How US Nissan Leaf sales are slowed by electrode supply

If you just look at the numbers, there is something that doesn't make sense about the Nissan Leaf production facility in Smyrna, TN. After all, the automaker has been building EVs there since early this year and can make enough batteries there for over 150,000 cars a year. But, currently, the Leaf sells just 2,000 or so copies a month in the US (and all US Leafs coming from Smyrna). So why does the company have a problem supplying demand? One word: electrodes.

"We recently decided to increase production in Smyrna, but we won't see that until November or December" - Nissan's Billy Hayes

That's what we learned speaking with Billy Hayes, vice president in charge of global sales of the Nissan Leaf, at the in-depth Nissan360 event in Southern California this week. Hayes said that Nissan did recently decide to increase Leaf production – from around 2,000 a month to 2,500 – but that it just takes time before that decision turns into more vehicles out the door. "What we wanted to see was a sustained 2,000 [sales] a month and it's no secret that we're running kind of tight on dealer inventory," he said. "What people don't really understand is that yes, we have capacity but there is also a lead time because of electrode production. Between the time that we make a decision to increase production to the time it actually goes up is about six months. We recently made the decision to increase production in the Smyrna plant, but we won't see that until November or December."

The new, higher production number will itself be reevaluated in the coming months – Hayes said he is "very optimistic" it will also be moved up – but any further increase would then take another six months to implement. That means we're not going to see US Leaf sales break out of their 2,000-3,000 monthly sales levels until at least the summer of 2014. There's more below.



The Leaf's electrodes come from AESC, a joint venture between Nissan and NEC. AESC builds the electrodes in Japan and delivers them in basic form to Nissan. Then, they still need to be processed into modules in Smyrna (or, for UK production, in Sunderland) before their shelf life is up. In Japan, where around 1,000-1,500 are made each month, just like Sunderland, Nissan can adjust Leaf production a bit faster because the electrodes don't need to travel as far (it can take 30-60 days for the electrode rolls to get from Japan to Tennessee). And that is how electrodes affect Leaf sales. Hayes said:

In January and February we did like 650 and 653 in those two months. It wasn't because the car wasn't performing, it was because we didn't have any. There were no cars to sell. So we couldn't get the Model Year '13 fast enough and once we did, we've been banging out 2,000 a month, as many as we can produce. It's been a challenge. You want to put them in the markets that sell and allocate them the right way, and that's been the challenge now, to keep the momentum up.

Globally, Nissan has sold over 75,000 Leafs to date, and the company hasn't even started sales in the world's most populous country.

Leaf sales in China

"The status is that we're planning on coming out with a version of the Leaf in China next year," Hayes said. "Right now, we're going through the testing phases." That means pilot test programs in six cities with around 250 cars total. The plan is to roll out the EV in the places where people are interested and where there are favorable government incentives. Hmm, that sounds familiar.

Hayes is about to start spending a lot of time in China – his first trip there was two weeks ago – to get ready for Leaf market introduction, round four. The challenge, as before, is to go through the customer research and determine how the car should be marketed, how much it should cost and how to get dealers ready. While the Leaf will not be the first EV in China, Hayes said that the EVs that are already there, like the BYD e6, are mostly used by fleets, so the mass-market Leaf will be among the first to directly try to catch the customer's eye.

Unlike the Model S, which is getting China-specific upgrades, the Leaf will not get any major changes for the Chinese market. It may even get to keep its name. Hayes said Nissan hasn't decided what, exactly, to call the car in China but the plan is to sell it under the Venucia brand. "I'd like to call it the Leaf," he said. "It seems to make sense."