I wonder this too. It doesn't seem sustainable.

 

I imagine that a combination of a big discount and an insurance policy to cover the gap play some part in keeping them solvent, but I don't know for sure.

 

Your not missing anything, Car/Auto loans are the next subprime mortgages.

 

It's cheaper to subsidise new car sales than close factories. Look at the Contract Hire figures on expensive German metal too!

 

I'm amazed that my new three year contract for a far better car being delivered next week, is coming in £40 cheaper per month than my last one purchased in 2013. Obviously there is some negative equity in my old Leaf, the residual value is way above what it is worth at auction. So, my guess is that the finance companies take out GAP insurance, too. I wouldnt want to be a Lloyds underwriter with unlimited liability, thats a fact. But maybe Nissan themselves are taking the hit in order to shift metal - they will know where the profits are to be made, and my guess is that the Leaf is starting to move towards profitability, but mainly they continue to invest at a loss because it is giving them a market lead that will enhance future sales?
I mean, the Leaf is becoming an iconic brand name for EVs, along with Tesla, and how many people call any vacuum cleaner a Hoover simply because they achieved market dominance early on?

 

Nissan makes its money on the Juke and Quashaqui. Leaf sales are tiny in comparison and Nissan have to keep the factories going.

I know people here go on about how 90% of trips people do are under 50 miles (or something similar), but the poor sales figures and the need for massive discounts/0% interest deals speak for them selves.

But as a customer we don't really need to worry. As long as Nissan can absorb the costs all is good .

 

No, as anyone in business knows, it is really important that Nissan and Tesla can prove to their shareholders that their bold EV strategy is soon going to deliver profits to the bottom line.

 

When I drive a hire car for work Avis have a sticker by the speedo saying " inform Avis when this car gets to 17,000 miles" or something similar, as they then sell them on to dealers. That would be crazy for Jo public as we loose a fortune in depreciation. But Avis can still survive as they pay nothing like list for the car. I'm sure it's the same on a PCP the paperwork may say £25k but that never changes hands.

 

Quite often that rental car was never owned by the rental company. They're sometimes pre-reg at the local dealer, rented to the hire company and then put on the forecourt

 

Well, there are lots of different factors that affect cost.
Firstly, design and development costs - bound to be far more expensive for anything radical and new, especially given the higher likelihood of recalls.
Secondly, manufacturing costs - but the higher the volume, the cheaper per unit.
My Leaf was imported from Japan, so that would bring on extra costs of shipping, tax, and so on. But my new one is made in the UK, far cheaper in terms of transportation costs to the dealer.
So my guess is that the financial modelling is very complex, and takes account of all these factors when looking at what it costs Nissan to put a new car on the forecourt. But I would be surprised if they can make a serious profit unless sales top the 1M mark, after which they might be forced to reduce prices anyway due to competition.

 

So my guess is that the financial modelling is very complex

I don't think its as complex as you might think (the following only really applies to OEM that run their own finance houses) as soon as you sign on the dotted line the manufacturer realises the sale at full list price, thats what the finance house pays discounts etc come off later. The finance house then sell your repayment as decent investment grade stuff on the open market, this is were the real money is made.

At the end of the PCP/agreement finance house then sells the car back to the market, or in BMW's case keeps it on the books at its made up asset price, and then does everything within its power to keep the market within the depreciation model.

So long as money retains its velocity the finance house can remain solvent, which ostensible means its in their interest to structure the finance such that you would want another at the end of the agreement, i.e. new car + new PCP.

There have been a couple of articles about this in recent months in the MSM but it is very underreported, the current makeup of finance is very close to what the sub-prime mortgages looked like before it all went "Pete Tong" In the US especially anybody including your cat is likely to get a auto loan, and more often than not they can't really afford it.

Ultimately the finance company exists to facilitate the parent company to sell new metal.

 

If you are backing the right horse, which they are, there is no problem.

 

The price might be 25k but what they paid for it may well be nothing like that.

I remember my girlfriend at the time buying a Ford KA from new 8-9 years ago the dealer accidentally left some paper work showing they only paid £4,500 for it. I know that prices have gone up since then, but it goes to show that there's still some healthy margins along the supply chain even at the bargain basement end of the spectrum.

Its also not right to assume that because we tend to think of electric cars as being the future that the engineering in the Leaf is somehow more technically advanced and expensive to produce than an equivalent ICE car, it simply isn’t!

The suspension for example is particularly simple and old school. How many leading edge cars these days have twist beam rear suspension like the Leaf has? The battery itself is an expensive lump but apart from that its just a different type of drive train that in many respects must be far simpler to put to bolt together and with far fewer components to design, manufacture, test and build compared to an ICE and its transmission all of which require incredibly fine engineering tolerances.

The Leaf might be some form of halo loss leader depending on how the books are cooked, but I very much doubt it.

