profit from battery powered, thus truly electric, cars. Ghosn has decreed that the customers will lease the batteries and buy or lease the chassis and body shells into which they fit.

This means that Nissan hopes to be able to sell the Leaf for less than $15,000.00, net of the battery lease cost. It also means that the risk of owning a $10,000.00 black box (the lithium-ion battery also to be made by Renault-Nissan) that may suddenly stop working is entirely on the seller rather than the buyer (leasee). I call this the BYD (OTCPK:BYDDF) solution after the Chinese battery company that also intends to build electric cars as opposed to a car company, like Nissan, that also intends to build (and lease) batteries. They will both have in common a servicing agenda that completely destroys any hope a company like GM can ever compete in this market segment. If your Nissan or BYD battery fails for any reason just get it to the dealer, and he will swap it for another one. Any inconvenience this may have caused you will probably be assuaged with a free prize of some sort. In the meantime the manufacturer will get to learn from the battery failure hopefully without losing a customer.

One problem with this marketing technique - the "leased" battery - is that the leasing entity must have the money to initially buy the battery (and build its own factory to make them), the technology to learn from operational failure, and the credit and capital to maintain a large leasing and battery service operation that will take some time to break even. This would seem to give the bankrupt poorly managed manufacturers, such as GM and Chrysler, no room at the inn.

Not satisfied with creating such a situation for his competitors Carlos Ghosn rubbed even more salt into their electrodes by announcing that the range of the Leaf on a single charge would be 100 miles. This means that the Leaf will get 2 1/2 times the range of hype-othetical Chevrolet Volt and sell for as little as 1/3 of the Volt's rumored selling price.

The Leaf is to get a full charge, Nissan says, on household voltage and current in 8 hours, and there will be, Nissan says, a fast charger available at "selected" service stations that will give the car the juice it needs in 30, count 'em,' 30 minutes. Of course the fast charge station will need heavy wiring, a step up transformer, and a deal with the local grid operator to prevent local brownouts to do this, but, hey, all problems have a solution.

As if the Leaf weren't thus far a real problem for Bob Lutz, it's going to get worse, says Ghosn. The target production of the Leaf for 2013 is 200,000, yes, 200,000 units. And even worse for the Voltster the car will be made in places like Japan, the UK, Portugal, and Smyrna, Tennessee while the batteries are made in the same places. Lutz, in the meantime, has assured us that the Volt will be made in small numbers at a loss until it is made in large numbers at a profit - whatever that means, if anything. The target production for the Volt is 10,000 units a year for the first 2 to 3 years, but I suspect that if the American car buyer is given the choice between a $15,000.00 Nissan Leaf with a range of 100 miles on a charge and a $45,000.00 Chevrolet Volt with a range of (believe me) less than 40 miles it doesn't take a jet pilot (like Bob Lutz) to see who will take the market.

Of course we don't know if the Leaf will get 100 miles on a charge in a Detroit winter uphill in an ice storm or downhill crossing the Mojave desert in California, but we don't know if the Volt will do its full 40 in those conditions either.

Lost in the hype was a very interesting statement by a man who we have quoted as saying that his electric car is not a niche car. The Financial Times says that "Mr. Ghosn predicted that pure electric vehicles (like the Leaf but not like the 'extended range, gasoline assisted [for charging] Chevrolet Volt') would account for 10% of new car purchases globally by 2020." Let's take a look at that statement.

By the most conservative guesstimate the global production of personal motor vehicles in 2020 will be 150,000,000 units a year. The global fleet by then will top one billion units. To see how conservative I am being note that the global fleet today-in 2009-is already 750,000,000 units. Therefore, most of the cars made in 2020 will be gasoline or diesel powered directly using petroleum hydrocarbon or carbohydrate (e.g., ethanol or methanol) fuel. If everyone kept their cars permanently - and this could be possible with a personal battery that you took from one chassis and body shell to the next chassis and body shell) then at 15,000,000 units prodcution a year (Ghosn's 10 percent) it would take around 60 years to electrify the global fleet at the size it was at in 2020.

I write about natural resource production rate limitations on technology implementation, and I consult and speak about that topic globally. I think Mr. Ghosn is right on with his prediction of the spread of the electrification of personal motor vehicles but may be optimistic.

The production and maintenance of one to two billion battery packs just for personal motor vehicles will take a huge amount of specialized production of natural resources. Assuming a Leaf lithium-ion battery is twice the size of a Chevrolet Volt battery means that each one will require 32 KG of lithium carbonate to construct. One billion of them will thus require 32,000,000,000 kgs of lithium carbonate or 32,000,000 metric tons. Last year's new mine production of lithium measured as carbonate was 167,000 metric tons. At that rate it would take 200 years to produce enough material to electrify the global fleet.

It has been stated by the six or so large miners of lithium that they could provide up to 600,000 metric tons a year of lithium as carbonate by 2020 if they were fully financed to do so right now. Assume that could be done, then we could reduce the time necessary to electrify the global fleet with lithium ion batteries by a factor of 4. This means it would take 50 years if we had such an electrification as a priority and a goal worldwide.

Ladies and gentlemen, it's going to take at least a century to electrify the global fleet if we start with a prioritized plan right now.

This means that realistically we're going to have a mix of power trains indefinitely. Most will be internal combustion engines buring hydrocarbons or carbohydrates, some will be full hybrids using nickel metal hydride batteries, some will be lesser hybrids using lead-acid, nickel metal hydride, or lithium ion batteries, and a growing number will be pure battery powered electrics using lithium-ion batteries.

Congratulations to Renault-Nissan and its chameleon like president, Carlos Ghosn. If the Leaf appears on time you may have given birth to the most common car of the (distant) future. I will buy one now if it has reasonable performance characteristics and cargo capacity and the price is right for a member of the new US former middle class.

Disclosure: I do not own shares in any company mentioned or referenced in this article.

Source: Carlos Ghosn and the 'Leased' Battery