Nissan's Ghosn embraces push to go green

Soon after Carlos Ghosn took over as chief executive officer of Nissan Motor Corp., he took a gamble by building a factory in Mississippi to produce big pickup trucks and sport utility vehicles.

Now, a decade later, he's steering in the opposite direction, ramping up production of small electric cars.

Mr. Ghosn appeared in Washington on Monday, along with FedEx Corp. Chairman Fred Smith and other CEOs banded together as the Electrification Coalition, to call on the government to adopt policies that would help put millions of all-electric or partially electric vehicles on the roads.

By 2040, 75% of the driving done in the U.S. should be done using electric power instead of petroleum combustion, the group said.

Mr. Ghosn, chief executive of both Nissan and its French alliance partner, Renault SA, says in an interview the companies will launch four electric vehicles globally, with three of them coming to the U.S., including the Nissan Leaf compact, a light commercial vehicle suitable for use by companies such as FedEx, and eventually an electric car to be marketed under the Infiniti luxury brand.

"Our forecast is that sales of electric vehicles will be 10% of the total market…by 2020," he says.

Once again, Mr. Ghosn is responding to demand.

The difference is that when he invested in big SUVs and pickups for the U.S. market, he was following consumers—in fact, Nissan was playing catch-up in segments Detroit's auto makers had pioneered and prospered from through much of the 1990s.

This time, Mr. Ghosn is responding to a market created and sustained in large measure by government policy.

In Western Europe, Japan and the U.S., leaders concerned about the effects of automotive emissions on the global climate, and uneasy about the volatility of the price of oil, are offering billions to consumers and manufacturers to spur demand for electric vehicles.

They're throwing in regulatory favors for the manufacturers, as well. Nissan and Renault are determined to get a piece of that action.

In the U.S., the government is offering $7,500 tax credits to buyers of electric vehicles, and is spreading around billions in loans and stimulus program grants to launch electric-vehicle production.

Nissan got approved for a $1.6 billion loan from the U.S. Department of Energy to retool part of its Smyrna, Tenn., factory complex to build electric cars.

The company will also get a boost from a $100 million Energy Department loan to ECOTotality Inc., an Arizona company that plans to develop the charging stations and related hardware to support a fleet of 4,700 Nissan Leaf electric cars.

Government policy is critical to these investments.

"We aren't putting electric cars in markets where they don't have an incentive for consumers" to buy them, Mr. Ghosn says. That means an electric Nissan for China will have to wait, even though China could be Nissan's largest market by 2011 or 2012, he says.

The risks associated with a market created by government policy are many.

Tax breaks and loans for electric vehicles are here today, but they could be gone tomorrow if cutting the deficit becomes a more important priority than subsidizing the car business.

President Barack Obama and some Democratic leaders in Congress favor strong action to curtail consumption of fossil fuels as part of a strategy to cut U.S. emissions of carbon dioxide and other gases linked to climate change. Caps on U.S. greenhouse-gas emissions could boost electric-vehicle demand in the long term.

But it appears unlikely that Congress will soon enact a strong climate bill that would raise the cost of gasoline enough to cause a consumer stampede toward fuel-efficient alternatives, cars that often cost more.

At a global level, a United Nations climate summit in Copenhagen next month probably won't produce a new binding global agreement to cap greenhouse gas emissions.

"You're disappointed if you had any expectations" for Copenhagen, Mr. Ghosn says. But businesses will need clarity as to what the rules will be. "What we'd like is something to be set," he says.

Mass acceptance of electric vehicles will also require a big change in consumer attitudes toward cars—attitudes the auto industry has spent decades inculcating through advertising and product design.

In the U.S., drivers like versatile, low-maintenance vehicles that can travel 500 to 600 kilometers or more between refueling stops. Even with improved battery technology, electric vehicles offer a quarter to a half that range.

A report released Monday by the Electrification Coalition mapped out the problem.

People in the average household take about six trips in their car a day, to work or someplace else. Those trips average just under 15 kilometers each.

Nearly any conventional gasoline-fueled vehicle that starts a day with a full tank can easily manage that without another refueling stop.

But electric vehicles don't have the same margin for error—especially since there are, by the coalition's count, just 1,000 public electric-vehicle recharging stations available.

As the coalition study notes, "a profitable business model for public charging infrastructure has not been reliably demonstrated." That's why the coalition calls for tax credits equal to 75% of the cost of installing charging stations.

Mr. Ghosn isn't betting the company solely on electric cars. Nissan and Renault are focused on the opportunities to put huge populations on wheels in China and India.

And for now, electric vehicles will be additions to Renault and Nissan's lineups, Mr. Ghosn says, not substitutes for mainstream vehicle models.

"Electric cars will move up slowly," he says. "It's not taking the market by storm."