 

Whilst I agree that the manufacturing cost of the Leaf is likely to be lower than a comparable ICE - the amortization of the R&D and setup costs must be huge! I doubt that as a cradle to grave P&L project that the Leaf has or ever will be profitable for Nissan. However it gives them a huge leap forward for the future.

 

Regulatory compliance is a massive cost for any new vehicle. I worked in Japan for a year back in 1975/76, and one of my drinking buddies was a Mitsubishi technical engineer who worked for a team that each specialised in a different market/country, each with their own regulatory regime. Problem is , there is no global standard, so the challenge is to design a car that meets multiple standards regimes. And in left and right hand drive versions, with different voltages and currents: we haven't even managed to produce a single electrical socket for all countries yet, let alone a complex electric appliance that meets all needs. The Japanese are masters of this black art, and I'm not surprised they have the lead over other manufacturers.

 

On our pcp paperwork it says ours cost 16k (after grant and various Nissan Uk/Dealer incentives), we pay a total of 3.2k (at 0%) over 24 months then in a years time with 12k miles it will be worth 13k - good luck for that, 2 year old Leafs seem to be about 10k now.

 

Both our Leafs have 6 months PCP to run. Both had less than £1k deposit and both ....... wait for it....... have GFV's of £18k each! They were the glory days for RCI. Worth £9k each I would say.

 

So I guess you're not going to buy them from RCI then?

 

Nope!! Toss the keys back. If the deals ain't good on a new one, we'll be on the lookout at auction for our cars!!

 

Sounds like a plan

 

I used to work for a manufacturer who lost an absolute fortune on these PCP deals. It was a classic case of the sales staff being incentivised purely on sales volume. The GFVs were set unrealistically high, and we gave big discounts to the dealers which enabled the low headline monthly rates. Big bonuses all round (massive massive bonuses for the senior management team) who all got promotions or headhunted. A couple of years later all the vehicles were returned and each one caused us to suffer a significant loss. Total short sightedness.

 

I used to work for a manufacturer who lost an absolute fortune on these PCP deals. It was a classic case of the sales staff being incentivised purely on sales volume. The GFVs were set unrealistically high, and we gave big discounts to the dealers which enabled the low headline monthly rates. Big bonuses all round (massive massive bonuses for the senior management team) who all got promotions or headhunted. A couple of years later all the vehicles were returned and each one caused us to suffer a significant loss. Total short sightedness.

It's alright though, as long as Nissan can sell a couple of Jukes/Note for every Leaf the books will be fine.....Its not like they need to sell EVs to keep afloat.

 

What nissan now know about batteries is worth a fortune.. they have a load of us running tests for them and reporting everything back via the telematics system. In the future other manufacturers will by buying that knowledge for a fair bit more than they lose on a leaf.

 

They also claw some of the money back via the RCI finance arm.
Instead of the banks getting the money, Nissan does.
Also I'm willing to bet the cost to RCI is a lot lower than we're paying.

 

Of course it is. I expect there are financial and tax benefits for Nissan to account for it as though you borrowed something at inflated value from their finance arm rather than bought the car cheaper outright.

 

My understanding (from the dealer) was that they were planning on getting people hired on EVs and having a new model out in time for the end of the deals in late 2016/early 2017.

 

Well BMW and VW have already announced their new increased capacity EVs; Nissan will have to wait until they actually have theirs in production before announcing it due to both cultural and sales pressures.

So late 2016 might be possible, but it strikes me as odd that they only released the 30kWh Leaf in late 2015.

I have a nasty (for Nissan) feeling that they have made a mis-step in their battery capacity improvements and are now out of sync with the wider market.

 

So late 2016 might be possible, but it strikes me as odd that they only released the 30kWh Leaf in late 2015.

I have a nasty (for Nissan) feeling that they have made a mis-step in their battery capacity improvements and are now out of sync with the wider market.

Well, now no matter what they do they are going to have to slash prices of the 30kW model in the next year, with other manufacturers releasing much longer range cars for about the same money. The PCP deals on those are going to be even worse for them, because the GFV will be even further from the market value than it is now.

It would be a shame to see Nissan stumble in the EV market, after they did so much to build it up in a number of countries.

 

My first LEAF was £18k with a GFV of £12k. It's on the forecourt for £9.5k so a loss of £2.5k? Not really. In the three years I owned it I paid a total of about £10k in deposit and monthly payments so when it's sold the total cash will be £19.5k. Given the car probably cost no more than £12k to make they've done very nicely thanks.

 

Anyone who has ever been in business knows that the cost of actually making a product is a great deal less than the total cost of research, design, management, sales, marketing, {{ promoting new charging sites - something very new}} , and so on and so on ... including contingencies for recall and the rest.
My guess is that Nissan are playing the long game in Leaf: I doubt it has made profits, but it has certainly generated a feel for future potential.

 

Our 2012 Leaf goes back next month after 3 years on a PCP with a GFV of £8,800 so it's getting handed back. For lolz I checked webuyanycar and they offered £2500! Retail value for a dealer seems to be about £7k so I imagine I'd get offered about £5k as a trade in