Nissan, Ford Plan Electric Push Aided by U.S.; Demand Is Uncertain

By MATTHEW DOLAN and JOHN MURPHY
Spurred by billions of dollars in new government aid, car makers are racing to deliver battery-powered vehicles to the mass market -- although whether enough consumers are interested in electric cars remains untested.
On Tuesday, Nissan Motor Co. was granted $1.6 billion in loans by the U.S. Department of Energy and said it plans to use the funds to build the capacity to make more than 100,000 electric cars a year at its plant in Smyrna, Tenn., by 2013.
Nissan's announcement dramatically expands the industry's bet on electric cars.
Ford Motor Co., meantime, received $5.9 billion in Energy Department loans to help retool plants in Illinois, Kentucky, Michigan, Missouri and Ohio to produce 13 fuel-efficient models, including 5,000 to 10,000 electric ones a year starting in 2011.
And Tesla Motors, a California start-up that makes a $109,000 electric sports car, gained approval for a $465 million loan, and said it will use most of the money to develop an affordable family sedan.

Electric vehicles run entirely on battery power for a certain number of miles before they need to be recharged or, in the case of some designs, supplemented by a gasoline engine.
Still, it is unclear whether Americans will embrace electric vehicles and when the market will be ready for them.
Electric cars tend to be smaller than the roomy models U.S. buyers favor. The need for recharging and, eventually, replacement of battery packs requires an infrastructure of recharging stations, repair shops and distributors that doesn't yet exist.
And any significant price premium over a similar-sized gas model could crimp sales -- especially if gas prices remain relatively low. Most auto makers haven't disclosed pricing plans for electric models, though General Motors Corp. has said its Chevrolet Volt is likely to cost about $40,000.
Some experts say additional government aid is needed to jump-start an electric-car industry.
"We need to see per-vehicle tax credits in the range of double -- or maybe triple -- what we see now for hybrids and other electric vehicles," said Eric Fedewa, vice president for global powertrain forecasts at CSM Worldwide, an automotive consulting and research firm.
The boom-and-bust sales of hybrids -- cars like Toyota Motor Corp.'s Prius that have both a gas engine and a battery-powered motor -- reflect Americans' fickle willingness to pay extra for improved fuel efficiency.

The Prius was such a hot seller a year ago when gas topped $4 a gallon that some dealers commanded above-sticker prices and had long waiting lists.
But with the U.S. in recession and gas prices much lower, Toyota has been forced to offer big incentives -- including 0% financing and $1,000 rebates -- to boost demand, and has mothballed a new Prius plant in Mississippi.
GM, which is reorganizing in bankruptcy court, and Chrysler Group LLC, which recently exited Chapter 11, also have applied for billions in Department of Energy loans, but their requests haven't yet been granted because the loans are only supposed to go to "financially viable" companies.
Energy Secretary Steven Chu told reporters the department is discussing the matter with Chrysler and has had "technical talks" with GM about how it would use such money.
Chrysler is working on several electric vehicles, and has started providing a small test fleet of battery-powered minivans to the U.S. Postal Service. GM plans to launch the Volt by the end of 2010.
Nissan, Japan's third-biggest auto maker by sales volume, will make electric cars and the lithium ion batteries to power them at its Tennessee plant, Chief Executive Carlos Ghosn told reporters after the company's annual shareholders meeting Tuesday in Japan.
U.S. production of an all-electric, five-passenger sedan could total up to 150,000 cars a year when the build-out at the Smyrna plant is complete, said Dominique Thormann, senior vice president for administration and finance at Nissan North America.
Other car makers working on electric vehicles include Toyota, Mitsubishi Motors Corp. and Fuji Heavy Industries Ltd., maker of Subarus.
Until now, electric cars have been marketed as a costly niche product. Nissan wants to be the first with a mass-market one by charging an affordable price.
Mr. Ghosn didn't offer details, but said Nissan's electric car would sell at a "reasonable price," comparable with the cost of a normal gasoline-powered car.
Nissan will unveil its electric vehicle Aug. 2, and begin producing it in Japan in the fall of 2010, starting at 50,000 units a year, the company said. It will import the vehicles into the U.S. in small volumes soon after production starts, Nissan officials said.
Mr. Ghosn said that as the economy recovers and oil prices rise, drivers will demand more fuel-efficient cars. Nissan plans to produce a lineup of electric models to satisfy different kinds of transportation needs, he said.
"I'm not at all worried about how to sell the car because there is an appetite for zero-emission cars," Mr. Ghosn said.—Yoshio Takahashi contributed to this article.
Write to Matthew Dolan at matthew.dolan@wsj.com and John Murphy at john.murphy@wsj.com