Batteries smart electric drive battery leasing

Published on June 27th, 2013 | by Important Media Cross-Post


Smart Battery Leasing Option Is Working Well

June 27th, 2013 by  

There are several ways auto companies can deal with the high upfront cost of batteries (e.g. fuel for electric cars) — from battery swapping, to putting fewer batteries in the car and pushing cars with a lower range, to leasing the batteries. Leasing the batteries seems to be doing well for smart/Daimler, as this Gas2 repost points out.

smart electric drive battery leasing

Battery leasing for electric cars is all the rage in Europe, shaving thousands of dollars off of the asking price in exchange for a small monthly lease payment. Smart has deployed this strategy in the US market, and almost 90% of ForTwo Electric Drive buyers opted to lease the battery for $5,000 off the asking price.

As the single most expensive (and heavy) component of electric vehicles, battery packs have proven a significant drag on EV sales so far. But rather than selling batteries with EVs, why not drop some money off of the MSRP and lease the battery to buyers instead? I originally railed against this idea, but I’ve since had a change of heart. Seeing EV sales struggle will change a man’s mind.

According to Smart general manager Mark Webster, as of two weeks ago, about 53 of the 60 Smart ForTwo Electric Drive buyers opted for the Battery Assurance Program. This knocks $5,000 off of the Smart’s $24,995 MSRP, and that is before the $7,500 Federal Tax Credit, meaning theoretically you could buy a Smart ForTwo Electric for $12,500. Someone get back to me on if this is possible, or if I am missing something here.

Would you rather lease than buy? Smart will lease you a ForTwo with the battery for $199 a month, or $119 a month plus a $80 battery leasing fee. The advantage is that if there are any problems with the battery, it is Smart’s problem, not yours.

Nissan has yet to offer a battery leasing program, though its French ally Renault already does. Instead, Nissan offers a $100-a-month battery replacement program. With so many people leasing EVs, though, the battery leasing program doesn’t seem to off much of an advantage right now. But down the road, could this be a deal breaker for cost-conscious car buyers? Absolutely, and then Smart might really start seeing the benefits of battery leasing.

Check out our new 93-page EV report, based on over 2,000 surveys collected from EV drivers in 49 of 50 US states, 26 European countries, and 9 Canadian provinces.

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  • JamesWimberley

    I’ve said this before: battery leasing is not about cost but risk. Batteries will get better: how fast? They may break down: how often? With a new technology, buyers have no good way of evaluating these risks. Leasing shifts them back to the manufacturer, who is better able to assess and bear them.

    The rest of an EV is pretty conventional – including electric motors, which have been around reliably for a century. So direct sale of the box and wheels makes good sense.

  • Others

    Smart is just 2/3 the size of Spark. And if Spark-EV sells for $28K, Smart-EV should sell for only $20K with battery. If its parent company tries to fool people, they will never buy it. Also a 2-seater car is not preferred by many.

  • agelbert

    I wish I knew more about that $7,500 tax credit. If it’s a tax dollar for dollar credit, can it be spread across a two or three years if you have low taxes?
    And if, on the other hand, you merely subtract $7,500 from your adjusted gross, it really turns out to a $750 tax cut (if you are in the 10% bracket).
    I guess I’ll read up on it.
    I DO think leasing the battery is an excellent idea. The electric motor is not a high temperature device like the ICE so it should last a couple of hundred thousand miles easy. The main thing is the battery and having the company being responsible for it will undoubtedly prevent major expenses in the future for the EV owner.
    I wonder, if you are in a wreck, do they up the lease payment on the battery because it was ruined prematurely or is the car insurance supposed to cover that?

    • Bob_Wallace

      It’s a tax credit, not a deduction, so it would be a reduction of actual taxes due. If your income taxes were $10,000 in 2013 and you bought a qualifying EV then your taxes would drop to $2,500.

      I’m pretty sure it has to be taken in a single year. Best to check on that rather than taking it for facts. ;o)

      Insurance should cover loss, minus deductible.

      I think battery leasing could be a good idea now. I suspect battery prices will drop rather quickly and EVs will be cheaper than ICEVs within a decade.

    • I need to read up on it more, too. Need to find out the limits for when the credit starts going below $7,500.

      • agelbert

        I just checked on the $7,500 tax credit. It’s gone when THIS happens:
        Qualified Plug-In Electric Drive Motor Vehicle Credit (IRC 30D) Phase Out
        The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.
        Considering the millions of ICE cars sold here, 200,000 is PEANUTS. There should be NO LIMIT on it or at least it should exist as long as fossil fuel subsidies do.

        This is the name of the law:

        Plug-In Electric Drive Vehicle Credit (IRC 30D)
        I’ll post some more here when I figure out the numbers. :>)

        • agelbert

          Tax Credits

          While tax deductions work by lowering taxable income, tax credits are a direct reduction of the tax due. After you figure out your taxable income and subtract your deductions, you calculate your tax due. You still have a chance to reduce that amount, often significantly, by taking advantage of any allowable tax credits.

          Read more:

          Refundable Tax Credits

          Refundable tax credits are the ones that are easiest to embrace, because they have fewer restrictions and limitations. You can benefit from a refundable tax credit even if you have no tax liability and no withholding. There are several credits in this category, including the earned income credit (EIC) and the adoption expense credit. The EIC, which is available to low income filers, can provide you with a refund of several thousand dollars.

          Read more:

          UNFORTUNATELY, the $7,500 Plug-in tax credit is a NON-REFUNDIBLE TAX CREDIT!

          It is a non-refundable credit that must be taken in the tax year you ….

          The way tax credits work, this could net you the full $7,500 in a refund, but …. fact that the tax credit is not refundable nor can be carried over to future tax years is …


          Hope this helps. What this means to low tax paying individuals like me on a modest pension is that, if we pay about $3,0000 in taxes, that’s the most we can get from the $7,500 credit. So it seems the credit IS NOT helping low income people at all. :>(

          • Bob_Wallace

            Good sleuthing.

            Perhaps you should write this up as an article and let Zach add it to the EV section.

          • agelbert

            Thank you. I’ll tell you what. If there is an update on this or some new benefit I will write it up and send it to Zach for approval.

          • Good stuff. Thanks. (Well, the research was good, the findings not so uplifting… but more or less what I expected.)

          • agelbert

            You are welcome.

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