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Electric-vehicle price war erupts in Japan

Mar 31, 2010 - The Yomiuri Shimbun

The first shots have been fired in a price war in the electric vehicle market.

Nissan Motor Co.'s announcement Tuesday that its Leaf electric vehicle will sell for less than 3 million yen, after factoring in a government electric vehicle purchase subsidy, triggered an almost immediate retaliatory strike from rival Mitsubishi Motor Corp.: a hefty cut in the price of its i-MiEV.

The Leaf is priced at 3.76 million yen, but a customer will actually only pay 2.99 million yen once the scheduled government subsidy is included.

The figure sent alarm bells ringing at MMC, which urgently called an executive meeting the same day and decided to cut the i-MiEV price by 619,000 yen to 3.98 million yen. MMC executives were concerned that potential i-MiEV purchasers could be tempted to instead wait until the cheaper Leaf goes on sale in December. The timing of Nissan's announcement could not have been worse for MMC, which was to start marketing the i-MiEV on Thursday to individual clients.

MMC last year started leasing and selling the i-MiEV to central and local government offices, as well as private companies.

The price of the i-MiEV with the subsidy is 2.84 million yen, 150,000 yen less than the Leaf.

The electric vehicle market has become a battleground that will likely see plenty more action as the cars become more popular. "EVs are no longer vehicles of the future. They're just ordinary cars," Nissan Senior Vice President Takao Katagiri declared proudly Tuesday morning at a news conference at Nissan headquarters in Yokohama.

In the room where Nissan held its news conference Tuesday, a panel showed how the electricity bill for charging the Leaf was considerably cheaper than the cost of keeping a hybrid vehicle on the road. The panel did not name the hybrid vehicles it was referring to, but subtly implied they were Toyota Motor Corp.'s Prius and Honda Motor Co.'s Insight. The electricity charges for the Leaf are about one-third of the gasoline cost for the hybrids, the panel suggested.

Electric cars are more expensive than hybrid cars. But if customers are persuaded that electric vehicles are cheaper to run than hybrid cars over the long run, the shares held by electric vehicles and hybrids in the eco-car market could be in for a shake-up.

While the price war will energize the domestic spread of electric vehicles, automakers will not be able to squeeze a profit from their electric vehicle programs for some time.

MMC initially forecast it would need to sell 30,000 units a year to make a profit and that it would take many years until its i-MiEV program became a money-spinner. MMC's decision to cut prices could sting its business showing.

Nissan poured a huge amount of money into developing the Leaf. The company's electric vehicle program is not forecast to be running in the black anytime soon, especially with a price war in full cry.

Further muddying the waters, it is unclear when the government will end its subsidy, the main support for sales of electric vehicles.

Depending on how things pan out, electric vehicle manufacturers could find themselves scrapping in a price war similar to the one being waged by electrical appliance makers.