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Report: Nissan to Cut EV Battery Production in US, UK

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In what can really only be chalked up to a bit of unfortunate timing, Nissan kicked off National Drive Electric Week on Monday with news that Carlos Ghosn is planning to cut battery production in the United States and United Kingdom so that the Alliance can source cheaper lithium-ion batteries from LG Chem in South Korea.

Nissan to cut EV battery production

Nissan to cut EV battery production in US

According to Reuters, this news has the potential to cause a significant rift in the Alliance, particularly with regards to the Japanese side of business. If production plants are shuttered in Sunderland, England and Smyrna, Tennessee, it would be the result of the Alliance’s failure to meet their admittedly lofty goals for both electric vehicle sales and affordable battery manufacturing.

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An executive within Renault-Nissan told Reuters that it is “less competitive than we’d wanted” in terms of leading the way for affordable battery manufacturing, and added that the Alliance is “six months and a year behind LG in price-performance terms.”

Perhaps most troubling is the fact that Nissan is tied up in a contract with NEC, which requires the automaker to purchase electrodes to accommodate 220,000 24kWh batteries even if there is not demand to match the output. If Nissan decided to source batteries from Korea, it would ultimately need NEC’s approval.

Wall Street Journal notes that, due to the $1.4 billion low-interest federal loan Nissan utilized to open the battery plant in Smyrna, shutting down U.S. battery production is not possible.

“The Renault-Nissan Alliance remains 100% committed to its industry-leading EV program,” Rachel Konrad, the chief spokeswoman for the Nissan-Renault Alliance, told WSJ. “This global commitment continues for the foreseeable future, and we haven’t taken any decision whatsoever to modify battery sourcing allocation. Nissan has no plans to impair its battery investments.”

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While sales of the LEAF are up hugely through August compared to where they were to-date in 2013, the sales totals are not remotely close to Nissan’s pre-launch expectations that it would sell 150,000 LEAFs a year in America as early as 2012. America remains slow to adopt EV technology, and short of a massive fluctuation in demand and a handful of miracles, Ghosn’s 2011 proclamation that the Alliance would sell 1.5 million electric cars by 2016 is looking more and more like a fever dream.

Ghosn also once proclaimed that electric vehicles would make up 10% of all new vehicle purchases by 2020. Currently, that number sits at less than 1%.