Nissan says zero-emission push timely amid crisis

TOKYO Wed Jul 8, 2009 7:11am EDT

Andy Palmer, Senior Vice President of Nissan Motor Co, speaks at the Reuters Japan Investment Summit in Tokyo July 8, 2009. REUTERS/Kim Kyung-Hoon

Andy Palmer, Senior Vice President of Nissan Motor Co, speaks at the Reuters Japan Investment Summit in Tokyo July 8, 2009.

Credit: Reuters/Kim Kyung-Hoon

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TOKYO (Reuters) - Nissan Motor Co (7201.T) said on Wednesday that while the economic crisis had hammered automakers, the company is in a perfect position to benefit from government loans thanks to its big push in the field of zero-emission cars.

Many governments, including the United States, have set aside funding to help automakers survive tight credit markets on condition that the subsidies help the countries' own efforts to meet environmental goals.

"The good news for us is that in seeking liquidity, governments have normally put behind that some kind of green initiative, and we're in a perfect situation to step up to that," Andy Palmer, senior vice president and head of product planning at Nissan, said at the Reuters Japan Investment Summit.

"We've got batteries, and we need government support... It's kind of a perfect storm. Everything came together at the right time," he added.

Hit by an industrywide plunge in vehicle sales, Nissan has suspended its goals set under a mid-term business plan, with the exception of its aggressive push into the electric car business.

Nissan, Japan's No.3 automaker, is looking to close the gap with hybrid pioneers Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T) as governments and consumers look increasingly to alternative-fuel vehicles.

Along with French partner Renault SA (RENA.PA), Nissan is aiming to become the first to mass-market pure electric cars with a global roll-out in 2012. Nissan has a joint venture with Japan's NEC Corp (6701.T) to develop and produce lithium-ion batteries, a key component that is seen as the biggest hurdle to lowering the cost of electric cars.

The high cost of setting up a lithium-ion battery factory, however, means Nissan is heavily dependent on state aid to succeed in its ambitious zero-emission push -- a risk that executives acknowledge.

"I guess it's fair to say that if we couldn't access government funds in this environment, we'd have to slow down the development because of the enormity of the investments," Palmer said.

U.S. BATTERY OUTPUT TO COST OVER $1 BLN

Last month, Nissan, Ford Motor Co (F.N) and California-based start-up Tesla Motors Inc became the first to receive approval for the U.S. Department of Energy's loans earmarked to build fuel-efficient vehicles in the United States.

Nissan will get $1.6 billion to build a battery assembly facility and retool an existing line to build a new electric car at its Smyrna, Tennessee, site starting in 2012. It aims to build up to 150,000 electric vehicles there a year.

Palmer said the battery production portion alone for the U.S. site would cost just over $1 billion, making up the bulk of the subsidized loan. The site would house three "modules," equivalent to production of 54,000 battery units, with each module costing $350 million, he said.

Nissan has also announced plans to build batteries in Japan and is negotiating with several governments on a site in Europe.

Developing an electric vehicle (EV) also costs more than a conventional gasoline-engine car, he said.

"Normal car development cost is about $300 to $500 million, and EVs are above the upper range of that."

Despite the huge outlays and the reliance for now on government support, Palmer said zero-emission cars would present a viable business for Nissan once mass-production and marketing begin in 2012.

"(Electric vehicles) aren't going to be subsidized forever. We're looking at two stages: initially, at the 2010 launch -- that's when we'll get all of the buzz and the aid and all the rest of it.

"That's why we're talking about mass-marketing in 2012, 2013. That's when it becomes a viable, mass business in our business model."

(For blogs from the Reuters Investment Summit, click on:

blogs.reuters.com/summits/ )

(Editing by Hugh Lawson)

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